U.S. consumers are already struggling with the highest inflation in four decades, a phenomenon that is consuming purchasing power and eroding wages. But there may be more economic pain, with an analyst estimating that the recent rise in gas prices following the invasion of Russia Ukraine it could add up to $ 2,000 in annual costs to the typical family budget.
The average cost of a gallon of regular gasoline has exceeded $ 4 per gallon for the first time since 2008. Many consumers have seen rapidly rising gas pump prices, and the price of normal gas rose 41 cents during the first full week of Russia’s war in Ukraine, according to AAA.
That will likely cost the typical home an additional $ 2,000 a year in gasoline costs, according to Yardeni Research in a research note Monday. That adds up to about $ 1,000 in additional costs at the grocery store due to inflation, meaning the typical household will have $ 3,000 less this year to spend on other items, Yardeni said.
Consumers are concerned about the impact on their budgets, with some already planning to reduce driving and monitoring their spending. This could pose a threat to the economic recovery of the pandemic, as personal consumption contributes about 70% of gross domestic product, according to the Federal Bank of St. Petersburg. Louis.
When local gas prices recently rose to about $ 4.25 a gallon, writer Andrew Liptak of Barre, Vermont, said he sent an email to his boss asking if he could work from home because his round trip of about 34 miles to the office, which covers mountainous terrain and therefore consumes more gas; it suddenly becomes much more expensive.
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“In the meantime, I might as well try not to drive as much as I can,” said Liptak, 36. “I’ve been thinking that this will include not going too far to see things,” such as movies. Liptak also plans to group the assignments so you can take a trip with your car instead of multiple excursions.
But what worries him most is the cost of fuel for home heating. “Last time it cost $ 500 for a full tank,” he noted. “I suspect it will be a lot more this time.”
On social media, consumers expressed concern about the additional expense of their travel, with one commenter pointing out that they live check to check and budget “up to nickel.” They added: “I’m low this week. There are real-life repercussions that people like me pay and no one talks about us.”
Meanwhile, some taxi drivers are asking for fuel surcharges or other forms of relief while facing higher gasoline prices, with a Canadian taxi drivers association calling for a fuel surcharge for taxi rides, according to the Vancouver Sun. In response to a request about whether Uber can raise fares due to fuel costs, the company said last year it launched a service that offers drivers discounts of up to 25 cents a gallon at some stations.
“[W]We will continue to monitor gas prices and listen to drivers over the coming weeks, “an Uber spokesman said in an email to CBS MoneyWatch.
Consumer pain
Inflation is causing financial problems for some consumers, according to a new survey by credit card company Capital One. He found that one in four Americans could not pay at least one bill in the last month, while 62% said they had cut spending in some way.
Overall, Americans’ sense of financial health is almost as low as at the start of the pandemic, Melissa Bearden, head of consumer intelligence at Capital One, said of the new investigation.
“Americans at all income levels are feeling the impact of inflation, and most people are already making adjustments: they spend more on commodities,” such as food and gas, Bearden said. “What brings me home is the tension that the American public is already experiencing and how much they are preparing for continued tension.”
About half of low- and middle-income workers, whom Capital One defines as those earning less than $ 25,000 in family income and those earning between $ 25,000 and $ 100,000, respectively, say they have recently reduced discretionary spending on shopping, dinner. and entertainment. , found the investigation.
Inflation could rise gradually due to pressures from the Russian invasion of Ukraine, which include higher gas prices as well as potentially higher grain and fertilizer prices, which will raise food prices, David said Kelly, chief global strategist at JPMorgan Funds, in a Research Note Monday.
“This could raise CPI inflation to 8.0% year-on-year in March,” he noted.
This is compared to an already high inflation rate of 7.5% in January, the most recent data available. The government will release its next inflation report on March 10, which will track rising consumer prices in February.
Higher prices could go through family budgets, Yardeni Research predicted: “Rising commodity prices as a result of the war are likely to depress consumer spending now that they have to spend much more on petrol and food. “.
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