Inflation hit rural household budgets harder throughout much of 2022, but the rural-urban gap evened out by the end of the year, a report shows.

The widely cited inflation data released monthly by the US Bureau of Labor Statistics (BLS) is the common benchmark for tracking price changes. It’s a crucial gauge that swings financial markets and drives policy decisions. But as a national measurement, that data—called the consumer price index (CPI)—has some limitations. While it breaks out inflation rates for nine geographic areas, it doesn’t account for rural prices. The surveys used for CPI calculations are only conducted in urban areas.

So when people asked David Peters how hard inflation was hitting rural Iowa, he didn’t have a ready answer beyond anecdotes. Now he has at least a rough idea. Peters, a professor of sociology and a rural sociologist for Iowa State University Extension and Outreach, combined CPI rates for various goods and services with urban and rural spending patterns from the BLS consumer expenditure survey to estimate how rising prices have affected households in both types of living areas. After releasing an initial version in July 2022, Peters updated the report.

Peters’ analysis shows that rural households were paying an extra $300 per month because of inflation in 2021, but the urban-rural gap in additional expenses was modest, fluctuating between about $15 per month either way. But when transportation costs shot up starting in early 2022, largely due to higher gas prices, rural households felt it more. For the first two-thirds of the year, inflation cost rural households at least an extra $450 per month—between $60 and $90 more than urban households.

“People who live in rural areas drive everywhere, so they’re impacted more by higher gas and diesel prices,” Peters says.

Rural life typically involves more driving because jobs, schools, stores, and services are spread out farther, he says. Alternatives such as public transportation and carpools are far less available, and vehicles tend to be older and less fuel efficient. The BLS data used for the analysis defines rural as living in neither a city with a population above 2,500 nor a county that’s part of a metropolitan area.

Rising prices have been a potent drag on all household budgets but especially in rural areas, where expenses over the two-year period ending in December increased by $8,120 (compared to $7,480 for urban households). Strong farming revenue helped drive rural income up over that time, but not enough to keep pace with expenses. From 2020 to 2022, discretionary income in urban households fell from $12,374 to $7,142. In rural areas over the same period, discretionary incomes fell from $8,165 to $5,433, leaving about $450 free per month.

Read the full article about gas prices for rural households by Dave Ropke at Futurity.