Americans are splitting into two groups when it comes to spending. Higher-income shoppers are still buying, while many lower-income families are cutting back. You can see it in food and drink, cars, and even airline seats. Coke says premium items like Topo Chico and Fairlife are selling well, and McDonald’s is pushing value menus because traffic from lower-income diners is down. Chipotle says some customers feel squeezed, and Procter & Gamble sees wealthier shoppers buying big packs while others stretch what they have at home. The same split shows up in big purchases. The average new car now costs over $50,000, defaults are rising for buyers with weaker credit, and airlines say premium seats are outpacing coach. A cooler inflation report came out after a shutdown delay, showing prices up 0.3% on the month and 3% over the year, and Social Security’s cost-of-living adjustment for 2026 will be 2.8%.
Hotels also show a mixed picture. Hilton’s budget brands saw softer revenue, but luxury did great. Their CEO thinks the gap may narrow if inflation and rates ease, with the middle and low end improving rather than the high end falling. To me, this “K-shaped” economy is simple to read on the ground. Households paying more for groceries and gas are trimming meals out and skipping upgrades, while wealthier households keep spending on premium drinks, bigger cars, and roomier seats. If the Fed cuts rates next week and inflation keeps cooling, we will see whether that helps the lower and middle tiers catch up.
source : https://www.cnbc.com/2025/10/23/k-shaped-spending-sectors-showing-bifurcation.html
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