The Fed’s Beige Book, an economic report published by the central bank eight times per year, showed that while economic activity remained relatively unchanged since the previous report published last month, “Overall consumer spending declined further, while higher-end retail spending remained
resilient.”
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The report further emphasizes a K-shaped economy, which occurs when different segments of the economy experience different outcomes. In this case, higher-income Americans are driving spending, while low- and middle-income Americans are spending less.
Retailers See Sharp Spending Divide
Comments from retail-facing companies have supported this pattern as well. For example, Hilton (HLT) said that its luxury brands have shown strong performance, while its more affordable brands faced falling revenue. In addition, McDonald’s (MCD) CEO Chris Kempczinski told CNBC‘s “Squawk Box” in September that lower-income consumer traffic had declined by double digits.
The Beige Book also pointed to low- and middle-income consumers increasingly using debt to cover household expenses while hesitating on discretionary purchases. On the other hand, “Higher-income consumer spending remained resilient.”
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