It is troublesome to explain the U.S. financial system in black and white phrases like “good” or “dangerous.” On a number of fronts, the information says the financial system is wholesome. However surveys present American shoppers do not feel that means.
“There isn’t any doubt proper now that completely different information can present barely completely different narratives,” says Heather Lengthy, chief economist at Navy Federal Credit score Union.
Relying on which measure you take a look at, inflation is falling or staying flat in latest months, Lengthy factors out. The buyer value index has dropped from its 9% peak in June 2022 and hovered round 3% since June 2023, in response to U.S. Bureau of Labor Statistics information. Private consumption expenditures has remained comparatively flat for the final yr, coming in at 2.9% in December 2025, the most recent studying from the Bureau of Financial Evaluation.
However costs for a lot of client items stay far above what they have been in 2020, and wages have roughly plateaued over that point when adjusted for inflation, in response to nonpartisan financial analysis group, The Hamilton Challenge. That disparity might be contributing to Individuals feeling dangerous concerning the financial system. Client sentiment is down almost 13% year-over-year as of February, in response to the College of Michigan Survey of Shoppers, which is launched month-to-month.
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Many economists referenced the U.S. financial system as “Okay-shaped” in 2025, illustrating how increased earners have been doing alright — persevering with to spend and driving financial progress — whereas lower-income Individuals pulled again.
Lengthy, who was among the many economists utilizing the phrase “Okay-shaped,” says the financial system is taking extra of an “E-shape” in 2026, with three tiers of client habits as an alternative of two. A center group is distinguishing itself, and people folks’s habits is beginning to present that they are experiencing rising indicators of pressure, she says.
Here is what she’s seeing.
High tier: ‘Driving plenty of the consumption’
Like the highest of the Okay-shape, the highest tier of the E-shaped financial system is comprised of excessive earners — the shoppers who proceed to spend cash regardless of elevated costs. The highest 20% of earners account for almost 60% of all U.S. client spending, a latest evaluation from Moody’s Analytics discovered.
“This prime tier [of earners] that is doing rather well, that is driving plenty of the consumption,” Lengthy says.
The distinction between the Okay-shape and the E-shape: Center-earners’ spending progress was intently aligned with higher-earners till it began diverging towards the tip of 2025, in response to Financial institution of America Institute information launched in February. As of January, the hole between high-income households and all different households’ annual spending progress reached its highest stage since mid-2022, the financial institution reported.
Rich shoppers aren’t simply persevering with to purchase what they all the time have, regardless of increased costs. Some retailers and types, particularly within the meals and hospitality industries, are more and more boosting their premium choices to draw these massive spenders, Lengthy says.
Premium bank cards just like the Chase Sapphire Reserve and AmEx Platinum lately upped their annual charges to $795 and $895, respectively, betting that extra perks will lure in additional high-earning cardholders. “Have a look at all of those unique platinum bank cards,” Lengthy says. “Virtually each firm is making an attempt to maneuver up the worth chain, and you may see that within the earnings calls.”
The technique has paid off for the airways, lodge manufacturers, and meals and beverage corporations which have reported robust demand for his or her extant and newer premium choices since fall 2025 — at the same time as gross sales for his or her customary and low cost merchandise decelerate.
Center tier: ‘Treading water’
Spending behaviors amongst center class Individuals is the place you begin to see indicators of the affordability disaster, Lengthy says. They’re nonetheless spending on their requirements and a few discretionary classes, however “the center class is treading water to allow them to nonetheless pay their payments,” she says.
Lengthy calls this tier the “Costco financial system,” referencing shoppers who aren’t essentially in a full-blown panic but, however are more and more purchasing at low cost and wholesale retailers like Costco and Walmart to get probably the most bang for his or her buck.
“They’re clearly spending in a nervous means,” she says, “They really feel they should stretch each greenback they really feel they should purchase in bulk, to do no matter they’ll [to save].”
No matter the place they’re purchasing, a rising variety of American households reside paycheck to paycheck. Almost 24% of households had bills consuming up the majority of their earnings in 2025, in response to information from Financial institution of America Institute revealed on Nov. 10. The financial institution’s report defines “paycheck to paycheck” as having prices for necessities like housing, groceries, utilities, gasoline, youngster care and extra that exceed 95% of earnings.
The share of paycheck-to-paycheck households has been on the rise since at the least 2023, the financial institution’s researchers discovered.
Center-class households could also be getting by for now, however Lengthy says they’re experiencing stress in waves. “Not solely are they going through excessive costs, nevertheless it’s each couple of months, one thing else surges,” she says. Eggs, for instance aren’t almost as costly in 2026 as they have been in 2025, however in January, beef costs have been up 22% from the earlier yr, per the Labor Division.
“It is simply whack-a-mole inflation,” says Lengthy.
Backside tier: Taking up debt
The underside tier of the E-shaped financial system is characterised by excessive bank card utilization and Purchase Now, Pay Later utilization, Lengthy says.
Whereas center and higher-earners actually use bank cards and typically carry balances on them, lower-earners usually tend to report carrying a steadiness. Amongst card holders, 59% of these incomes between $25,000 and $49,999 say they’ve carried a steadiness from month to month at the least as soon as within the final yr, in response to the Federal Reserve’s newest Survey of Client Funds which was performed in October 2024 and launched in Could 2025.
Half of cardholders incomes between $50,000 and $99,999 say they’ve carried a steadiness at the least as soon as within the final yr, in comparison with simply 38% of these incomes $100,000 or extra.
As for Purchase Now, Pay Later plans, adults incomes between $25,000 and $49,999 are largely more likely to have used the installment loans within the final yr, the Fed stories. Decrease earners, households incomes lower than $25,000, have been the almost certainly survey respondents to report being paying late on a Purchase Now, Pay Later plan, information exhibits.
1 / 4 of Purchase Now, Pay Later customers reported utilizing the loans to pay for groceries in 2025, up from 14% in 2024, discovered a February 2025 LendingTree survey.
The 2026 tax season might come as a lifeline for Individuals within the center and backside tiers, Lengthy says. Over a 3rd — 35% — of Individuals anticipating a tax refund say they will use at the least a portion of it to pay down debt, a Feb. 23 Intuit TurboTax survey discovered. However even giant refunds are solely a short lived repair for an ongoing affordability downside, Lengthy says.
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