September 15, 2025

Hi everyone, my name’s Taylor St. Germain with ITR Economics. Thanks so much for joining me on this episode of TrendsTalk. We at ITR are your apolitical and unbiased source of economic intelligence. And today I wanted to talk about different income brackets and how we’re handling our expenses.

Now, we know that consumer spending is very important for the US economy, about two-thirds of GDP is consumer spending. we talk through data sets like retail sales, savings rates, personal income, a number of these indicators that have an impact on the consumer picture. Well, our team did some fascinating research throughout this week, and I wanted to share it with you. What we’re looking at now is food, housing, and healthcare as a percentage of expenditures for different income brackets, and some of this information is very interesting. So what the team did was they broke income brackets down into five different groups, those in the 0-20, 20th percentile of earners, 20-40, 40-60, 60-80, and then the top 20% of earners. And we looked at food, housing, and healthcare as a percentage of their total expenditures, and looked at this over time.

It was very interesting the takeaways, which were those lower income earners in that 0-20th percentile or 20-40th percentile, food, housing and healthcare are making up a larger percentage of their expenditures compared to history. So that lower income bracket, again, 0-20 and 20-40th percentile, those folks are being challenged with food housing and healthcare costs compared to the long-term trend. Now, those in the 40-60 group, 60-80th percentile and the top 20% of our income earners, food, housing, and healthcare remains below the long run average for those folks.

So what does this data mean? It means that the lower income earners are having, are running into a more challenging financial picture, especially when you’re digesting their expenses on food, housing, and health care. It shows that the top 60% of earners in our country are those that are still flourishing from an expenditure perspective, at least seeing those costs below the long run average. We’ve talked about this before, it’s really what we call the tail of two consumers, right? Which is that, yes, the top earners are doing quite well, the middle to upper income earners, but it’s those lower to middle income earners that are really getting crowded out at this point in time.

So I think, you know, there’s a number of implications, this has implications on consumer spending. Now, the reality is the top 60% of earners are going to have a bigger impact on GDP growth. But as you’re thinking about products and pricing, it’s important to acknowledge that the bottom 40% of earners in our country are facing some significant affordability challenges. It’s really important to get granular into this data, because, as we’ve shown here, it’s not the same across the board when you’re evaluating the current state of the consumer. Now, again, from a GDP perspective, we do find it encouraging that the top 60% of earners are seeing food, housing, and healthcare below the long run average. That’s going to drive economic growth, but let’s not be naive to the fact that some people are really challenged in our country as it relates to some of these costs.

This is the type of analysis that we need to be doing in these higher inflation environments that we’re expecting moving forward. Understanding where the pockets of weakness in the economy are, understanding where the pockets of strength will be and what that means for economic growth. We still have a very rosy consumer spending outlook, rosy retail sales outlook moving forward, but it’s important to get into the weeds of the data because you can because you can see some of these different trends as you get more granular.

Certainly hope you find this information interesting and helpful. Please remember to like and subscribe to TrendsTalk wherever you listen to your podcast, and I look forward to seeing you all in the next one. Thanks so much. Take care for now.