Anthony Murphy and Isha Parmar

Despite consumer price inflation falling considerably since peaking in 2022, household inflation-related stress and concern remain elevated, having dropped only slightly.

Although most economists and policymakers tend to focus on the decline in inflation (the change in prices), a large share of households—especially low-income households—remain focused on still-elevated prices and the resulting difficulties paying expenses.

More than four in 10 households (45 percent) reported feeling highly stressed by rising prices in third quarter 2024, little changed from 47 percent in third quarter 2022. The incidence of high concern about anticipated inflation in the upcoming six months remained elevated at 57 percent of households in third quarter 2024 compared with 61 percent in third quarter 2022.

As wage growth picked up and exceeded the inflation rate in the wake of the pandemic, earnings among low-income households have risen more rapidly than for high-income counterparts. Still, it’s likely low-income households have been most pained by the pandemic-era inflationary spurt (Chart 1).

As noted in a previous article, the inflation experience of low-income and renter households is likely very different than that of high-income households for a variety of reasons. Among them, inflation is felt more acutely because of the goods that low-income households and renters purchase. Additionally, they have not benefited from the surge in house prices since the pandemic.

Household Pulse Survey data track trends

We use data from the Census Bureau’s online Household Pulse Survey, which began in spring 2020. The survey tracks households regarding COVID–19 concerns, child care issues, difficulty paying expenses, food insufficiency, the likelihood of eviction and, since fall 2022, current inflation stress and concern about future inflation. The most recent data here cover from mid-August to mid-September 2024.

We analyze quarterly trends in the “inflation stress” and “inflation concern” data. We look at the distribution of inflation stress by income group, since income is the most important determinant of stress. We also compare income stress and concern in Texas relative to the nation.

Inflation concern, stress questions posed

The Household Pulse Survey asked respondents, “In the area where you live and shop, how concerned are you, if at all, that prices will increase in the next six months?” Respondents chose from “very concerned,” “somewhat concerned,” “a little concerned” or “not at all concerned.”

The inflation stress survey question—“How stressful, if at all, has the increase in prices in the last two months been for you?”— was only asked of respondents who said that prices for goods and services had increased in the past two months. Possible answers were “very stressed,” “somewhat stressed,” “a little stressed,” or “not at all stressed.”

We focus on respondents who said that they were “very stressed” and/or “very concerned” about rising prices. For convenience, we refer to these groups as “high-inflation stress” and “high-inflation concern” respondents.

Households remain worried about inflation

The share of households reporting rising prices declined from 93 percent in third quarter 2022 to 81 percent in third quarter 2024 (Chart 2).

However, inflation stress and concern remain elevated, as indicated by the red and light blue bars in Chart 3. Most households remain worried about rising prices, despite the inflation rate decline.

Other financial stress indicators appear elevated

Have other indicators of financial stress also remained elevated? Responses regarding difficulty paying expenses, insufficient food, rent arrears and the likelihood of eviction cover a longer period than the inflation stress and concern data.

Focusing on the common data period beginning in third quarter 2022 and through third quarter 2024, we see little change in the share of households reporting that they find paying expenses very difficult or often do not have enough food (Chart 4, Panel A). 

Income remains most important stress determinant

Almost all households reported a small decline in inflation stress and concern. Nevertheless, the patterns of stress and concern with respect to income, housing tenure and household size, for example, resemble what we previously reported using earlier Household Pulse Survey data.

Inflation stress and concern are highly correlated with income—those with the lowest annual household incomes are the most stressed and concerned, whereas those with the highest incomes are least stressed. This suggests the burden of high inflation disproportionately affected the most vulnerable households (Chart 5, Panel A).

We estimated logit models to statistically assess the probability of a household relating high-inflation stress and concern (the “very stressful” or “very concerned” responses) to a set of potential determinants, including age, sex, marital status, household size, housing tenure, education and income. Household income was by far the most important determinant of high-inflation stress and concern during the period studied, the second and third quarters of 2024.

Using the logit model results, we also calculated the marginal, or ceteris paribus, effects of income that provide an estimate of how the incidence of high-inflation stress varies as household income changes, holding factors such as household size, housing tenure, race and ethnicity constant. (The marginal effects of income on inflation stress are the red bars in Chart 5 Panel B, whereas the blue bars are the raw effects from Panel A, using the level of stress of households with $75,000 to $100,000 annual income as a baseline.)

Very little of the variation in high-inflation stress (or concern) by income group is explained by factors other than income. For every income band, the raw effect of income (blue bars) and the marginal effect of income on its own (red bars), holding other factors fixed, are almost identical.

Higher inflation stress, concern greater in Texas

We previously noted that Texas is among states feeling most stressed by inflation. Although, inflation stress and concern levels in the state have declined since 2022, they remain considerably higher in Texas than in most other states (Chart 6, Panel A). Texas placed eighth for high-inflation stress and was 15th for inflation concern in third quarter 2024. Texas has always shown up among the top 10 states for inflation stress by quarter.

The share of households that reported finding it very difficult to pay expenses is also higher in Texas than in most other states (Chart 6, Panel B). Texas was the fifth-highest state among such households in third quarter 2024.

The higher level of inflation stress and concern in Texas reflects a greater prevalence of low- and moderate-income households, large households, renters and Hispanic households in Texas relative to the rest of the country.

Other things equal, these groups experience relatively greater financial stress, explaining why the state’s inflation stress and concern levels are comparatively high.

About the authors

Anthony Murphy
is a vice president in the Research Department of the Federal Reserve Bank of Dallas.

Isha Parmar
was an intern in the Research Department at the Federal Reserve Bank of Dallas.

The views expressed are those of the authors and should not be attributed to the Federal Reserve Bank of Dallas or the Federal Reserve System.