Tracking the K‑Shaped Economy: Who’s Driving Spending?

Aggregate real consumer spending has risen solidly since 2023. However, it is less clear how widely shared this improvement has been across all segments of society. This is important because systematic heterogeneity may mask the dependence of aggregate growth on a relatively small group of households and thus conceal macroeconomic risks. In this post, we use consumer spending data recently added to the Economic Heterogeneity Indicators (EHIs) and find that retail spending growth has been driven by high-income households—those earning more than $125,000 per year. In the popular press, the phenomenon of higher-income households growing at a faster rate than lower-income households has been referred to as the K-shaped economy . We find that consumption has exhibited a K-shaped economy since 2023, although not in the pre-COVID period or during the post-COVID recovery.