Primerica Household Budget Index™: Middle-Income Purchasing Power Edges Higher Amid Gas and Auto Insurance Relief

The Primerica Household Budget Index™ (HBI™) for the first quarter of 2025 offers a glimmer of hope for middle-income households, as a modest decline in gas prices and auto insurance costs nudged purchasing power higher. After months of inflationary pressures eroding budgets, the March 2025 HBI™ rose to 99.6%, marking a 0.2% monthly improvement and a 1.3% year-over-year gain. While this still falls short of the pre-pandemic baseline of 100% (set in January 2019), the data underscores a fragile recovery for households earning between $30,000 and $130,000 annually.

A Month-by-Month Breakdown

• January 2025: The HBI™ dipped to 99.7%, driven by a 1.8% surge in gas prices and a 12% annual spike in auto insurance costs. This reversed a prior downward trend, squeezing budgets and pushing necessity-driven inflation to 4.4% year-over-year.
• February 2025: Gas prices climbed another 1.3%, while auto insurance rose 0.9%, pushing the HBI™ down to 99.4%. Middle-income households spent an extra $110 monthly on necessities compared to January.
• March 2025: The tide turned. Gas prices dropped 0.9%, and auto insurance costs fell 0.6%, lifting the HBI™ to 99.6%. However, food (+0.3%), utilities, and healthcare costs offset gains, keeping the index below its 2019 baseline.

The Bigger Picture: Inflation and Sentiment

While March brought relief, broader trends remain concerning. Middle-income households face a 3.6% annual inflation rate—0.8% higher than the overall U.S. CPI of 2.8%. Utilities, healthcare, and food costs, which account for over 30% of household budgets, continue to rise.

The Primerica Financial Security Monitor™ (FSM™) reveals why optimism is scarce:
- 65% of respondents say their income isn’t keeping up with costs—a sentiment unchanged for 14 straight quarters.
- 62% expect their financial situation to worsen or stay the same in the next year, with younger generations (75% of Millennials) bearing the brunt of anxiety.

Investment Implications

1. Energy Sector: The dip in gas prices could benefit industries like airlines or logistics, but oil prices (CL) remain volatile. Investors should monitor geopolitical risks and supply dynamics.
2. Auto Insurance: The March decline hints at market saturation or regulatory shifts. Insurers like Allstate (ALL) or Geico (BRK.A) may face margin pressures unless they can curb costs.
3. Utilities and Healthcare: Steady cost increases in these sectors favor defensive plays, such as regulated utility stocks (XLU) or healthcare ETFs (like XLV).
4. Consumer Discretionary: Caution is warranted. Middle-income households are 71% more likely to struggle with saving, suggesting reduced spending on non-essentials.

Conclusion: A Fragile Glimmer of Hope

The HBI™ data paints a mixed picture: while March’s dip in gas and auto insurance costs provided temporary relief, persistent inflation in utilities and healthcare keeps households treading water. With 65% of middle-income Americans still feeling financially out of sync, investors must prioritize sectors insulated from necessity-driven inflation or poised to benefit from consumer spending shifts.

The 1.3% year-over-year HBI™ improvement in March hints at a gradual recovery, but the path ahead is narrow. As long as 4% wage growth trails necessity inflation (now at 4.2% annually), middle-income households—and the sectors they support—will remain vulnerable to economic headwinds.

For investors, this is a call to focus on diversification and resilience: allocate to stable utilities, monitor energy volatility, and avoid overexposure to discretionary sectors. The middle class’s financial health is a barometer for the broader economy—and right now, it’s sending a cautious signal.