Sustained high energy prices are starting to hammer lower-income consumers, calling into question how much longer the US economy can continue to shrug off the effects of the Iran conflict.
By the numbers: The surge in gas prices has meant rapidly deteriorating spending power for lower-income consumers, Citi analyst Jon Tower warned in a note on Wednesday
Tower’s data shows aggregate purchasing power (netting wages and job growth against inflation) dipped negative for all sub-$50,000 (annual income) consumers in April. Compared to last year, middle-income consumers ($50,000-$70,000) are paying over $90 per month more for essentials, and more than $75 of that increase has happened in the past two months. “Growth in spending power is slowing across the board,” warned Tower. The latest on fuel prices: Gas prices in the US have reached a boiling point, with the national average for regular unleaded gasoline surging to $4.51 per gallon, according to AAA data.
This represents a dramatic 50% increase since the start of the Iran conflict in late February, when prices were hovering around $3. Over the past month alone, drivers have seen the average gas price jump by approximately $0.40, driven by the effective closure of the Strait of Hormuz, which has sent Brent crude oil (BZ=F) prices spiraling toward $117 per barrel. Compared to last year, when the average was a more manageable $3.15, Americans are now paying roughly $1.36 more per gallon.