The top 10% drop almost as much in the bottom half as the bottom 70% put together
Households in the top 10% of the income bracket drop nearly as much money on discretionary items — things that don’t include necessities like housing and health care — as the bottom 70% combined, according to experts at the Bank of America Institute.
“That’s important because these categories are among the clearest indicators of consumer spending health,” Liz Everett Krisberg, head of the Bank of America Institute, and David Michael Tinsley, senior economist at the Bank of America Institute, wrote in a brief this week.
Experts have analyzed the data on spending for profits from 2023, but the K-shaped trend – in which a few wealthy households prosper while everyone else is left behind – continues in 2026. The increase between high-income Americans and everyone else has been noted in the housing market and credit scores, for example.
On the spending side, by 2023, the top 10 percent of pre-tax income earners will account for 36.2 percent of annual average spending on voluntary goods and services, the Bank of America Institute said. That helps affluent households, which spend more on luxury goods than their lower-income counterparts, drive demand for luxury goods. (Bank of America also reported earlier this year that luxury spending was growing, with the strongest growth seen among the wealthy.)
Meanwhile, low-income consumers tend to spend what they have on essentials, such as groceries and gas, leaving them vulnerable to inflation in those categories. The bottom 10% of earners will account for only 2.1% of discretionary spending in 2023.
“As long as affluent consumers continue to open their wallets, inflation is likely to remain stubborn, according to BofA Global Research,” added Krisberg and Tinsley. Indeed, their comments follow two Bank of America Global Research reports showing that wealthy consumers have supported healthy spending despite a tough job market and rising prices that have moderated household incomes and median incomes.
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“IK is not only a difference in the rate of growth of expenditure, but also about a difference in the consumption basket, low-income households expand due to demand, while high-income households retain the ability to drive fixed demand,” Bank of America economists, led by Shruti Mishra, in a June 29 report titled “K.”
While the gap between spending and wage growth across income groups has narrowed recently, high-income households have seen significant gains in both areas, Bank of America experts said in another report. Overall, total credit card spending that month saw the strongest annual growth in nearly four years, at 5.1%.
