Inflation is Crushing the Little Guy

Everything has gotten more expensive over the last couple of years. The consumer price index, the broadest measure of inflation, is up 21% since January 2020. And certain categories are up way more.

One of the things we keep hearing is that higher prices are pressuring consumers, particularly at the low end. This isn’t entirely wrong - when you’re talking about a group of people that numbers in the tens of millions, not everybody is going to have the same experience. But it definitely isn’t entirely true, either.

Carl Quintanilla tweeted, via BofA, “lower-income spending has generally outpaced higher-income spending on a y/y basis since early 2023, even excluding necessities (i.e., groceries and gas). This is consistent with the strength in blue-collar wage growth since the start of the pandemic.”

Spending is driven by wage gains and, yes, debt, which I’ll write about later this week. The chart below states, “Wages have outpaced prices across the wage distribution. Lower-income workers have seen the largest wage gains.”

Don’t believe Bank of America? Fine. What about Walmart and Target?

An analyst asked about lower-end consumers on Walmart’s earnings call, . Here was their response:

And here’s what Target had to say:

I’m not saying everything is suddenly awesome for lower-income workers. As I mentioned at the beginning of this post, this stuff is complicated. But I am definitely saying that things aren’t nearly as bad as you probably would have guessed. The economy and the stock market aren’t at all-time highs because people can’t afford anything anymore.