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Primerica Household Budget Index™: Middle-Income Purchasing Power Held Steady in January
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Primerica, Inc. (PRI) releases the Primerica Household Budget Index™ (HBI™), showing middle-income households' purchasing power at 101.6% in January 2024, almost unchanged from December 2023. The index has steadily increased since 2014 but dropped to a low of 86.7% in June 2022 due to inflation. Middle-income families have overspent by $2,425 on basic needs since May 2021, with potential growth to 110% without pandemic and inflation impact.
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Insights
The introduction of the Primerica Household Budget Index (HBI) provides a quantifiable measure of the purchasing power of middle-income households, which is a significant segment of the economy. The stability of the index from December 2023 to January 2024 suggests a relative stabilization in the economic conditions for these households. However, the increase from the previous year indicates a recovery in purchasing power, which could imply that wage growth is keeping pace with, or outpacing, inflationary pressures.
From an economic standpoint, this data is essential for understanding the financial health of the middle class. Since consumer spending is a primary driver of economic growth, the HBI can serve as a leading indicator of consumer confidence and potential spending behavior. A stable or increasing HBI could signal a positive outlook for retail and consumer goods sectors, potentially impacting stock valuations in these industries.
For investors, the HBI serves as a tool to gauge the financial well-being of the consumer base that Primerica and similar financial services companies target. The index's baseline comparison to January 2019 allows for a long-term view of consumer financial trends. The historical context provided, showing a peak in November 2020 and a significant dip during the pandemic, offers insight into the volatility and resilience of the consumer market.
Investors can use this data to inform decisions regarding sectors that are sensitive to consumer purchasing power, such as discretionary spending and financial services. The fact that the HBI has remained relatively stable suggests that there may not be immediate concerns about consumer default rates, which could impact the financial sector and credit markets.
Analyzing the Primerica Household Budget Index from a market research perspective reveals the shifting dynamics of consumer behavior. The index's indication that households have cumulatively spent more than budgeted on necessities could suggest a shift towards more budget-conscious spending habits. This could lead to increased demand for value-based products and services, affecting companies' product development and marketing strategies.
Furthermore, the potential of the HBI reaching 110% without the pandemic and inflation indicates a suppressed consumer potential. Businesses should consider this latent purchasing power when strategizing for future growth, particularly as economic conditions improve and inflationary pressures ease. This could lead to a rebound in sectors that have been hit hard by reduced consumer spending during the pandemic.
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 January 2024, the average purchasing power for middle-income households was 101.6%, relatively unchanged compared to 101.7% in December 2023. A year ago, the index stood at 95.6%.
Primerica Household Budget Index™ (HBI™) - In January 2024, the average purchasing power for middle-income households was 101.6%, relatively unchanged compared to 101.7% in December 2023. A year ago, the index stood at 95.6%. (Graphic: 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”.
