More K-shaped spending
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What is a K-shaped economy and how does it affect different income groups?
There's a growing gap between the have and have-nots in our economy, and that's changing the way we move through it. From American Public Media, this is Marketplace.
In New York, I'm Kristen Schwab, in for Kyra's doll. It's Thursday, February 12th. Good to be here with you. The K-shaped economy.
How are middle-income households impacted in the current economic landscape?
You've heard us use the phrase again and again and again to describe so many corners of the economy. But it's looking like we might need a different letter to describe the financial divide. Bank of America released a new report that confirms, yes, there is a growing gap between high- and low-income households. But a newer and notable trend is there are increasing signs that life is getting more difficult for the middle class. Marketplace's Carla Javier explains.
David Tinsley at the Bank of America Institute is starting to notice that a simple K-shape doesn't totally summarize the situation anymore.
What trends are emerging in consumer spending among different income levels?
According to January customer data, middle-income household spending growth was just 1%, compared to 2.5% for high-income households.
So if you like, there's a K-shape opening up between higher-income households and middle-income households as well. A K within a K. And if their spending continues to soften, Tinsley says, The economy would struggle to maintain overall consumer momentum.
At Big Chalk Analytics, which works with retailers, restaurants and companies that make packaged goods, Rick Miller says he doesn't really think of spending as a straightforward K these days either.
In our data, we see that there are household budgeting stresses happening across the spectrum of incomes.
Which is why he likes to split consumers up by whether or not they're making tradeoffs. He says tradeoff consumers are actively cutting the size of the products they're buying, going for a 12-pack of soda instead of a 30-pack, for example. They're also visiting more stores in search of the best deals.
How are newer firms adapting workplace policies compared to established companies?
And about a year ago at this time, we saw about 19 percent of households that were actively switching from premium brands down to store brands. That number's jumped up to almost 22 percent.
So he says retailers are promoting their own store brands. Jessica Ramirez is the co-founder of the advisory business, the Consumer Collective. She says those who are still spending are focused on value, which means retailers are looking hard at the assortment of products they offer. What does my assortment look like going forward? So where is there going to be an opportunity? How do I need to downsize my assortment in order not to take on losses?
What advantages do younger firms have in attracting talent with flexible work options?
She says among fashion companies, for example, their strategy this time around is not to mark everything down like they did in the last recession, but instead to plan inventories better to meet consumers where they are. I'm Karla Javier for Marketplace.
Wall Street today went all the way red. We'll have the details when we do the numbers.
Tomorrow, we'll get the latest read on inflation, the Consumer Price Index for January. And while the word consumer is key here, the CPI tracks the cost of goods and services, businesses are the makers of those goods and services. And they're dealing with inflation, too. So to get a preview of what we might see in tomorrow's report, we're checking in with a few small businesses today. We're starting with Ashley Morkin, owner of Unglued, a gift shop and craft store in Fargo, North Dakota. Business has been surprisingly really good for the dead of winter and Q1, which is traditionally the slowest time for, I would say, most retailers.
How are small businesses coping with pricing pressures and tariffs?
I think we're up 10% or a little higher than 10% for January. And just so many people coming out, even when it's been that bitter Arctic cold coming through. We've sold more DIY kits than we probably ever have at this time of year. We're getting asked every single day about the Rebel Loon of Minnesota or if we have buttons. really related to the world right now. And so we just bought a button maker so that we can get what people want. There's been some small increases in wholesale pricing.
What challenges is the Washington National Opera facing with the Kennedy Center's changes?
Like our card maker in Minneapolis just had theirs go up about like 3%.
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Chapters
8 chapters
1
What is a K-shaped economy and how does it affect different income groups?
0:02–0:30
2
How are middle-income households impacted in the current economic landscape?
0:30–1:09
3
What trends are emerging in consumer spending among different income levels?
1:09–2:11
4
How are newer firms adapting workplace policies compared to established companies?
2:11–2:49
5
What advantages do younger firms have in attracting talent with flexible work options?
2:49–4:09
6
How are small businesses coping with pricing pressures and tariffs?
4:09–4:41
7
What challenges is the Washington National Opera facing with the Kennedy Center's changes?
4:41–5:28
8
What is the outlook for the arts and opera in the U.S. amid economic challenges?
5:28–25:53