The alphabet soup of interpretations for today’s economy has lately landed on the letter “K” to describe the diverging ways inflation has impacted Americans: boom times for the asset-wealthy at the top, and a much more painful moment for those struggling to stay afloat amid rising prices for groceries and electricity.
The logic of the K-shaped economy has been used to explain why consumption has yet to dip towards recession levels. While low-income shoppers are cutting back on spending, high earners keep infusing the economy with their cash, fueled by stock and real estate gains. One estimate by Moody’s Analytics calculated last year that the top 10% of earners made up nearly half of all consumer spending.
