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Primerica Household Budget Index™: Fast Rising Gas Prices Putting Pressure on Middle-Income Purchasing Power
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Primerica, Inc. (PRI) releases the Primerica Household Budget Index™ (HBI™) for February 2024, showing a slight decrease in middle-income households' purchasing power due to rising gas prices. The index was at 101.2%, down from 101.6% in January 2024 and up from 95.9% a year ago.
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The introduction of the Primerica Household Budget Index (HBI) provides an interesting tool for gauging the economic health of middle-income households, which is a significant segment of the economy. The slight decline in purchasing power from January to February 2024, as indicated by the HBI, suggests a modest tightening of financial conditions for these families. This is reflective of broader economic trends, such as the uptick in gas prices, which can have a ripple effect on consumer spending and overall economic activity.
It's important to note that the HBI is more than just a number; it's a reflection of the ability of households to meet their financial obligations without incurring debt. A decrease in this index could signal a reduction in discretionary spending, which might lead to a contraction in certain sectors of the economy that rely on consumer spending. However, the index still being above 100% indicates that, on average, these households are not yet in a position where they are spending more than they earn.
Looking at the historical data, the peak in November 2020 followed by a sharp decrease due to inflation highlights the vulnerability of middle-income households to macroeconomic shifts. The cumulative additional spending since May 2021 is a concern as it may lead to increased debt levels if the trend continues. This is critical for businesses to monitor as it could predict future consumer behavior.
From a market perspective, the Primerica Household Budget Index serves as a barometer for consumer confidence and potential spending patterns. Businesses, particularly those in consumer goods, retail and financial services, should pay close attention to this index as it can impact their sales forecasts and marketing strategies. A decline in purchasing power often precedes shifts in consumer priorities, with a potential increase in demand for essential goods while luxury items may see a decrease.
The index's baseline comparison to January 2019 offers a pre-pandemic benchmark, which is useful for analyzing long-term trends. The fact that the HBI would be around 110% without the pandemic and inflation indicates a significant impact these factors have had on middle-income households. For businesses, this could mean adjusting their product offerings and pricing strategies to maintain relevance and competitiveness in a changing economic landscape.
Additionally, the HBI can serve as a leading indicator for stock market investors, as consumer spending drives a large portion of economic growth. A sustained decline in the index could signal caution, while an uptick might suggest a favorable environment for consumer discretionary stocks.
DULUTH, Ga.--(BUSINESS WIRE)--
Primerica, Inc. (NYSE: PRI), a leading provider of financial services and products in the United States and Canada, announced today the release of the Primerica Household Budget Index™ (HBI™), a monthly index illustrating the purchasing power of middle-income households with income between $30,000 and $130,000. In February 2024, the average purchasing power for middle-income households was 101.2%, slightly down from 101.6% in January 2024. The fast rise in gas prices, a 4.3% increase since the beginning of the year, impacted purchasing power for middle-income families in February. A year ago, the index stood at 95.9%.
Primerica Household Budget Index™ - In February 2024, the average purchasing power for middle-income households was 101.2%, slightly down from 101.6% in January 2024. A year ago, the index stood at 95.9%. (Photo: Business Wire)
HBI™ HISTORICAL BACKGROUND
The index baseline is set at January 2019 and can be thought of as when middle-income households set a budget based on their earned income at that time. Between 2014 and 2020, the HBI™ results recorded steady gains in purchasing power for middle-income families, with a peak of 105.1% in November 2020. This means that relative to January 2019, households were in a stronger financial position to pay their monthly bills because wage growth outpaced the cost of everyday goods. Increasing inflation then caused the index to plummet. In June 2022, it reached a post-pandemic low of 86.7%.
Since May 2021, when the HBI™ dipped below 100% for the first time since the pandemic, the average middle-income household has cumulatively spent around $2,425 more than budget on basic necessities. In line with this, if the pandemic and ensuing inflation would not have been a factor, the HBI™ today would be closer to 110%.
About the Primerica Household Budget Index™ (HBI™)
The Primerica Household Budget Index™ (HBI™) is constructed monthly on behalf of Primerica by its chief economic consultant Amy Crews Cutts, PhD, CBE®. The index measures the purchasing power of middle-income families with household incomes from $30,000 to $130,000 and is developed using data from the U.S. Bureau of Labor Statistics, the US Bureau of the Census, and the Federal Reserve Bank of Kansas City. The index looks at the cost of necessities including food, gas, utilities, and health care and earned income to track differences in inflation and wage growth.
The HBI™ is presented as a percentage. If the index is above 100%, the purchasing power of middle-income families is stronger than in the baseline period and they may have extra money left over at the end of the month that can be applied to things like entertainment, extra savings, or debt reduction. If it is under 100%, households may have to reduce overall spending to levels below budget, reduce their savings or increase debt to cover expenses. The HBI™ uses January 2019 as its baseline. This point in time reflects a recent “normal” economic time prior to the COVID-19 pandemic.
Periodically, prior HBI™ values may be revised due to revisions in the CPI series and Consumer Expenditure Survey releases by the U.S. Bureau of Labor Statistics (BLS). Beginning with the October 2023 release of the HBI™ data, health insurance costs will no longer be included in the calculation of the HBI™ data as part of the healthcare component because of some newly acknowledged methodology that has been used by the BLS to calculate the health insurance CPI. The health insurance CPI, as calculated by BLS, does not measure consumer costs of health insurance such as the cost of premiums paid or a combination of premiums and deductibles, but rather premium values retained by health insurers we do not believe it accurately reflects consumer experiences. The healthcare component will continue to include medical services, prescription drugs and equipment. Prior published values have been adjusted to reflect this change. For more information visit householdbudgetindex.com.
About Primerica, Inc.
Primerica, Inc., headquartered in Duluth, GA, is a leading provider of financial products and services to middle-income households in North America. Independent licensed representatives educate Primerica clients about how to better prepare for a more secure financial future by assessing their needs and providing appropriate solutions through term life insurance, which we underwrite, and mutual funds, annuities and other financial products, which we distribute primarily on behalf of third parties. We insured approximately 5.7 million lives and had approximately 2.9 million client investment accounts on December 31, 2023. Primerica, through its insurance company subsidiaries, was the #3 issuer of Term Life insurance coverage in the United States and Canada in 2022. Primerica stock is included in the S&P MidCap 400 and the Russell 1000 stock indices and is traded on The New York Stock Exchange under the symbol “PRI”.
What is the Primerica Household Budget Index™ (HBI™)?
The Primerica Household Budget Index™ (HBI™) is a monthly index that illustrates the purchasing power of middle-income households with incomes between $30,000 and $130,000.
What was the average purchasing power for middle-income households in February 2024?
In February 2024, the average purchasing power for middle-income households was 101.2%.
How did the rise in gas prices impact middle-income households' purchasing power in February 2024?
The fast rise in gas prices, a 4.3% increase since the beginning of the year, impacted purchasing power for middle-income families in February 2024.
What was the purchasing power index a year ago?
A year ago, the purchasing power index stood at 95.9%.
