The indefatigable American consumer has managed to regularly surprise economic doomsayers in recent years. Real personal consumption expenditure has remained strong and steady during much of the post-pandemic expansionary cycle. Early in the recovery, consumption was buoyed by excess savings associated with large-scale fiscal transfers and by strong wage gains linked to an unusually tight labor market.

More recently, however, low- and middle-income households have struggled in the face of sticky inflation and high borrowing costs. They have depleted their excess savings and a cooling labor market is starting to affect wage growth. Delinquency rates (especially for credit card and auto loans) among subprime borrowers are on the rise.

Consequently, personal consumption expenditure, which accounts for around 67 percent of GDP, is increasingly driven by the spending patterns of high-income households. Those earning more than $250,000 a year (the top 10 percent of earners) are now

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