Ahead of next week's CPI report, this concept of how differently various groups of humans experienced the three years of higher-than-targeted increases in the general price level is exactly the point of the introduction to August 5's "Unless You Deeply Understand How Inflation Hits Different Groups, You Don't Understand Inflation":
When I say 'deeply' I mean having the empathy and imagination to actually 'feel' the emotions that result from having to comparison-shop food prices and then food prices vs other necessities.
It all comes down to financial assets and whether a person benefits from rising asset prices.
Regarding the example below, Denny's, I've never been to a Denny's. Nobody I know goes to Denny's. But there are millions of people who do; when they need something to eat and don't have the time or skill or implements to cook for themselves. And for those people the S&P 500 approaching the old highs literally has no meaning....
And from VoxEU, December 3:
Families across the UK are struggling with inflation. This column asks whether low-income households have been disproportionately affected, using micro-data on food products to examine the rate of inflation for different income groups. Though firms passed rising upstream costs on to retailers at similar absolute rates, the increases for low-end products are disproportionately large when measured in percentages – a pattern with real consequences for consumers. This difference in product-level prices was responsible for up to two-thirds of the gap in food-at-home inflation rates between the lowest and highest income quintiles.
In 2022, anti-poverty campaigner Jack Monroe tweeted that the UK’s national inflation index “grossly underestimates the real cost of inflation” for low-income households, listing a dozen low-price grocery products with inflation rates well above the national figure. Her post was re-tweeted over 44,000 times, leading to coverage in several national newspapers and ultimately spurring the Office for National Statistics (ONS) to launch a study of inflation rates for low-price grocery items (ONS 2022).
Despite this interest, evidence that low-income households experienced disproportionate inflation over the past few years remains scant. The ONS study found dramatic variation in inflation rates for 30 low-priced food items but, due to the small number of products it tracked, was unable to conclude that these products had higher than average inflation rates. Meanwhile, other studies using aggregate price indices concluded that inflation in 2021 and 2022 was highest for middle-income households, who spend the greatest share of their expenditures on gasoline and vehicles (Jaravel 2022).
In a recent working paper (Sangani 2023), I revisit inflation rates experienced by different income groups using micro-data on food products. I find evidence of a systematic link between upstream costs and inflation inequality, leading to excessive food inflation rates for low-income households from 2020–2023. This excessive inflation is not due to higher expenditures on aggregate categories like food and utilities (e.g. Jaravel 2022, Hormuth et al. 2023, Cavallo 2023, Soldani et al. 2023), but to differences in inflation rates across products in narrowly defined categories. These results suggest that prices of low-end products grew at double the rate of prices of high-end products from 2020–2023.
How prices react to rising costs
The source of this inflation inequality is how rising costs affect prices of low- and high-end products. To explore this, I begin by determining how the prices of products in a few narrow categories such as rice and coffee react to changes in upstream costs. 1
Figure 1 shows how retail prices for rice products varied with changes in rice commodity prices, which exhibited considerable volatility from 2006 to 2020. Rice commodity prices skyrocketed from $350 per tonne to more than $1000 per tonne over the spring of 2008 due to export restrictions by major exporters like India and Vietnam, before falling to under $600 per tonne by the end of 2008. Retail prices of rice products exhibit a corresponding rise and fall over 2008–2009, lagging about one quarter behind the rise and fall in commodity prices.
When changes in retail prices are measured in percentages (top panel), these commodity price movements appear to disproportionately affect the prices of low-end products. For example, inflation for rice products with low unit prices peaked at nearly 70% in 2008, compared to 20% for rice products with high unit prices. When rice commodity prices rebounded in 2011, low-price rice products saw excessive inflation rates of around 20%, compared to under 5% for high-price rice products....
....MUCH MORE
And it is ongoing. Yahoo Finance, December 6, 2023:
Lower income households feeling pressure: Campbell Soup CEO
Canned soup.
The laptop warriors who treat inflation as some sort of political game of 'gotcha' and one-upmanship are a bunch of sick mofos.
