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Wealthy U.S. Households Boost Inflation‑Adjusted Spending While Poorer Families Lag

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Higher‑Income Consumers Outpace Spending Growth New York Fed data released on February 3, 2026 shows that households earning $125,000 or more raised inflation‑adjusted spending by 2.3% since 2023, outpacing the 1.6% rise for incomes $40,000‑$125,000 and the 0.9% increase for those below $40,000 [1]. College‑educated and higher‑income consumers have consistently increased spending faster over the past three years, a pattern linked to growing economic pessimism [1]. The report highlights that this acceleration persisted despite white‑collar job cuts in 2025 [1].

Lower‑Income Households Face Elevated Inflation Pressures In the final quarter of 2023, price gains on essential goods hit poorer households harder, eroding their real purchasing power [1]. The spending figures exclude autos and omit higher‑income outlays on travel, restaurants, and entertainment, underscoring the disparity in consumption categories [1]. Rural and lower‑income families experienced the steepest inflation, contributing to a widening gap in living standards [1].

Data Sample Mirrors National Retail Sales Trends The analysis draws from a panel of 200,000 consumers tracked by Numerator, a sample the New York Fed says aligns with monthly retail‑sales reports released by the government [1]. This granular dataset provides a detailed view of consumer behavior across income tiers [1]. The Fed’s methodology allows for direct comparison of spending trends with broader economic indicators [1].

Pandemic‑Era Shift Deepens Consumption Inequality After the 2021‑22 stimulus and strong hiring, poorer families briefly saw spending gains, but hiring slowed in early 2023 while stock‑market gains spurred wealthier spending [1]. Non‑college households fell below January 2023 spending levels until November 2024, whereas college graduates remained up 4% and kept spending rapidly in 2025 [1]. The shift reflects a lasting change in consumption patterns rooted in pandemic‑era policies [1].

Dallas Fed Research Highlights Concentrated Earnings and Consumption short paper from the Dallas Fed finds the richest 20% captured 60% of earnings and 57% of consumption in the 2020‑25 period, up from 54% and 53% respectively in the 1990s [1]. This concentration underscores the growing economic divide highlighted by the New York Fed data [1]. The research reinforces concerns about widening inequality in both income and spending [1].

Sources

Timeline

2022 – Inflation peaks at a four‑decade high, reaching roughly 9 % year‑over‑year, creating the price‑pain backdrop for later policy tightening and public discontent. [12]

Q3 2023 – U.S. GDP expands at about 4.3 % annualized, the last time the economy grows this fast before the 2025 surge. [10]

Sep 2025 – The PCE price index rises to a 2.8 % annual rate; core PCE eases to 2.8 % and consumer‑spending growth slows to 0.3 %, the weakest real‑spending reading since May. [5]

Early Dec 2025 – Economists anticipate a 25‑basis‑point Federal Reserve rate cut at the upcoming meeting, citing a cooling labor market despite inflation staying above the 2 % target. [5]

Dec 12 2025 – An AP‑NORC poll shows 68 % of Americans label the economy “poor,” inflation runs at 3 % (a full point above the Fed target), and half of respondents delay big purchases or dip into savings. [12]

Dec 13 2025 – Trump’s approval of his handling of the economy stalls at 31 %; a national tour launches to reassure voters ahead of the 2026 midterms as holiday‑season spending slows, especially among households earning under $50,000. [8]

Dec 23 2025 – The Commerce Department reports Q3 2025 GDP growing at a 4.3 % annualized rate, the fastest in two years, driven by a 3.5 % jump in consumer spending, an 8.8 % rise in exports, and a rebound in defense outlays; President Trump credits tariffs for the strength, while a pending Supreme Court case could overturn many of those tariffs. [1][4]

Dec 23 2025 – Consumer confidence falls to a December reading of 89.1 (the lowest since April), and the unemployment rate climbs to a four‑year high, tempering optimism from the headline GDP gain. [4]

Dec 24 2025 – Gasoline prices dip below $3 per gallon nationwide, with AAA reporting averages of $2.85‑$2.86, providing rare relief amid broader economic gloom. [7]

Dec 24 2025 – Tech and data‑center investment accounts for roughly 14 % of Q3 GDP, underscoring the role of AI‑related capital spending in the growth story. [7]

Dec 24 2025 – Despite the 4.3 % growth headline, monthly job creation averages about 51,000, highlighting a “great decoupling” where output outpaces hiring and signaling a shift toward a capital‑heavy, AI‑driven economy. [6]

Dec 24 2025 – Economists describe the recovery as K‑shaped: higher‑income households boost spending and see wage gains that outpace prices, while lower‑ and middle‑income families face stagnant wages and higher inflation, keeping consumer sentiment grim. [3][11]

Dec 24 2025 – Household‑debt delinquency hovers just over 4 %, mortgage rates sit near 6.2 %, and polling shows limited approval of Trump’s economic stewardship, illustrating the gap between strong macro data and everyday financial strain. [7]

Jan 22 2026 – The Commerce Department revises Q3 2025 GDP upward to a 4.4 % annualized rate, the strongest since Q3 2023, confirming consumer spending’s 3.5 % contribution and a trade surplus that lifts growth; job creation remains weak at about 28,000 per month and unemployment stays at 4.4 %, reinforcing concerns about a K‑shaped outlook. [10]

Jan 23 2026 – Trump economic adviser Kevin Hassett urges the next Federal Reserve chair to keep rates low, likening the approach to Alan Greenspan’s playbook and arguing that strong growth and modest inflation stem from AI‑driven productivity gains. [2]

Jan 23 2026 – At the Davos summit, Microsoft CEO Satya Nadella warns that the AI revolution will falter unless adoption becomes widespread, highlighting a key risk to the “run‑it‑hot” growth plan. [2]

Feb 3 2026 – New York Fed data reveal higher‑income and college‑educated consumers have increased inflation‑adjusted spending by 2.3 % since 2023, while lower‑income households see only a 0.9 % rise and face higher inflation on essentials; the top 20 % now capture about 60 % of earnings, widening the consumption gap. [9]

2026 midterms (future) – Trump’s campaign continues the national economic‑confidence tour ahead of the 2026 midterm elections, seeking to translate headline GDP gains into voter support despite persistent public pessimism. [8]

Next Fed chair (future) – The incoming Federal Reserve chair is expected to inherit a policy environment shaped by low‑rate advocacy and AI‑linked productivity, as highlighted by Hassett’s call for a Greenspan‑style stance. [2]

Supreme Court case on tariffs (future) – A pending Supreme Court case could invalidate many of President Trump’s import tariffs, potentially reversing the trade‑policy boost credited for the Q3 growth. [4]

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