Bank of America report: gas prices squeeze lower-income household budgets

Key Points:

• American households, especially lower-income ones, are spending a higher share of their income on gas due to rising fuel prices driven by the Iran conflict, with lower-income households spending 4.2% of their income on gas in March, up from 3.9% last year.
• About 10% of lower-income consumers spent more than 10% of their income on gas in March, compared to 6% of higher-income households, highlighting the disproportionate impact on those with less discretionary income.
• Gas prices surged past $4.50 per gallon nationally after oil prices rose above $100 a barrel due to the Iran war, causing a 40% increase in gas prices and straining consumer budgets similarly to past crises like the 2008 financial crisis and the post-COVID period.
• While higher-income households have seen wage growth of over 5%, lower- and middle-income groups have experienced much smaller increases (1% and 2%, respectively), leading some consumers to rely more on credit cards and buy now, pay later options to manage expenses.
• Despite the pressure from higher gas prices, many households have increased their savings by about 10% compared to pre-pandemic levels, partly due to larger tax refunds, which may help them buffer the financial impact temporarily.