A small share of wealthy households is carrying much of the nation’s consumer spending — and with it, the broader economy.
New data from Moody’s Analytics Chief Economist Mark Zandi, based on the Federal Reserve’s Financial Accounts and Survey of Consumer Finance and updated through the second quarter of 2025, highlights a clear divide in how Americans are powering the economy.
Spending Patterns by Income
Since the pandemic, households in the bottom 80% of the income distribution — those earning less than about $175,000 annually — have increased spending only enough to keep pace with inflation. Their personal outlays closely track the Consumer Price Index, indicating limited real growth in spending power.
In contrast, the top 20% of households have outspent inflation by a wide margin. Within that group, the very highest earners — roughly the top 3.3% of households — have seen spending accelerate most significantly, well beyond inflation or income growth further down the distribution.
Implications for the Economy
The data suggest that higher-income households increasingly support overall US economic growth. Consumer spending remains the largest component of GDP, and the ability and willingness of wealthier households to continue spending have so far helped sustain expansion.
At the same time, the reliance on a relatively small share of households introduces risk. If higher-income consumers begin to cut back, whether due to market downturns, changes in interest rates, or broader economic uncertainty, the slowdown could have outsized effects.
In Maryland, with personal income tax as the State’s largest revenue source — and counties dependent on both income and property taxes — consumer spending patterns directly affect fiscal health.
Slower spending among the bottom 80% of households could weigh on revenues tied to income and housing transactions. In contrast, housing market resilience and high-income earnings continue to bolster receipts in wealthier jurisdictions.
Household Pressures
For most households, rising costs for essentials such as housing, food, and healthcare have eroded gains in disposable income. Even with a strong labor market in recent years, the bottom 80% have seen their spending power constrained, limiting their contribution to overall demand growth.
Meanwhile, the concentration of spending among higher earners underscores the uneven recovery since the pandemic. It helps explain why many Americans report that the economy does not feel strong despite headline growth numbers.
Looking Ahead
Sustained growth will require more than high-income resilience — it will depend on whether middle- and lower-income households regain real spending power. With a Federal Reserve rate cut expected and more decisions on the horizon, stay tuned to Conduit Street for how shifts in monetary policy and consumer behavior shape the outlook for both the national economy and state and local budgets.
