Characterizing the U.S. economy in simplistic dichotomies such as “good” or “bad” proves to be a complex endeavor. On multiple dimensions, the data indicates that the economy is robust. However, surveys indicate that American consumers do not share that sentiment. “There’s no doubt right now that different data can show slightly different narratives,” states Heather Long. According to Long, inflation appears to be either declining or remaining stable in recent months, depending on the metric considered. The consumer price index has decreased from its 9% peak in June 2022 and has remained around 3% since June 2023, as reported by the U.S. Bureau of Labor Statistics. Personal consumption expenditures have exhibited a stable trajectory over the past year, registering at 2.9% in December 2025, according to the latest data. However, prices for numerous consumer goods continue to be significantly higher than their levels in 2020, while wages have approximately stabilized during this period when accounting for inflation, as reported by the nonpartisan economic research organization, The Hamilton Project. The observed disparity may be influencing the negative sentiment among Americans regarding the economy. As of February, consumer sentiment has declined by nearly 13% year-over-year, as reported by the University of Michigan Survey of Consumers, which is published on a monthly basis.

Numerous economists characterized the U.S. economy as “K-shaped” in 2025, highlighting the disparity where higher earners thrived — maintaining their spending and propelling economic growth — while lower-income Americans reduced their expenditures. Long, who was among the economists using the phrase “K-shaped,” asserts that the economy is evolving into a “E-shape” in 2026, characterized by three tiers of consumer behavior rather than two. A middle group is differentiating itself, and the behavior of these individuals is beginning to reflect increasing indications of stress, she states. The apex of the K-shape, akin to the upper echelon of the E-shaped economy, consists of high-income individuals — the consumers who persist in their spending habits even in the face of rising prices. According to a recent analysis, the highest earning 20% of individuals contribute to almost 60% of total consumer spending in the United States. “This top tier [of earners] that’s performing exceptionally, that’s propelling a significant portion of the consumption,” Long states. The distinction between the K-shape and the E-shape is evident in the spending growth of middle-earners, which was closely aligned with that of higher-earners until a divergence occurred toward the end of 2025, as indicated by data from the Bank of America Institute released in February. As of January, the disparity in annual spending growth between high-income households and all other households reached its peak since mid-2022, according to the bank’s report.

Affluent consumers are not merely maintaining their purchasing patterns in the face of rising prices. According to Long, a growing number of retailers and brands, particularly within the food and hospitality sectors, are enhancing their premium offerings to appeal to high-spending consumers. Premium credit cards such as the Chase Sapphire Reserve and AmEx Platinum have recently increased their annual fees to $795 and $895, respectively, with the expectation that enhanced benefits will attract a greater number of affluent cardholders. “Observe the array of exclusive platinum credit cards,” Long states. “Nearly all firms are endeavoring to ascend the value chain, a trend evident in the earnings calls.” The strategy has yielded positive results for airlines, hotel brands, and food and beverage companies, which have reported robust demand for both their existing and new premium offerings since the fall of 2025, despite a deceleration in sales for their standard and discount products. According to Long, spending behaviors among middle-class Americans reveal early indicators of the affordability crisis. They continue to allocate funds towards essential needs and certain discretionary items, yet “the middle class is treading water so they can still pay their bills,” she states. Long refers to this tier as the “Costco economy,” highlighting consumers who are not in a state of full-blown panic but are progressively turning to discount and wholesale retailers such as Costco and Walmart to maximize their purchasing power. “They’re clearly exhibiting a cautious approach to spending,” she states, “They believe it’s essential to maximize every dollar, to purchase in larger quantities, and to take any measures possible [to economize].”

A rising proportion of American households, irrespective of their shopping venues, are experiencing a paycheck-to-paycheck existence. In 2025, approximately 24% of households experienced expenses that consumed a significant portion of their earnings, as reported by the Bank of America Institute on November 10. The bank’s report characterizes “paycheck to paycheck” as a situation where expenses for necessities such as housing, groceries, utilities, gas, child care, and others surpass 95% of income. The proportion of households living paycheck-to-paycheck has increased since at least 2023, according to findings from the bank’s researchers. Middle-class households might be managing their circumstances for the time being, yet Long indicates that they are enduring stress in fluctuations. “Not only are they facing high prices, but it’s every couple of months, something else surges,” she states. In 2026, the price of eggs is significantly lower compared to 2025; however, in January, beef prices experienced a 22% increase relative to the previous year, according to the Labor Department. “It’s merely a game of whack-a-mole with inflation,” states Long. The lowest segment of the E-shaped economy is marked by elevated credit card utilization and the adoption of Buy Now, Pay Later options, according to Long. Although individuals in the middle and upper income brackets do utilize credit cards and occasionally maintain outstanding balances, those in the lower income bracket are more inclined to indicate that they carry a balance.

According to the Federal Reserve’s latest Survey of Consumer Finances, conducted in October 2024 and released in May 2025, 59% of card holders earning between $25,000 and $49,999 report having carried a balance from month to month at least once in the past year. Among cardholders with incomes ranging from $50,000 to $99,999, 50% report having carried a balance at least once in the past year, in contrast to only 38% of those earning $100,000 or more. The Federal Reserve reports that individuals with annual incomes ranging from $25,000 to $49,999 are the most frequent users of Buy Now, Pay Later plans over the past year. Data indicates that lower earners, specifically households with incomes below $25,000, were the most likely respondents in the survey to report late payments on a Buy Now, Pay Later plan. A quarter of Buy Now, Pay Later users indicated that they utilized the loans for grocery purchases in 2025, an increase from 14% in 2024, according to a February 2025 LendingTree survey. According to Long, the 2026 tax season could serve as a crucial support mechanism for Americans situated in the middle and lower income brackets. According to a survey conducted by Intuit TurboTax on February 23, 35% of Americans anticipating a tax refund indicated that they plan to allocate at least a portion of it towards debt repayment. However, Long asserts that even substantial refunds merely serve as a short-term solution to a persistent issue of affordability.