The news: The rising cost of gas, utilities, and other household expenses tied to the war in the Middle East is adding to the strain on low-income consumers. These households were already struggling with persistent inflation, along with recent cuts to SNAP and Medicaid benefits.
Lower-income households—those earning less than $40,000—responded to the March spike in gas prices by using public transportation or carpooling more. Even so, their gas spending rose 12% despite buying 7% less gas, per the Federal Reserve Bank of New York.
In light of financial challenges, lower-income consumers have less to spend elsewhere. Goldman Sachs estimates their pre-savings discretionary cash inflow will grow just 0.8% this year, a significant dip from the 3.2% it forecast prior to the war’s start in January. That pressure is also reflected in record-low sentiment about the economy among low-income consumers in May, per University of Michigan data.