Shaped Economy: Who’s Driving Spending?

Key Points:

• Since 2023, aggregate real consumer spending has grown solidly but this growth has been primarily driven by high-income households earning over $125,000 annually, indicating a K-shaped economic recovery.
• Analysis using Numerator consumer spending data, benchmarked against official retail trade surveys, shows that real retail spending increased for high-income groups while stagnating or declining for low- and middle-income households.
• Income-specific retail price deflators reveal that inflation impacts spending differently across income groups, with low-income households experiencing real spending declines for part of the period and middle-income growth stalling in 2023.
• Within the high-income bracket, higher nominal and real spending growth is observed in higher sub-brackets, except for the top earners ($250,000+) who spend more on services not fully captured by retail data.
• This K-shaped spending pattern contrasts with pre-COVID and pandemic periods, when lower-income groups saw stronger spending growth due to relief measures and labor market conditions, highlighting current economic vulnerabilities tied to reliance on high-income consumer spending.