The U.S. economy is increasingly being propped up by its highest earners, as affluent Americans continue to spend freely while lower-income households tighten their belts amid rising living costs and persistent inflation.
Recent data shows a widening gap in consumer behavior across income levels – a trend that’s reshaping sectors from travel and autos to packaged foods and even discount retailers.
Airlines, for example, are seeing robust demand from premium travelers. Delta Air Lines CEO Ed Bastian told Yahoo Finance that the company’s “high-end consumer” base remains financially strong and eager to travel, noting that its premium cabin revenue climbed 9% year over year last quarter.
United Airlines CEO Scott Kirby echoed that sentiment, highlighting that wealthier, brand-loyal passengers have kept planes full even as lower-income travelers pull back.
United’s premium revenue jumped 6% in the same period.
The Federal Reserve’s latest Beige Book confirmed this divide, reporting that “spending by higher-income individuals on luxury travel and accommodation was reportedly strong,” while lower- and middle-income households increasingly sought “discounts and promotions” to manage financial strain.
According to the Bank of America Institute, spending among households in the top third of the income spectrum rose 2.6% in September compared to last year, versus just 0.6% for the lowest third.
The divergence, experts say, is largely driven by wage growth disparities.
David Tinsley, senior economist at the Bank of America Institute, explained that wages for top earners rose 4% over the past year, while the lowest earners saw only a 1.4% increase not enough to keep pace with inflation.
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“That divergence has widened really over the last six months,” he said, identifying it as the “primary driver” of the spending gap.
Stock market performance is also playing a role. The S&P 500 has gained over 12% in the past year, bolstering the confidence and spending power of wealthier Americans who hold substantial investments.
The auto industry provides another clear example. The average price of a new car surpassed $50,000 last month, according to Kelley Blue Book, a record driven largely by affluent buyers splurging on luxury vehicles such as Cadillac Escalades and Ford F-150 pickups.
Meanwhile, lower-income consumers are feeling the squeeze. PepsiCo CEO Ramon Laguarta told investors that the company’s budget-conscious customers are “very stretched” as inflation bites into disposable income.
In response, the food giant is developing smaller, more affordable product sizes to cater to cash-strapped shoppers. Even discount chains are benefiting from these shifting dynamics.
Dollar Tree’s multiprice strategy – with price points ranging from $1.35 to $5 has not only attracted bargain hunters but also wealthier shoppers “trading down.”
CEO Michael Creedon said the trend has proven “highly accretive” to the company’s performance.
