“E-Shaped Economy: BofA Data Reveals Consumer Class Divide”
Recent analysis from Bank of America indicates a shift in the economic landscape, moving from a “K-shaped economy” to what some are calling an “E-shaped economy.” This change highlights a growing divide among consumers, particularly between higher-income households and those in the middle and lower-income brackets.
E-Shaped Economy Revealed by BofA Data
The “K-shaped economy” concept illustrated an increasing gap in economic fortunes. Wealthy individuals have enjoyed growth, while lower-income individuals have seen a decline. However, recent data suggests a different trajectory for middle-class consumers. They are faring better than lower-income consumers but still remain behind the wealthier demographic.
Key Insights from BofA Analysis
- In a recent note, six economists from Bank of America discussed concerning trends in income-based spending divergence.
- January data showed spending growth for higher-income households at 2.5%, while lower-income growth was just 0.3%.
- Middle-income households saw minimal spending growth of 1% during the same period.
Wage Growth Trends
The analysis also revealed disparities in wage growth. Higher-income households experienced a year-on-year wage increase of 3.7% in January, improving from 3.3% in December. In contrast, middle-income households saw a slight increase to just under 1.6% from over 1.5%.
Historical Context and Wealth Distribution
To understand the current economic divide, it’s essential to examine historical wealth distribution trends. The Federal Reserve began tracking household wealth in Q3 2010, noting that total wealth reached $60.76 trillion. The wealthiest 0.1% owned $6.53 trillion, while the bottom 50% only had $330 billion. By Q3 2025, the bottom 50%’s wealth grew to $4.25 trillion, a significant 1,189% increase, yet still lagging behind the top 0.1%’s wealth of $24.89 trillion.
Consumer Resilience Post-Pandemic
Despite the challenges posed by rising interest rates and a higher cost of living, U.S. consumers have shown remarkable resilience since the pandemic. The New York Fed recently reported that while mortgage delinquency rates are near historical norms, issues are concentrated in lower-income areas with declining home values.
Spending Habits and Shifts in Behavior
BofA’s data highlights a noticeable shift in consumer behavior. More households are now paying off their credit card balances each month compared to 2019. This trend is evident across all income levels and generations.
Changing Shopping Preferences
- Households are increasingly gravitating towards value-oriented grocery stores over premium options.
- Spending growth at value grocery stores has consistently outpaced growth at premium grocery stores by approximately five percentage points for the past three years.
This evolving economic landscape underscores significant changes in consumer spending and income dynamics, signaling a potential redefinition of the economy as it shifts towards an “E-shaped” structure.
