The US economy is more reliant on the richest Americans than ever before.
The top 10 percent of earners – households making $250,000 or more a year – now account for 49.7 percent of consumer spending.
That is a record figure, according to analysis by Moody’s Analytics of Federal Reserve data going back to 1989.
Three decades ago, the richest Americans only accounted for 36 percent of spending, The Wall Street Journal reported.
The data lays bare the widening gap between American consumers. While many lower earners are cutting back, exhausted by stubborn inflation and rising costs, the well-off are ramping up their spending.
Between September 2023 and September 2024, high earners increased their spending by 12 percent.
Over the same period, however, middle-class and working-class households decreased their spending.
This means that economic growth is reliant on rich Americans continuing to shell out on everything from vacations to designer handbags, the outlet reported, buoyed by stock market and real estate gains.
Between September 2023 and September 2024, high earners increased their spending by 12 percent
Mark Zandi, chief economist at Moody’s Analytics, estimated that spending by the top 10 percent of earners alone accounted for almost a third of gross domestic product (GDP) in the US.
‘The finances of the well-to-do have never been better, their spending never stronger and the economy never more dependent on that group,’ Zandi told the Wall Street Journal.
The richest Americans have increased their spending far beyond inflation, spending 58 percent more than they did four years ago.
The bottom 80 percent of earners, meanwhile, only spent 25 percent more than in 2020.
This only just outpaced the 21 percent increase in prices over the four year period.
Credit and debit card spending by the richest third of customers is growing faster than the lowest earning third, Bank of America revealed.
The top 5 percent of households spent more than 10 percent more on luxury goods abroad compared with a year ago.
‘They’re going to Paris and loading up their suitcases with luxury bags and shoes and clothes,’ David Tinsley, senior economist for the Bank of America Institute, told the outlet.
But a stock market selloff or a marked decline in home values that hits the confidence of the top 10 percent of earners and causes them to cut back on spending would have a real effect on the US economy.
The top 5 percent of households spent more than 10 percent more on luxury goods abroad compared with a year ago, according to Bank of America
While many lower earners are watching their spending, exhausted by stubborn inflation and rising costs, the well-off are ramping it up
A stock market selloff that hits the confidence of the top 10 percent of earners and causes them to cut back on spending would have a real effect on the US economy
The top 10 percent of earners – households making $250,000 or more a year – now account for 49.7 percent of consumer spending
Earlier this month, a widely accepted survey of consumer sentiment by the University of Michigan revealed confidence in the economy had fallen five percent since Donald Trump returned to The White House.
European stocks have also hugely outpaced Wall Street in the month since Trump became President for the second time, due in part to concerns around potential tariffs.
The buying power of higher earners comes, in part, from them being able to hold on to the savings they made during the Covid-19 pandemic.
When people were forced to stay at home, many managed to save up. But then as the stay-at-home orders began to lift, prices soared as inflation hit decades-long highs.
The top 10 percent kept most of what they saved, while lower-income earners saw their savings quickly depleted.
Affluent people also found themselves with assets, including stocks, that were suddenly worth far more, The Wall Street Journal reported.
The net worth of the top 20 percent of earners has risen by more than $35 trillion, or 45 percent, since the end of 2019, according to Federal Reserve data.
While net worth grew at a similar rate for the rest of the population, it only translated into a wealth increase of $14 trillion.
