Wealthy Boost Spending as Lower-Income Americans Struggle

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A new report from the Federal Reserve Bank of New York found that higher-income Americans and those with college degrees have increased their spending more quickly over the past three years compared to lower-income households. The data suggests a 'K-shaped' economic recovery, where upper-income consumers are fueling a disproportionate share of consumption, while those with lower incomes face higher inflation and slower spending growth.

Why it matters

The widening gap in spending and inflation between higher and lower-income Americans points to growing economic inequality that may be contributing to broader pessimism about the state of the economy. Policymakers will likely need to address these disparities to ensure a more equitable recovery.

The details

The New York Fed's data shows households with incomes of $125,000 or more have boosted their spending by 2.3% since 2023, after adjusting for inflation. Middle-income households earning between $40,000 and $125,000 increased spending by 1.6%, while those earning below $40,000 lifted spending by just 0.9%. The data also found that in the final quarter of last year, lower-income and rural households faced higher inflation than higher-income households, likely due to a greater share of their spending going towards goods like housing, groceries, and utilities that have seen sharp price increases.

• The data was released by the Federal Reserve Bank of New York on February 3, 2026.
• The spending data covers the past three years, from 2023 to the present.

What’s next

Policymakers will likely need to examine ways to address the growing disparities in spending and inflation between higher and lower-income Americans to promote a more equitable economic recovery.