A New York Fed report reveals a stark divergence in how U.S. households are coping with rising gasoline prices, with lower-income families forced to cut back on real consumption.
The widening gap in consumption trends is described as "quantitatively larger" than the one seen after Russia's invasion of Ukraine.
Rising Gas Prices Hit Lower-Income Households Harder
A report from the Federal Reserve Bank of New York, released on Wednesday, analyzed the impact of rising gasoline prices stemming from the Middle East war on U.S. households.
Higher-income households were able to increase nominal spending to maintain real gasoline consumption levels in March. In contrast, lower-income households experienced increased nominal spending but reduced real consumption.
The analysts noted that lower-income households may have responded by switching to less costly options such as carpooling or public transit. The report described the current gap in consumption trends by income level as quantitatively larger than the gap observed four years ago following Russia's invasion of Ukraine.
Broader Economic Divergence
The New York Fed's analysis is part of a broader series examining diverging economic outcomes across the income spectrum. A separate report released on Friday indicated that wealth accumulation for higher-income Americans has outpaced others, partly due to financial market performance.
The researchers noted that the reliance on financial assets raises questions about the vulnerability of retail spending to a market correction.