Spending Diverges Among Income Groups, Worsening Inequality

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A new report from the Federal Reserve Bank of New York reveals that higher-income Americans and those with college degrees have increased their spending more quickly over the past three years compared to other consumers. The data also shows lower-income and rural households faced higher inflation than higher-income households in the final quarter of last year, adding to evidence of a 'K-shaped' economic recovery.

Why it matters

The spending data highlights worsening inequality in the U.S. economy, with upper-income Americans fueling a disproportionate share of consumption that drives the overall economy, while lower-income households see fewer gains. This trend contributes to growing pessimism about the economy among some Americans.

The details

The New York Fed's data shows households with incomes of $125,000 and higher have boosted their spending 2.3% since 2023, adjusted for inflation, while middle-income households between $40,000 and $125,000 have increased spending by 1.6%. Those earning below $40,000 have lifted their spending by just 0.9%. The data only captures spending on goods excluding autos and does not include likely higher-income spending on travel, restaurants and entertainment.

• The data covers the past three years, from 2023 to the present.