Here’s which sectors are showing bifurcation
Cola drinks are on display at a 7-eleven convenience store on July 17, 2025 in Austin, Texas.
Brandon Bell | Getty Images
Due to recession fears, government shutdowns and tariff uncertainty, consumers are becoming increasingly diverse in their spending.
As wealthier Americans mobilize their purchasing power, lower-income Americans begin to pull back — often described as a “K-shaped” economy. Friday’s consumer price index report shed further light on the pressures facing large swathes of the country.
The CPI report, which measures price changes across a range of goods and services, was initially scheduled to be released nine days ago but was delayed by the government shutdown. The report came in colder than expected, showing a 0.3% increase on the month. This brings the annual inflation rate to 3% and points to a possible rate cut by the Fed next week.
A subset of the CPI report also helps determine the cost-of-living adjustment, which the Social Security Administration said Friday will be 2.8% in 2026.
Low- and middle-income consumers have been hit hardest by the rising costs of daily essentials such as food and gas. Meanwhile, wealthier investors have benefited from stock market rallies and rising home values. Latest data JPMorgan’s The Cost of Living Survey found that income group is a big factor in Americans’ differing views on the current state of the economy.
Here’s where the fork starts to occur:
food and beverage
Coca Cola, The company, often seen as a pioneer of consumer financial health, is seeing differences across the business.
More expensive products with greater exposure to higher-income consumers, such as Topo Chico sparkling water and Fairlife protein shakes, are driving the company’s sales growth, CEO James Quincey told CNBC’s “Squawk on the Street” on Tuesday.
At the same time, Coke is in higher demand, both at dollar stores that appeal to low-income consumers looking for deals, and at higher-end outlets that cater to wealthier consumers, such as fast-casual restaurants and amusement parks.
McDonald’s CEO Chris Kempczinski told CNBC’s “Squawk Box” in early September that the burger chain’s expansion of its value menu is a response to a fragmented consumer environment, or what he calls a “two-tiered economy.”
While the company sees upper-income consumers performing well, lower- and middle-income customers are “a different story,” Kempczinski said.
“Traffic to low-income consumers is in double digits, and that’s because people are either choosing to skip a meal… or they’re choosing to just eat at home,” he said last month.
A similar dynamic is happening now chipotleAccording to Chief Financial Officer Adam Rymer.
“There are certain groups of consumers, certainly on the lower-income side, who are feeling the pressure right now. That’s something we need to take into account as we look at prices going forward,” Rymer said. he told Reuters in July.
Procter & Gamble on Friday said the company is seeing K-shaped shopping behavior among consumers, with affluent shoppers purchasing larger packages from club retailers and lower-income shoppers depleting pantry stocks before returning to stores.
“The consumer environment is not perfect, but it is stable,” CFO Andre Schulten told reporters.
Cars and plane tickets
Average price of a new vehicle last month It surpassed $50,000 for the first time, according to Cox Automotive Kelley Blue Book.
The record pricing comes as auto loan defaults and repossessions are on the rise, especially for those with FICO scores below 620.
“Today’s auto market is driven by wealthier households who have access to capital, good credit rates and support the upper end of the market,” Cox Automotive executive analyst Erin Keating said last week.
Although airlines have been experimenting with premium offerings for years, high-cost tickets have gained momentum in recent months.
Delta Airlines It said earlier this month that revenue from premium offerings was expected to surpass coach cabins next year, and CEO Ed Bastian said he saw no signs of a slowdown in larger, more expensive seats.
Hospitality
Still, while there are signs of a “K-shaped” economy, some argue it will not last.
Hilton CEO Christopher Nassetta told CNBC last month that he sees a bifurcation, but he doesn’t expect that pattern to last much longer, in part because he sees inflation and interest rates falling.
“My belief is that as we look into the fourth quarter and especially next year, we’re going to see a very big shift in those dynamics, so I don’t think you’re going to continue to have this bifurcation,” Nassetta said. he said. “That doesn’t mean I think the upper bound will get worse, I just think the middle and lower bound will rise.”
On Wednesday, the hotel chain reported a decline in revenue for affordable brands such as Hampton by Hilton and Homewood Suites by Hilton.
Nassetta, meanwhile, told investors on its earnings call that revenue from luxury offerings is performing extremely well and remains a focus for Hilton moving forward.
— CNBC’s Amelia Lucas, Michael Wayland, Alex Harring, Luke Fountain and Leslie Josephs contributed to this report.
