Inflation and Its Impact on Household Consumption Patterns

Abstract

Inflation, defined as a sustained rise in the general price level, exerts a pervasive influence on the economic welfare of households by eroding real purchasing power and reshaping the structure of consumption. An interval encompassing pre-pandemic stability, the demand and supply shocks of the COVID-19 pandemic, and the acute inflationary surge of 2022 and its subsequent moderation. Drawing exclusively on secondary data published by institutions including the International Monetary Fund (IMF), the World Bank, the Organisation for Economic Co-operation and Development (OECD), national statistical agencies, and central banks, the study synthesises evidence on how rising prices have altered the allocation of household budgets across food, energy, housing, and discretionary categories. The analysis is organised around five thematic data tables that trace headline and food inflation, shifts in budget shares, the differential burden of inflation across income groups, changes in saving behaviour, and consumer-confidence dynamics. Findings indicate that inflation disproportionately burdens lower-income households, who allocate a larger share of expenditure to necessities such as food and energy, and that the 2022 surge compelled widespread substitution toward cheaper goods, reduced discretionary spending, and a measurable decline in household saving rates. The paper concludes that the welfare consequences of inflation are profoundly unequal, that targeted fiscal support and credible monetary policy are essential to protecting vulnerable households, and that consumption resilience depends heavily on the speed with which price stability is restored. The study contributes a consolidated, evidence-based account valuable to policymakers and researchers concerned with the distributional consequences of price instability.