Federal Reserve Study: Poor Suffer from Commodity Price Surge

June 13th, 2011
in econ_news

Econintersect: It should come as no surprize that the poorer you are, the larger the portion of your budget is spent on food and energy.  The study, which is based on the BLS Consumer Expenditure Survey, said that 18.5% of the lowest income earning segment of the economy is spent on food and energy, compared with the total population aggregate of 13.75%.

Follow up:

In the chart below, the each quintile is 20% of the USA  households.  A value of 1.0 is the average household spending for food & energy for the population in total.


The study concluded:

However, because of the large rise in consumer energy prices in the first quarter, this aggregate purchasing power measure fell by 0.45 percent of PCE, equivalent to over $45 billion at an annual rate (in contrast, because the rise in consumer food prices was less extreme, its effect on aggregate purchasing power was less than 0.05 percent of PCE). With aggregate effects of this magnitude, there is a larger effect on lower income households: Performing a calculation similar to the one in the previous paragraph, we find that the purchasing power impact on lower income households is about 0.6 percent of their spending. Because many of these households have tight budgets and few assets, such a drop in discretionary income can impose notable constraints on their spending.

Source: NY Fed Liberty Street


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