Fed Study: Wealthy Americans Drive Spending Boom as Others Lag Behind/ Newslooks/ WASHINGTON/ J. Mansour/ Morning Edition/ A new study from the New York Federal Reserve shows that high-income Americans are significantly increasing their spending while lower-income households struggle to keep up. Inflation continues to hit rural and poor communities harder, deepening the divide. The data supports a growing “K-shaped” economy where prosperity is unevenly shared.
Wealth Inequality in Consumer Spending Quick Looks
- High-income earners have boosted inflation-adjusted spending by 2.3% since 2023.
- Lower-income households have only increased spending by 0.9% in the same period.
- Rural and low-income households faced higher inflation in late 2025.
- The data excludes services like travel and entertainment, where the wealthy also spend more.
- Fed economists cite the widening gap as a clear example of a “K-shaped” recovery.
- In 2021–2022, stimulus and wage gains helped low-income earners temporarily.
- Post-2023, stock market gains and slowing job growth favored higher-income groups.
- College-educated households have increased spending by 4% since 2023.
- Non-college households only recently returned to early 2023 spending levels.
- The study is part of the Fed’s new heterogeneity indicators tracking economic inequality.
Deep Look: Wealthy Americans Outpace the Rest in Post-Pandemic Spending Recovery
WASHINGTON (AP) — A newly released analysis from the Federal Reserve Bank of New York reveals a growing divide in U.S. consumer behavior: wealthy Americans are driving spending growth, while lower-income and rural households continue to fall behind.
The data, covering goods purchases (excluding automobiles), shows that households earning $125,000 or more have increased their inflation-adjusted spending by 2.3% since 2023. In contrast, middle-income earners ($40,000–$125,000) saw a more modest 1.6% gain, while lower-income households (under $40,000) barely moved the needle, with just a 0.9% increase in inflation-adjusted spending.
The figures feed into the narrative of a “K-shaped economy”, where wealthier Americans continue to benefit from rising asset values and economic resilience, while others remain stuck, contending with stagnant wages and higher inflation.
Inflation Hits Harder at the Bottom
The report also notes that lower-income and rural households bore the brunt of inflation in late 2025, facing higher price pressures than their upper-income counterparts. These households typically allocate a larger share of their budgets to essential goods — such as housing, groceries, and utilities — which have seen substantial price hikes since the pandemic began.
That exposure, combined with a decline in pandemic-era financial support and slower job growth since 2023, has squeezed working-class families.
Education Splits the Economic Recovery
A similar divide emerges when comparing households by education level. From early 2023 through most of 2024, non-college-educated households saw their real spending dip below 2023 levels and only recovered by November 2024. Meanwhile, college-educated households had already surpassed those levels and recorded a 4% increase in inflation-adjusted spending.
Despite job losses in white-collar industries like tech, marketing, and government, the data shows that college-educated households continued spending at an elevated pace throughout 2025, suggesting greater financial resilience.
“The difference in the trend in retail spending between college graduates and non-graduates is consistent with the story of a ‘K-shaped economy,’” wrote Rajashri Chakrabarti, economic research advisor at the New York Fed, alongside three colleagues.
What the Fed Is Tracking
This latest report is part of the Fed’s economic heterogeneity indicators, designed to offer deeper insights into how economic conditions vary across income brackets, education levels, and geographic regions.
The findings highlight the persistent challenges in crafting economic policies that effectively serve the broader population, especially as upper-income households drive most consumer activity, which makes up about 70% of U.S. GDP.
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