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

Rajashri Chakrabarti, Thu Pham, Beckett Pierce and Maxim Pinkovskiy

No 20260501a, Liberty Street Economics from Federal Reserve Bank of New York

Abstract: 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.

Keywords: K-shaped economy; spending; Numerator; heterogeneity; Economic Heterogeneity Indicators (EHIs); inequality (search for similar items in EconPapers)
JEL-codes: D14 E21 E24 H0 (search for similar items in EconPapers)
Date: 2026-05-01
Note: Editors’ Note: The title of the second chart in this post has been corrected. May 1, 10:40 am.
References: Add references at CitEc
Citations:

Downloads: (external link)
https://libertystreeteconomics.newyorkfed.org/2026 ... os-driving-spending/ Full text (text/html)
https://libertystreeteconomics.newyorkfed.org/wp-c ... g-Spending_data.xlsx Chart Data (application/vnd.ms-excel)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fednls:103158

Ordering information: This working paper can be ordered from

DOI: 10.59576/lse.20260501a

Access Statistics for this paper

More papers in Liberty Street Economics from Federal Reserve Bank of New York Contact information at EDIRC.
Bibliographic data for series maintained by Gabriella Bucciarelli ().