The average American is shelling out an extra $276 a month because of the highest inflation in four decades, according to a new Moody's Analytics analysis.
Consumers are wrestling with a once-in-a-generation stick shock as the cost of everything from cars, groceries, gasoline and furniture surges.
The consumer price index rose 7.5% in January from a year ago, according to a new Labor Department report released last week, marking the fastest increase since February 1982, when inflation hit 7.6%. The CPI – which measures a bevy of goods ranging from gasoline and health care to groceries and rents – jumped 0.6% in the one-month period from December.
"Having inflation at 7.5% on a year-ago basis, compared with the 2.1% average growth in 2018 and 2019, is costing the average household $276 per month," said Ryan Sweet, a senior economist at Moody’s.
Sweet came up with that figure by comparing prices for goods and services when inflation hit 7.5% versus how much households would have paid for those same items when inflation was 2.1%, the average in 2018 and 2019.
Price increases were widespread last month: Although energy prices rose just 0.9% in January from the previous month, they're still up 27% from last year. Gasoline, on average, costs 40% than it did last year. Food prices have also climbed 7% higher over the year, while used car and truck prices – a major component of the inflation increase – are up 40.5%. Shelter costs jumped 0.3% for the month and 4% year-over-year.
"A lot of people are hurting because of high inflation. $276 a month—that’s a big burden," Sweet told The Wall Street Journal. "It really hammers home the point of ‘what is the cost of inflation?’"
The financial impact of red-hot inflation is not distributed equally and is differed across income and demographic groups.
A separate Wells Fargo analyst showed that lower-income Americans, particularly those who are renters, are probably experiencing much higher inflation than wealthier homeowners.
Middle-income households were hit the hardest by the price increase, with costs up 6.7% in December – 0.5 percentage points higher than for the lowest and highest income brackets. That's in large part because of transportation costs – middle-class households tend to spend more on gasoline than other income groups.
They are also more prone to buy used cars, whereas wealthier people are more likely to purchase a new car. Used car prices, a key component of the months-long inflation surge, increased again last month, jumping 1.5% from the previous month and 40.5% year over year. By comparison, the cost of new cars rose 0.6% in December from the previous month and 12.2% from the prior year.
Higher-earning households also spent more on dining out and restaurants, which rose less than overall inflation.
Finally, Hispanic or Latino households saw inflation of 7.1%, largely because of the disproportionate use of gasoline and used autos. That compares with an average inflation rate of 5.6% for Asian families, which tend to be wealthier than the average American household.