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Why India Has a Diet Coke Shortage
May 10, 2026
How to Solve a Highway Problem
May 12, 2026
We might be back to our K-shaped economy.
But it could be an “E.”
Household Spending
Gasoline
During March, gasoline spending rose by more than 15% while actual gasoline consumption was down 3%. Looking more closely, we can see the different response to elevated gas prices from high (earning over $125,000), middle (earning between $40,000 and $125,000), and low (earning less than $40,000 a year) income households. Spending 19% more, high income households reduced the gallons they bought by just 1%. At the same time, the lowest income group spent 12% more, even when cutting gas purchases by 7%. As for the middle, you can see below that their numbers were in between the other groups.
Consequently, sentiment is moving toward an E. Saying we no longer have a K with high income sloped upward and lower groups sinking, instead, they point to the differences for high, middle, and low.
Necessities and Luxuries
Somewhat similarly, in addition to gasoline, we have to decide between the K and the E for necessities and luxuries. One reason for the divide is the wealth increase for high income households since 2023 that fueled the increase in retail spending. But also, at the same time, the middle was splintering from the top while low income households experienced more inflation:
Our Bottom Line: Alphabet Economics
We’ve always used letters to describe how our economy behaves:
Perhaps though, the Bank of America Institute said it perfectly when they told us that, “Income‑based divergence in spending and wage growth persists, and we are concerned that a “K” shape is opening up between higher-income households and middle-income households, alongside the existing gap with lower-income households.”
So, yes, the B of A confirmed that now we need to add E.
My sources and more: Always a solid source, the NY Fed’s Liberty Street Economics, here, here, and here inspired today’s post and provided many of our facts. But then we read about the E-shaped economy with NerdWallet having more to say about it.
