Wealthy consumers continue to spend, but lower-income earners cut back
- Lower-income consumers are prioritizing essential purchases over discretionary spending.
- Spending among wealthy consumers has increased despite economic uncertainty.
- The current divide in consumer behavior may have long-term implications for the economy.
In the first quarter of 2025, the financial landscape in the United States presented a stark contrast between different consumer segments. Wealthy consumers maintained their spending habits, favoring luxury experiences such as dining out and travel, while lower-income earners constrained their spending to essential items only. This divergence highlights broader trends in the economy and has raised concerns about the overall health of consumer sentiment in light of existing economic pressures. Data from major credit card lenders, including American Express and JPMorgan Chase, revealed a 6% increase in spending among their affluent customer base. These institutions, serving primarily high-credit-score clients, appeared insulated from the stresses affecting lower-income groups. In stark contrast, Synchrony reported a 4% decline in transactions made by lower-income consumers who are hyper-focused on essentials due to rising inflation and economic uncertainty. Experts have pointed to a combination of factors contributing to this climate of variability. Inflation has been particularly impactful, causing a reduction in purchasing power for many households. Moreover, the recent trade policies introduced by the Trump administration have further amplified anxieties regarding future spending behaviors. Lower-income earners have begun to pull back on discretionary and large purchases, shifting their focus toward necessities amid fears of escalating prices caused by potential tariffs. The default trend mirrors a more general phenomenon in consumer behavior as evidenced by the rise in credit card users opting to make only minimum payments. Federal Reserve Bank of Philadelphia data indicates an increase to 11.1%, the highest number in over a decade. This trend suggests a tightening grip on finances for many consumers, indicating a cautious approach to spending while the wealthy continue to spend with abandon. Analysts express concern that if inflationary pressures continue, it could lead to reduced demand for large-ticket items in the near future.