High gas prices 'taking a bite' on lower income consumers, BofA research

High gas prices are "taking a bite on the lower income consumers" who are cutting back on items such as clothing and furniture, according to BofA data analytics.

The research shows lower-income and higher-income households increased their spending on gasoline as prices have surged.

While overall impact is still small as of early March, the increase for lower income households was more notable, the note said.

“Rising gas prices are particularly painful for lower income consumers. For one, gas makes up a larger share of their total spending. For another, lower income consumers tend to work in sectors where remote working is not an option,” according to BofA.

The research also notes lower income consumers have increased their credit card (relative to debit card) spending on gas, which could suggest decreasing savings for the group.

“At the sector level, the lower income group saw the biggest slowdown in clothing and furniture spending on a 3-year basis, while restaurant spending remained resilient,” according to the research.

The analysis notes some of the weakness in clothing and furniture spending by the lower income group could also be due to fading stimulus as these were the sectors that saw the biggest stimulus boost.

The latest headline inflation print released on Thursday showed CPI, the Consumer Price Index, jumped 7.9% to a fresh 40-year high in February.

On Thursday, crude prices rebounded before ending the session lower after a dramatic decline of more than 10% on Wednesday over the possibility of more supply outputs from Iraq and United Arab Emirates.

U.S. West Texas intermediate (CL=F) and Brent (BZ=F) have seen massive rallies since the outbreak of the Russia-Ukraine war.

“You can’t have this rise at the fuel pumps not hit the economic pockets of everyday Americans,” siad G Squared Private Wealth Founding Partner Victoria Greene.

“Anything that rides on four wheels or six wheels to get anywhere including all your shipping, it’s going to make all your costs rise,” said Greene.

nes is a stock market reporter for Yahoo Finance. Follow her on Twitter at @ines_ferre

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