Rural Americans hit harder by inflation but that may change

(NewsNation) — Rural Americans have been hit harder by high inflation than urban dwellers over the past two years but that may be set to change in 2023, according to a new report.

From 2020 to 2022, rural households paid an estimated $8,120 extra due to inflation, almost 9% more than urban households over the same time period, Iowa State University professor Dave Peters found.

Peters, who specializes in rural sociology, said much of the difference can be explained by the rise in transportation costs.

Those living in rural areas tend to drive more. They have longer commutes to work and often travel farther for needs like grocery shopping and essential services like education and health care.

As gas prices and used car prices rose to record highs, rural Americans — about 46 million people — were more likely to feel the pain.

Over the past two years, rural residents paid $1,620 more for gasoline and diesel fuels than they did in 2020, according to Peters.

His recent analysis provides insight into a trend that can be difficult to measure: the impact of rising inflation on rural Americans.

That’s because the main indicator of inflation, the Consumer Price Index, specifically tracks the price urban Americans pay for a set basket of goods. Those living in rural areas, towns outside metro areas with fewer than 2,500 people, are not surveyed.

The lack of clear data may be obscuring some of the financial pressures people in rural communities now face.

Since 2020, rising costs have cut into rural households’ discretionary income, which was already lower than urban households’ to begin with, Peters found.

Today, expenses consume 93% of rural takehome pay. That’s left the average rural household with just $5,430 remaining for the year.

“That’s not a lot to save for your kids’ college or to save for your own retirement, or other things that might improve your future,” Peters pointed out.

It also means rural households are more vulnerable to unexpected costs like a broken furnace or a health emergency.

But recent evidence suggests the inflationary burden may be shifting toward urban dwellers.

After peaking at more than $5 a gallon in June, fuel prices have dropped to $3.50 for regular gasoline. Diesel prices have also fallen from $5.80 a gallon to $4.67. Both those declines have eased the pressure on rural Americans.

At the same time, housing rental costs in rural areas fell in 2022 despite increasing in urban areas.

“We are in a major housing crisis, an affordable housing crisis, due to a variety of factors and that’s going to hurt urban areas much worse,” said Peters.

If the current trends continue, he expects inflation in 2023 will be worse for urban consumers.

For rural Americans, Peters believes health insurance may become the primary inflation issue going forward.

His analysis found a sharp increase in the price of health insurance for rural workers, who are more likely to be self-employed and buy their insurance on the open market.

Peters worries rising rates could lead many rural households to opt out of health insurance altogether.

If they do, rural families could be one medical emergency away from large bills at the hospital, he said.

Overall, the inflation rate has slowed in recent months, a development that will come as welcome news for urban and rural Americans alike.

Annual inflation hit 6.5% in December, down from 9.1% in June but still well above the target rate.

On Wednesday, the Federal Reserve raised its benchmark interest rate by another quarter point. That will make it more expensive to borrow for homes, automobiles and other purchases but could help lower prices down the road.

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