Summary
Some economists are questioning the popular idea of a "K-shaped economy," where wealthy people drive economic growth while poorer people fall behind. They argue that data does not strongly support this view and that spending growth has been more balanced across income levels than previously thought.
Key Facts
- The "K-shaped economy" suggests rich individuals boost spending while poorer groups cut back.
- Economists at Barclays warn this idea might be overstated and not fully backed by data.
- Over the past 25 years, the richest 20% consistently accounted for 40% of consumer spending.
- The lowest 20% of income groups consistently account for about 9% of spending.
- Spending by wealthy households in specific categories grew no faster than spending by other groups.
- Real income for the poorest households grew 38% between 2019 and 2024.
- The Boston Fed President noted less spending difference across income levels, despite narratives suggesting otherwise.
