Not all consumer segments will drive US retail growth: NRF economist

Evidence shows high-income consumers are outperforming and outspending lower-income consumers, he noted in a blog.

US retail sales grew robustly last year, outperforming NRF expectations.

A K-shaped economy describes?a scenario where different income groups grow at drastically different rates, with their relative performance diverging like the arms of the letter ‘K’.

NRF worked with its partners Pyxis by Bain & Company and Affinity Solutions to examine credit and debit card data, and found a very real difference in spending growth in discretionary goods when the data dismantled by consumer spending levels.

What’s really notable is that, even though the bottom seven deciles saw negative growth in spending on discretionary items on a year-over-year (YoY) basis, the grand total for all incomes was actually positive for the year.

That’s because the top 20-per cent of spenders in this category accounted for over three-fifths of total spending. Essentially, strong spending in higher income segments is masking weakness among lower income segments, Mathews noted.

“We performed a similar analysis for a range of retail sectors. For many of these sectors, the outlines of a K shape are visible. However, this is clearly not a simple bifurcation as a K shape implies. We see much more stratification across income groups. And it’s also worth noting that this stratification isn’t uniform across all sectors. Some sectors have seen growth across the board. Others have seen declines across the board,” he wrote.

“What is clear is that across lower- to middle-income households, growth in spending has begun to slow. However, top-line spending remains robust, and some sectors have even managed to retain or grow their share across income groups,” he noted.

He expects to see continued growth at a top-line level for retail into 2026, but it is clear that not all segments of the consumer will be driving this growth.

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