U.S. Inflation Inequality between 2010 and 2023

Abstract

Following the literature that uses data from the Consumer Expenditure Survey and the consumer price index, this article examines U.S. households’ inflation experiences during the recent period from 2010 to 2023. We construct group-specific market baskets to reflect diverse spending patterns and identify key differences in inflation. Our main finding is that, although average inflation was higher and more volatile during this period, inflation inequality remained stable or even declined compared with the earlier period. Nevertheless, despite the overall similarity in households’ inflation experiences, the underlying drivers of inflation—by consumption category and specific subcategory—can differ significantly.

Introduction

Inflation is a key economic indicator that directly influences household purchasing power, yet its effects are not uniformly felt. This phenomenon, known as inflation inequality, has been documented in the United States through various studies using data from the Bureau of Labor Statistics (BLS). Early work by Michael (1979) and Hagemann (1982) analyzed consumer price index (CPI) data from the 1970s, while subsequent research by Hobijn and Lagakos (2005) and McGranahan and Paulson (2006) extended this analysis using BLS data spanning the mid-1980s to the early 2000s.

Our study contributes to this literature by examining more recent data from 2010 to 2023, offering updated insights into inflation inequality during a period characterized by significant economic transitions. This time-frame encompasses the low-inflation recovery following the global financial crisis, the economic disruptions caused by the COVID-19 pandemic, and the subsequent high-inflation period marked by global supply chain disruptions. These diverse economic conditions, coupled with substantial changes in consumption expenditure patterns during the pandemic (Cavallo, 2024), provide a rich context for examining how inflation experiences differ across the population.