The majority of Americans are cutting back on expenditure amid high prices and persistent inflation, while consumption among the wealthy appears unabated. The top 10% of affluent households are consuming at levels that surpass inflation, supporting the U.S. economy.
◇ U.S. consumption, the top 10% accounts for half
On the 23rd (local time), The Wall Street Journal (WSJ) reported that households in the top 10% with annual incomes exceeding $250,000 (approximately 357.8 million won) are generously spending on everything from vacations to luxury handbags. According to WSJ, consumption among the top 10% income bracket increased by 12% from September 2023 to September 2024, while consumption among the middle class and working class decreased during the same period.
According to Moody's Analytics, the top 10% of income earners account for 49.7% of total U.S. consumption, the highest level since 1989. Just 30 years ago, their share of U.S. consumption was only 36%.
The consumption growth rate of the wealthy has far exceeded inflation. Over the past four years, the expenditure of the bottom 80% has increased by 25%, while prices have risen by 21%, leaving little real consumer capacity. In contrast, the top 10% have increased their consumption by a whopping 58%.
In particular, overseas luxury consumption by the top 5% of households has increased by more than 10% compared to the previous year. David Tinsley, chief economist at Bank of America (BofA), said, "They travel to Paris and buy luxury handbags, shoes, and clothes in abundance."
◇ U.S. economy's unprecedented reliance on wealthy consumers
The WSJ analyzed that the U.S. economy has become unusually reliant on the consumption of the wealthy. Mark Zandi, chief economist at Moody's Analytics, noted, "The consumption of the top 10% accounts for nearly one-third of the U.S. Gross Domestic Product (GDP)." He stated, "The financial situation of the wealthy is better than ever, and their purchasing power is strong," adding, "The U.S. economy is becoming increasingly dependent on them."
The purchasing power of the wealthy is attributed to the rise in real estate and stock markets. While rising stock and real estate prices are seen as signs of economic prosperity, they also widen the gap between those who hold assets and those who do not.
Analyses show that the consumption gap has significantly widened, especially following the COVID-19 pandemic. According to data from the U.S. Federal Reserve (Fed), the net worth of the top 20% has increased by $35 trillion (approximately 5,950 trillion won), a 45% increase since the end of 2019. In contrast, while the bottom 80% showed a similar rate of increase in net worth, the absolute amount was only $14 trillion (approximately 238 trillion won).
The WSJ noted, "If the stock market crashes or real estate values decline, reducing the consumption of the wealthy in a situation where their spending is sustaining the economy, it could lead to a significant blow to the economy," adding, "Recently, factors such as the possibility of tariff increases have also been somewhat dampening consumer sentiment, including among the wealthy."