4 Facts You Probably Haven't Considered About Inflation Data

The Center for Retirement Research at Boston College has published a new analysis considering the varying impact that persistently high inflation has on households at different income levels. The issue brief was penned by Alicia Munnell, CRR director, and Diana Horvath, a CRR researcher. It questions the extent to which the effects of inflation vary for households with different income levels by running what Munnell and Horvath call a "straightforward analysis" that weights the eight major categories in the CPI-U measure against expenditure data from Bureau of Labor Statistics' Consumer Expenditure Survey, or CEX, for each income quintile. As Munnell and Horvath point out, this approach is complicated by the fact that low-income households spend virtually all their after-tax money on inflation-affected items, while high-income households spend only 80% of their resources on these items. The analysis concludes that inflation rates for the 12-month period ending in June 2022 for items included in the CPI-U are roughly similar across income groups. However, despite facing similar inflation levels, low-income households spend virtually all of their income on affected items, according to Munnell and Horvath, thereby exposing a larger share of their resources to price increases compared with high-income households. In pursuing their analysis, Munnell and Horvath identify some counterintuitive facts about inflation that advisors should understand. Check out the slideshow to learn what they are.