Shopping: Two-Speed Spending: How Earnings Reveal a Split Economy in 2025

What Is the “Split Economy” Trend? – When Wallets Divide by Wage

Earnings reports and consumer-data indices are showing a clear divide: higher-income households continue to spend with relative stability, while lower-income households tighten, reroute, and reduce their outlays.

• Divergent Consumption Patterns: Quick-service dining chain Chipotle flagged softness among lower-income diners—while higher-income patrons maintained visitation.

  • Lower-income consumers are trading down or delaying discretionary purchases, shifting the nature of spending rather than its total volume.

• Essentials Take Priority: Amazon noted growth in online grocery and household items — a sign that consumers under pressure are prioritising recurring essentials.

  • This suggests a reallocation of spend from “nice-to-have” to “need-to-have.”

• Fragile Financial Buffer: The Wage to Wallet Index shows that households earning under ~$50,00

  • With fewer than one-in-three able to cover a $2,000 emergency, spending becomes highly sensitive to disruptions.

Insight: A “single economy” narrative no longer holds—different income segments are effectively on separate rails.

Why It Is Trending: Income & Impact Amid Macro Stability

Despite generally favourable headlines in aggregate retail and credit metrics, corporate earnings and customised indices show stress concentrated among lower-income earners.

• Earnings as a Lens: Companies are communicating that their growth is driven by higher-income customers or value modes, emphasising the slowdown among budget-sensitive segments.

• Macro vs. Micro Disconnect: National retail numbers remain resilient, but the micro reality for the “Labor Economy” (households with less than ~$50K annual earnings) tells a different story.

• Data Visibility: Indices like the Wage to Wallet capture nuance in income, savings, and sentiment—revealing patterns traditional metrics mask.

Insight: Resilience in the aggregate may mask fragility underneath—businesses and policymakers must look beyond averages to spot stress.

Overview: Uneven Spending, Uneven Growth

While headline spending appears durable, underlying behaviour is shifting in ways that matter. Lower-income households are cutting back on frequency, discretionary purchases and are more payment-sensitive. Meanwhile, higher-income households continue spending on travel, dining, and luxury items. This divergence means that businesses and sectors reliant on volume from lower-income consumers face heightened risk—even as the broader economy appears stable.

Insight: This “split economy” means growth now polarises rather than spreads.

Detailed Findings: Where the Pressure Lies

• Dining Out Pullback Among Lower Income: Chipotle’s third-quarter commentary showed that while higher-income segments maintained patronage, the under ~$50K income bracket cut back on visits and average checks.

  • Lower-income consumers are more likely to skip weekday meals out and opt for lower-priced menu items.

• Shift to Essentials Digital-First: Amazon’s online grocery growth indicates value-seeking behaviour and a shift away from discretionary retail.

  • Budget-tight consumers prefer known platforms and subscription models for essentials.

• Savings Gap & Income Volatility: Labor Economy households have average liquid savings of $5,737 compared to $9,869 for the typical U.S. consumer—and fewer than 1 in 3 could cover a $2,000 emergency.

  • Income consistency and job stability are major drivers of spending fluctuations.

Insight: Vulnerability is concentrated where it counts—on the demographic that drives mass-market consumption.

Key Success Factors of the Trend: Visibility, Volume, Vulnerability

Understanding the split economy requires paying attention to three intertwined factors.

• Income Stratification: Spending patterns diverge based on income tier, making segment-specific strategies essential for brands.

• Elastic Demand: Lower-income consumers show high sensitivity to wage timing, savings and economic signals—so their demand fluctuates more.

• Data-Driven Insights: Tools like the Wage to Wallet Index provide actionable signals beyond standard retail metrics, enabling more precise targeting.

Insight: Addressing consumer behaviour today means understanding which segment—and what financial context—they belong to.

Key Takeaway: Growth Has a Fault Line

Businesses face a bifurcated market: some consumers are spending broadly, others are retrenching. Growth strategies now need to adapt to this reality.

• Segment-Specific Growth: Brands targeting higher-income consumers may continue to thrive, but those relying on volume from lower-income segments must adjust pricing, value propositions and risk models.

• Resilience Doesn’t Equal Security: Overall spending may look steady, but underlying fragility among certain households poses tail-risk.

• Proactive Strategy: Brands and policymakers must monitor segment-level shifts—not just aggregate numbers.

Insight: The economy still grows — but not evenly.

Core Consumer Trend: The Budget-Cautious Spender

This group includes lower-income consumers (earning roughly $50K or less) who are increasingly selective, value-driven, and responsive to economic stress.

Insight: Their behaviour isn’t just “tightening” — it signals a structural shift in spending among a key population.

Description of the Trend: Dual-Speed Consumption

Consumption no longer follows a unified path—two speeds have emerged.

• From Broad to Bounded: Many lower-income households are shifting from discretionary to essential spending only.

• From Volume to Value: Instead of frequency or premium spend, this group prioritises price-sensitive decisions and delay of non-essentials.

• From Growth to Grounding: Their reduced participation undercuts segments of the economy once taken for granted.

Insight: The future of consumption may be driven more by differentiation than general acceleration.

Key Characteristics of the Trend: Sensitive, Selective, Segment-Driven

• Sensitive to Shock: Small changes in income, savings or hours worked trigger large adjustments in spending.

• Highly Selective: Lower-income consumers often delay or forego non-essentials and wait for sales or value deals.

• Segment-Driven: Brand strategies must recognise this group behaves differently than higher-income consumers.

Insight: Liquidity and line-item impact matter more than overall sentiment.

Market and Cultural Signals Supporting the Trend: Indicators of Fracture

• Earnings Commentary: Companies like Chipotle explicitly noted a slowdown in lower-income traffic.

• Shift in Retail Channels: Growth in essentials (groceries, household goods) contrasted with stagnation in discretionary categories.

• Data Indices: Wage to Wallet Index quantifies savings, spending power and sentiment among lower-income households.

Insight: Signals point to segmentation and stress—not just slowdown.

What Is Consumer Motivation: Protecting the Present, Delaying the Optional

• Prioritising Essentials: Shoppers focus first on food, bills, subscriptions; non-essentials become optional.

• Maximising Value: When they spend, they search for deals, price cuts, bulk purchases, and cheaper channels.

• Avoiding Risk: With low buffer savings, avoiding disruption becomes more important than chasing novelty.

Insight: Motivation shifts from “own more” to “risk less.”

What Is Motivation Beyond the Trend: Resilience Through Restraint

Beyond immediate behaviour lies a broader shift toward financial resilience and control.

• Building Buffer: Even small savings matter, and spending becomes a means of protecting future security.

• Redefining Success: Consumption is less about display and more about durability, cost-efficiency and longevity.

• Shifting Identity: For some, “smart spender” replaces “big spender” as preferred self-image.

Insight: The spending behaviour of today reflects a mindset of survival and strategy.

Description of Consumers: The Frugal Core – Grounded, Pressured, Strategic

• Who They Are: Lower-income households (earning < $50K annually), representing ~36.5% of U.S. employment but only ~15.1% of total spending. PYMNTS.com

• Age & Gender: Broadly dispersed across adult demographic, but many are workers earning $25/hour or less.

• Income & Lifestyle: Lower liquid savings (~$5,737 on average) and high sensitivity to wage timing and job stability.

• Mindset: Spend selectively, prioritise essentials, delay discretionary purchases and navigate uncertainty.

Insight: The Frugal Core may spend less, but their behaviour influences entire sectors and supply chains.

How the Trend Is Changing Consumer Behavior: From Habitual to Hierarchical

• Frequency Declines: Lower-income consumers visit restaurants less often and reduce non-essential purchases.

• Channel Shift: They move away from premium discretionary spend toward value-based channels for essentials.

• Delayed Purchases: They postpone big-ticket or novelty purchases until stability returns.

Insight: Behaviour changes are less cyclical and more structural—redefining brand-consumer relationships.

Implications Across the Ecosystem: Impact for Consumers, Brands & Retail

• For Consumers: They must adapt to tighter budgets and demand greater value and utility from every dollar.

• For Brands & CPGs: Those targeting mid- to lower-income markets must retool messaging, pricing, and value propositions.

• For Retailers: Store formats, assortment and marketing must shift to recognise increasingly selective spenders—not just message growth.

Insight: The winners will be those who recognise dual-speed consumption and align accordingly.

Strategic Forecast: Navigating the Two-Track Economy

• Value Innovation: Brands should develop tiered offerings: premium for high spenders, value-rich for budget-sensitive segments.

• Data Focus: Segment-level insights (savings, income continuity, category shift) will guide allocation of marketing and product investment.

• Resilience Planning: Firms must model for lower-income fragility—not just macro growth—since this drives large swaths of consumer behaviour.

Insight: Strategy must be adaptive—and segment aware.

Areas of Innovation (Implied by the Trend): Value, Flexibility & Financial Inclusion

• Affordable Subscriptions & Bundles: Products and services tailored for lower-income segments (lower cost, higher value).

• Payment Flexibility: Pay-later, micro-payments, and more frequent pay cycles align with income volatility.

• Embedded Finance & Savings Tools: Brands that offer financial wellness features (cash-flow aids, savings nudges) can deepen loyalty and reduce friction.

Insight: Innovation will increasingly bridge commerce and financial resilience.

Summary of Trends: “Dual-Track Spending – A Split Economy Emerging”

Economic health and consumer spending in 2025 are not uniform—they are divided. One track sees stability and discretionary growth; the other sees tightening, trade-downs, and strategic restraint.

• Core Consumer Trend: “Budget-Cautious Spender”Lower-income consumers prioritise value and delay discretionary spend, signalling structural change.Insight: Their choices ripple across categories.

• Core Social Trend: “Stratified Affluence”Wealth isn’t just high—it’s creating distinct consumption patterns, dividing markets and experiences.Insight: Social mobility shows up in spending lanes.

• Core Strategy: “Segment-Smart Growth”Brands must differentiate approaches based on income tier—one-size marketing no longer suffices.Insight: Growth strategy must be dual-engine, not single-track.

• Core Industry Trend: “Volume to Value Pivot”Mass-market players face shrinking volume from budget-sensitive consumers; value innovation becomes imperative.Insight: Value creation will be the new competitive frontier.

• Core Consumer Motivation: “Essentials Over Extras”Consumers are driven by necessity, security and utility rather than novelty or status.Insight: The currency of consumption is shifting.

• Core Insight: “Vulnerability Is Visible”As lower-income consumers tighten, their behaviour becomes an early signal of broader economic stress.Insight: The margin of stability lies in the margins of income.

• Trend Implications for Consumers and Brands: “Adaptive Value Ecosystem”Brands and retailers must align to two realities: the premium spenders and the pressured majority.Insight: Success lies in acknowledging the divergence—not masking it.

Final Thought: Two Speed , One Economy

2025 reveals an economy that is resilient—but uneven. While some consumers press play on discretionary spend, others hit pause. Brands, CPGs and policymakers must recognise the dual nature of today’s spending and shift strategies from blanket optimism to segmented realism.

Insight: In a split economy, growth isn’t about raising all sails—it’s about steering two vessels.

Source: https://www.pymnts.com/economy/2025/earnings-reports-show-a-split-economy-as-lower-income-wallets-tighten/