When it comes to unraveling the real-life impact of those government-reported inflation numbers, the truth is, well, complicated. While the latest Consumer Price Index published by. The Bureau of Labor Statistics for January 2026 shows that the overall rate of inflation has fallen to 2.7 percent year-over-year, that’s not the whole story. The overall inflation rate dropped in January primarily because of one category: Gasoline, which saw prices fall by 7.5 percent over the last year. The only other category to fall was used cars and trucks, which lost 2.0 percent. New cars saw a very minor increase by .2 percent. Prices in just about every consumer category rose, however. Some saw big increases. Electricity rose by 6.3 percent over the past year, and natural gas jumped by 9.8 percent. Among the other key categories where prices continue to rise are: - Groceries rose by 2.9 percent, while dining out cost 4.0 percent more. - Shelter costs increased by 3.0 percent. - Medical care rose by 3.9 percent. - Apparel rose by a modest 1.7 percent, while personal care products and services increased by 5.4 percent. While not included in the Consumer Price Index, health insurance is also a category seeing big increases in premiums in 2026. Employer-sponsored plans are costing participants 6 to 7 percent more than last year, while health insurance purchased through the ACA marketplace is costing participants 20 to 26 percent more this year. It’s no wonder consumers are feeling the squeeze this year, and “affordability” continues to be a top concern for the majority of Americans. **CONSUMERS CONTINUE TO LOSE GROUND** Average wages continue to grow but not enough to keep workers significantly ahead of inflation. The chart below shows the last two years’ worth of job growth against the rate of inflation. Consumers have only barely outpaced inflation by 1 percent over the last two years. | Month | Wage Growth (YoY) | CPI (Inflation) | Real Gain/Loss | | --------: | :---------------: | :-------------: | :------------: | | Jan 2024 | 4.40% | 3.10% | 1.3% | | June 2024 | 3.90% | 3.00% | 0.9% | | Dec 2024 | 4.10% | 2.90% | 1.2% | | June 2025 | 3.70% | 2.70% | 1.0% | | Dec 2025 | 3.70% | 2.70% | 1.0% | | Jan 2026 | 3.70% | 2.40% | 1.3% | _Sources: Federal Reserve Bank of Atlanta Wage Tracker, U.S. Bureau of Labor Statistics (BLS)_ How are consumers responding to slow wage growth? It depends on who they are. For the wealthy, spending has slowed little, if at all. With stock market gains fueling their wealth, they continue to buy luxury goods and travel and seem to be easily absorbing the nearly across-the-board price hikes. But middle- and lower-income consumers are being cautious about big-ticket purchases, dining out less often, and switching to generic brands. Instead of pricey new cars, they are turning to used vehicles, and rather than upgrade their electronic devices every time a new model comes out, they are holding on to them longer.