A slim slice of consumers in the top quintile of incomes is doing the majority of spending in this economy.

Apple’s latest financial results give us a glimpse into this phenomenon. After a couple years of lagging sales, the release of the iPhone 17 led to double-digit growth in iPhone sales in the last quarter. The retail price of that new phone: $799 dollars. 

This concentration of spending at the top has been building for decades, driven by widening wealth inequality, said Kristina Sargent, an economist at Middlebury College.

“Higher earners have seen strong wage growth and massive gains in wealth from stock and housing. Meanwhile, middle- and lower-income households are squeezed by rising costs like rent and childcare, groceries, the basics,” she said.

This inequality has really shown up in spending the last few years, as consumers have grappled with inflation. 

And it’s changed the kinds of things people in different economic classes buy, said Leo Feler at the consumer insight company Numerator.

“Everyone has kept buying food. Everyone has kept buying health and personal care items such as deodorant and soap and toothpaste,” he said.

But then, there’s pretty much everything else — vacations, restaurants, discretionary goods.

“This is going to include things like toys, electronics, sporting goods, apparel. This is where we really see a big pullback amongst lower-income consumers, and higher-income consumers have continued to spend,” he said.

The potential trouble with an economy propped up by the wealthiest is that a lot of them are feeling wealthy thanks to the stock market, said Sargent

“So if the stock market dips, that can ripple out really quickly, and the wealthier households make fewer big ticket purchases, we see slower demand and then knock-on effects for jobs,” she said.

It’s like the economy is a table, balancing on just three legs, Sargent said. “You’re fine in good times, but it gets shakier as things turn to be a little bit less stable,” she said.

But Betsey Stevenson, an economist at the University of Michigan, said the concern that the wealthy might pull back in a downturn could be a bit overblown. 

“The higher -ncome people tend to have savings as well as access to borrowing, and so they don’t change their consumption very much as their wealth moves around,” she said.

The real risk to a K-shaped economy, Stevenson said, is social and political instability.

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