State of the Middle Class

Cost of Living

How Inflation Is Stressing Your Budget

Whether it’s moderate or extreme, inflation adds to the cost of living and puts constant pressure on American families to increase their incomes to keep up with rising prices.

Households
Manufacturing
Trade
The Economy

Inflation leads to lost dollars

The Federal Reserve targets 2% inflation, which requires incomes to increase by $1,000 to $2,000 per year for middle-income households to keep pace. However, post-COVID, inflation has added thousands of dollars in expenses to our yearly spending, even above target, with the higher costs of shelter, transportation, and food as the main culprits.

Inflation Rates and Yearly Spending Increases for Middle-Income Households

target based on 2% inflation and 10.4% over five years

Past Year Past 5 Years
Sept 2024
Inflation (2% target)
Increase per Year
Target Increase
Inflation (10.4% target)
Increase per Year
Target Increase
Overall Spending
2.4%
$1,615
$1,324
22.8%
$12,328
$5,627
Shelter
4.9%
$1,119
$461
26.1%
$4,629
$1,848
Transportation
-1.1%
-$122
$227
28.8%
$2,500
$904
Food
2.3%
$201
$177
28.2%
$1,984
$731
Medical Care
3.3%
$167
$103
12.9%
$599
$483
Utilities
2.6%
$118
$90
22.4%
$967
$449
Sources
Definitions

Higher food prices still locked in

Post-COVID, even though food inflation has decreased, food prices remain high, costing already cash-strapped middle-income families thousands of dollars per year.

Food: Growth in Costs (Inflation Rates) with Current Prices

target inflation = 2%

Growth in Cost
Sept 2024
Current
Past Year
1 Year Ago
2 Years Ago
3 Years Ago
4 Years Ago
Food Spending per Year
$9,050
2.4%
3.7%
11.2%
4.6%
3.9%
Dozen eggs
$3.82
39.6%
-14.5%
30.5%
12.6%
0.1%
Whole Milk/gal
$4.02
1.2%
-3.6%
14.4%
3.2%
9.2%
Whole Chicken/lb
$1.98
2.0%
1.3%
14.9%
7.2%
6.7%
Ground Beef/lb
$5.58
4.7%
5.8%
3.9%
10.8%
8.3%
White Bread/lb
$1.98
-1.6%
7.8%
14.1%
1.4%
4.1%
Bananas/lb
$0.62
-0.9%
0.5%
7.3%
1.6%
4.1%
Oranges/lb
$1.73
4.2%
1.2%
14.9%
1.4%
0.7%
Tomatoes/lb
$1.94
0.9%
0.6%
-1.0%
1.0%
7.8%
Sources

Transportation costs drive strained budgets

In recent years, middle-income households have spent thousands of dollars more each year due to inflation in the transportation sector. These added costs, combined with the high prices of new and used vehicles, force many families to take on excessive debt just for basic private transportation.

Transportation: Growth in Costs (Inflation Rates) with Current Prices

target inflation = 2%

Growth in Cost
Sept 2024
Current
Past Year
1 year ago
2 years ago
3 years ago
4 years ago
Transportation Spending per Year
$11,253
-1.0%
1.4%
13.4%
17.8%
-4.1%
New Cars, Average Price
$46,841
-1.9%
0.1%
10.5%
8.8%
1.0%
Used Cars, Average Price
$25,172
-5.1%
-8.0%
7.2%
24.4%
10.3%
Gasoline/year
$2,034
-15.3%
3.0%
18.2%
42.1%
-15.8%
Insurance/year
$2,132
16.3%
18.9%
10.3%
4.8%
-5.0%
Fees & Maintenance/year
$1,440
3.9%
5.9%
9.5%
3.7%
2.3%
Sources

Inflation in Largest Spending Categories Sources:

Inflation rates, CPI indices, and budget shares are obtained from the Consumer Price Index Archived News Releases, U.S. Bureau of Labor Statistics. Budget increase for a category is calculated by multiplying total household expenditures by budget share at the beginning of the period, and then by the inflation rate over the period.  Target increase is calculated in the same manner using 2% target inflation instead of the inflation rate.  Total household expenditures are obtained from the Bureau of Economic Analysis’ Table 2.6. Personal Income and Its Disposition, Monthly, then dividing by the number of households obtained from Federal Reserve Economic Data.  This is then converted to expenditures for a middle-income household based on a regression analysis between the annual BEA data and annual middle quintile expenditure data obtained from Federal Reserve Economic Data.

Inflation in Largest Spending Categories Definitions:

Definitions are provided by the U.S. Bureau of Labor Statistics’ Consumer Price Index Archived News Releases,  Shelter includes both rentals and rent equivalents for owner occupied residences.  Transportation includes both private and public transportation. Food includes both groceries purchased at home and meals and items purchased away from home.  Medical care includes all consumer payments for services, health insurance, medical products, and pharmaceuticals.  Utilities include both energy and non-energy utility services and are calculated by taking the aggregate for utilities and public transportation and subtracting public transportation.

Food Expenditures and Inflation Sources:

Inflation rates, CPI indices, and budget shares are obtained from the Consumer Price Index Archived News Releases, U.S. Bureau of Labor Statistics. Budget increase for food is calculated by multiplying total household expenditures by budget share at the beginning of the period, and then by the inflation rate over the period.  Total household expenditures are obtained from the Bureau of Economic Analysis’ Table 2.6. Personal Income and Its Disposition, Monthly, then dividing by the number of households obtained from Federal Reserve Economic Data.  This is then converted to expenditures for a middle-income household based on a regression analysis between the annual BEA data and annual middle quintile expenditure data obtained from Federal Reserve Economic Data. Prices and inflation rates for food items are obtained from Average price data (in U.S. dollars), selected items (bls.gov)

Transportation Expenditures and Inflation Sources:

Inflation rates, CPI indices, and budget shares are obtained from the Consumer Price Index Archived News Releases, U.S. Bureau of Labor Statistics. Budget increase for a category is calculated by multiplying total household expenditures by budget share at the beginning of the period, and then by the inflation rate over the period.  Total household expenditures are obtained from the Bureau of Economic Analysis’ Table 2.6. Personal Income and Its Disposition, Monthly, then dividing by the number of households obtained from Federal Reserve Economic Data.  This is then converted to expenditures for a middle-income household based on a regression analysis between the annual BEA data and annual middle quintile expenditure data obtained from Federal Reserve Economic Data.  Average car prices are obtained from Cox Automotive for new cars and used cars.