The wealthy ramp up spending while other Americans tread water, new study finds

WASHINGTON (AP) — Higher-income Americans and those with college degrees have ramped up their spending more quickly in the past three years than other consumers, according to pessimism about the economy.

The data, released by the Federal Reserve Bank of New York, also show that in the final three months of last year, lower-income and rural households faced higher inflation than higher-income households. The spending data focuses only on goods excluding autos, and does not capture likely spending by higher-income households on travel, restaurants and entertainment.

The figures add support to the notion of a “K-shaped” economy, in which upper-income Americans are fueling a disproportionate share of the consumption that is the primary driver of the economy, while lower-income households see fewer gains. Poorer households in general often experience higher inflation, with a greater share of their spending being set aside for goods that have seen prices soar since the pandemic, things like housing, groceries, and utilities.

The New York Fed’s data show that households with incomes of $125,000 and higher have boosted their spending 2.3%, adjusted for inflation, since 2023, while middle-income households — those between $40,000 and $125,000 — have increased their spending by 1.6%. Those earning below $40,000 have lifted their spending by just 0.9%, the report showed.

The figures are an addition to the New York Fed’s economic heterogeneity indicators, a series of data sets intended to track variations in the economy by geographic region and demographic and income groups.