Spending Growth Diverges Across Income Groups as Pandemic Relief Ends
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New York Fed research shows real retail spending growth has been uneven across income groups since January 2023, with high-income households growing spending by 7.6% while low-income households grew by just over 1%. The divergence began after pandemic-era relief programs expired, and wealth and inflation are identified as key drivers. Recent months have seen real spending turn negative across all groups.
Facts First
- High-income households saw 7.6% spending growth through March 2026, according to New York Fed data.
- Middle-income households grew spending by about 3%, while low-income households grew by just over 1%.
- The spending divergence began in 2023 following the expiration of pandemic-era relief programs.
- Real spending has turned negative across all income groups in recent months.
- Wealth and inflation are identified as key drivers, with the top 1% gaining over 25% in real net worth since 2023.
What Happened
The Federal Reserve Bank of New York (New York Fed) released research regarding the K-shaped economy. Since January 2023, real retail spending has grown at an uneven pace across different income groups. High-income households experienced cumulative real spending growth of approximately 7.6%, while middle-income households saw a spending growth of about 3%, and low-income households saw spending growth of just over 1%. Prior to the COVID-19 pandemic, lower-income households outpaced wealthy households in spending growth. The divergence began in 2023 following the expiration of pandemic-era relief programs. New York Fed data shows that real spending has turned negative across all income groups in recent months.
Why this Matters to You
The uneven spending growth may reflect broader economic pressures that could affect your daily life. If you are in a middle- or low-income household, your ability to spend on goods and services appears to be growing much slower than that of higher earners. The recent negative spending trend across all groups suggests a broader economic slowdown that might impact retail prices and job stability. The research indicates that wealth and inflation are more powerful drivers of this dynamic than wage growth, which means your financial security may be increasingly tied to asset ownership rather than your paycheck.
What's Next
The New York Fed's identification of wealth and inflation as primary drivers suggests that future economic policy and relief efforts may need to address these factors directly to reduce the spending gap. The recent negative spending trend across all income groups will likely be monitored closely by policymakers to gauge the health of the broader economy. Analysts like Pantheon Macroeconomics may continue to examine whether the wealthy households' share of total consumer spending remains stable, as they have argued it has for 25 years.