Affordability pain is real, but resilient consumers are still infusing money into the economy, Brian Moynihan , CEO of Bank of America, said at the Axios House News Shapers summit in Washington, D.C. Why it matters: The U.S. economy sits on a remarkably durable foundation , supporting consumer spending even with hot inflation. But at the same time, Americans tell pollsters economic conditions is at rock bottom, fueling a political reckoning over affordability. - "There's a say-do paradox," Moynihan said. "The question is, what are people actually doing?" Driving the news: Two things can be true, Moynihan explained to Axios' Mike Allen. - "Affordability is a real issue," he said. But he added, "what people are doing is still spending…
Data: Bureau of Economic Analysis ; Chart: Axios Visuals Americans are burning through their financial cushion at an accelerating pace, spending faster than their income is growing, as the energy shock from the Iran war slams household budgets. Why it matters: Consumer spending has indeed held up, defying rock-bottom sentiment readings. But there's new evidence that suggests households are increasingly drawing down savings to support their spending, a fragile dynamic for the broader economy. What they're saying: "While prices are rising faster than comfortable, incomes are not, putting consumers in an uncomfortable spot," NerdWallet senior economist Elizabeth Renter wrote. - "Rising prices, sluggish income and economic uncertainty could…
Data: Federal Reserve Bank of New York ; Chart: Courtenay Brown/Axios The uncomfortable new normal for the U.S. economy: spending growth concentrated at the top of the income ladder, a split largely explained by wealth gains from financial assets. Why it matters: The K-shaped economy is real, though it is not particularly new. That's the conclusion of research out Friday morning from the Federal Reserve Bank of New York. - It confirms an economic risk lurking beneath an economy that is navigating relentless disruption — a war driving energy prices higher, AI uncertainty and more — where spending growth is concentrated in a single cohort that could pull back sharply with a market downturn. - Low-income households have been squeezed by…
The K-shaped economy — wealthy Americans propping up consumer spending while poorer consumers increasingly pull back — has become the economic consensus. - One big problem: Some economists warn that the narrative has outrun the data supporting it. Why it matters: The narrative has seeped into how CEOs explain spending patterns and how economic policymakers think about risk. Getting this wrong may make the economy look more resilient than it is, with less of a shock absorber than previously believed if conditions turn quickly. What they're saying: "The narrative of K-shaped growth appears to be exaggerated, downplaying risks of a fragile expansion," a team of economists at Barclays wrote in a note earlier this month. The intrigue: The…