Coca-Cola\u2019s chief operating officer, Henrique Braun, said the company continued to see \u201cdivergency in spending between the income groups\u201d last quarter. \u201cThe pressure on middle- and low-end-income consumers is still there.\u201d<\/p>\n
The widening K<\/p>\n
The U.S. economy has been turning more \u201cK\u201d-shaped for decades, with the high-earner cohort doing better and better while others fall further down the economic ladder.<\/p>\n
In 1989, the top 10% of U.S. wealth holders already controlled about 61% of the total wealth in the economy, according to Federal Reserve data<\/a>. Today, it\u2019s about 67%.<\/p>\n<\/p>\n While inequality has grown throughout this period, its rate of growth has ebbed and risen.<\/p>\n For example, signs of bifurcation blared louder<\/a> during the first six months of the Covid-19 pandemic. As the stock market began to recover its early losses, huge parts of the economy remained shut down.<\/p>\n But these signs receded somewhat in the following years, as government stimulus checks and loan-payment forbearance helped boost the fortunes of lower-income households.<\/p>\n Five years on, worrying signals of inequality are roaring back into view. This time, the cracks appear to be hardening.<\/p>\n Average worker pay only barely outpaces inflation \u2014 which remains above the Federal Reserve\u2019s 2% target. But the pace of that wage growth is higher for salaried workers than for those paid by the hour, according to data<\/a> from the Atlanta Federal Reserve.<\/p>\n For nearly all workers, the employment outlook is uncertain, with mass layoffs in the news and AI doing work that people used to do.<\/p>\n \u201cWhile upper-income consumers are doing great and benefiting from the wealth effect of owning their home and having a stock portfolio, anyone renting or who doesn\u2019t own stocks is not,\u201d said Peter Boockvar, chief investment officer at OnePoint BFG Wealth Partners. \u201cAt best, their wages are only keeping up. They\u2019re doing a lot of running in place.\u201d<\/p>\n Two kinds of consumers<\/p>\n The same K shape that characterizes widening income inequality is reflected in consumer spending.<\/p>\n As a result, the volume of companies reporting evidence of a two-tiered economy among their customers surged in recent weeks.<\/p>\n Chipotle CEO Scott Boatwright said the restaurant chain had seen the divide among its customers deepen just in the past few months.<\/p>\n \u201cEarlier this year, as consumer sentiment declined sharply, we saw a broad-based pullback in frequency [of restaurant visits] across all income\u201d levels, he said on Chipotle\u2019s earnings call Wednesday.<\/p>\n \u201cSince then, the gap has widened, with low- to middle-income guests further reducing frequency\u201d of their visits, he said.<\/p>\n Younger adults ages 25 to 35 are being particularly hard hit, said Boatwright. \u201cThis group is facing several headwinds, including unemployment, increased student loan repayment and slower real wage growth.\u201d<\/p>\n It\u2019s not just fast-casual dining that\u2019s feeling the loss of lower-income customers.<\/p>\n On Tuesday, the CEO of snack giant Mondelez said the company saw weakness in its cookie and cracker segment last quarter partly due to \u201cvalue-seeking consumers increasingly turning to discounters and club stores.\u201d<\/p>\n Yet a decline in consumers willing to pay for name-brand snacks like Oreos and Chips Ahoy is only part of the challenge, said chief executive Dirk Van de Put.<\/p>\n \u201cHigher-income consumers increasingly are choosing premium and better-for-you products,\u201d he said, a category that excludes many of Mondelez\u2019s biggest sellers.<\/p>\n The twin issues, he said, were starting to affect the company\u2019s bottom line.<\/p>\n Washington is watching<\/p>\n The growing inequality between a small percentage of consumers and everyone else has caught the attention of the Federal Reserve.<\/p>\n Fed Chair Jerome Powell said he had noticed the surge in consumer-oriented companies reporting split-screen spending patterns.<\/p>\n They \u201care saying there is a bifurcated economy there, and that consumers at the lower end are struggling and buying less and shifting to lower-cost products,\u201d Powell said Wednesday.<\/p>\n \u201cBut at the top, people are spending, at the higher income and wealth,\u201d said Powell. \u201cSo, we think there is something there.\u201d<\/p>\n President Donald Trump\u2019s tariffs are part of the equation, too, Fed governor Christopher Waller told CNBC.<\/a><\/p>\n Rising prices on a subset of consumer goods hit with tariffs has contributed to a \u201ctwo-tier\u201d spending scenario where higher-income shoppers had become virtually \u201cprice insensitive,\u201d he said.<\/p>\n Meanwhile, lower-income customers will simply \u201cwalk out the door\u201d if they see higher prices, Waller said.<\/p>\n The wealthy keep shopping<\/p>\n As lower-income consumers pull back, spending by the top half of the K is increasingly helping to keep the economy humming.<\/p>\n The top 10% of earners account for about half of all consumer spending, according to recent estimates<\/a> from Moody\u2019s Analytics.<\/p>\n This month, American Express reported that spending by its typically higher-income card holders accelerated by 8%. The number of newly opened \u201cPlatinum Card\u201d accounts doubled, partly due to a recent \u201crefresh\u201d of the card\u2019s perks.<\/p>\n Automakers and airlines have likewise expanded their higher-end offerings \u2014 with stellar results.<\/p>\n Delta Air Lines now expects sales of premium seats like Comfort-Plus to exceed sales of main cabin seats for the first time, starting next year.<\/p>\n \u201cPremium products used to be loss leaders, and now they\u2019re the highest-margin products,\u201d airline President Glen Hauenstein said on the company\u2019s recent earnings call.<\/p>\n Likewise, Ford and GM both reported<\/a> booming sales for their largest and most expensive SUVs.<\/p>\n \u201cToday\u2019s auto market is being driven by wealthier households who have access to capital, good loan rates and are propping up the higher end of the market,\u201d Erin Keating, an executive analyst at Cox Automotive, wrote in September<\/a>.<\/p>\n Beyond consumer spending<\/p>\n Simply looking at consumer behavior may not capture the full financial picture of American households, said Chris Wheat, managing director at JPMorganChase & Co. and president of the the bank\u2019s research institute.<\/p>\n \u201cJust looking at spending, do you really have the full picture of \u2018How K-shaped is the K?\u2019\u201d he said. \u201cThere are other ways people might be taking advantage of some of the economic growth we\u2019ve been experiencing.\u201d<\/p>\n For example, there are signs that more lower-income households are investing in the stock market than a decade ago.<\/p>\n![\"A](\"https:\/\/www.newsbeep.com\/uk\/wp-content\/uploads\/2025\/11\/250529-covid-RS-74d50d.jpg\")
A woman wears a mask in New York on Aug. 6, 2020, amid the Covid-19 pandemic.Cindy Ord \/ Getty Images<\/p>\n![\"US](\"https:\/\/www.newsbeep.com\/uk\/wp-content\/uploads\/2025\/11\/251031-empty-restaurant-ew-512p-219c60.jpg\"){kind=spacer}
An empty patio at a restaurant in Dayton, Ohio, on Oct. 21, 2025.Kyle Grillot \/ Bloomberg via Getty Images file<\/p>\n![\"A](\"https:\/\/www.newsbeep.com\/uk\/wp-content\/uploads\/2025\/11\/251031-louis-vuitton-shopper-ew-352p-28da65.jpg\")
A shopper carries a Louis Vuitton store bag in New York on Sept. 6.Michael Nagle \/ Bloomberg via Getty Images file<\/p>\n
![\"US](\"https:\/\/www.newsbeep.com\/uk\/wp-content\/uploads\/2025\/11\/251031-wall-street-ew-345p-8b80b6.jpg\")
The New York Stock Exchange on July 2.Michael Nagle \/ Bloomberg via Getty Images file<\/p>\n