How The High-Income Cohort Drives Top-Line Consumer Spending

A key differentiator between Morning Consult’s spending data and publicly available government data is the ability to break it out by various demographic groups. This data set feature has been especially relevant since the 2022 inflation surge. In this recent period of elevated price growth, aggregate government spending measures, such as the Census Bureau’s retail sales or the Bureau of Economic Analysis’ personal consumption expenditures, have reflected a much rosier, more resilient economy than that seemingly being experienced by many consumers. Morning Consult’s data on income groups helps explain this discrepancy: Spending trends among the high-income cohort are more closely aligned with top-line government spending measures than spending trends among the lowest income cohort–defined as those earning less than $50,000 annually in Morning Consult’s data. High earners dominate the overall trend, even as the larger–but less economically impactful–group of low earners may be experiencing different circumstances.

High earners’ spending aligns more closely with aggregate government spending measures

Morning Consult’s spending data for adults from households earning $100,000 or more strongly correlates with government data tracking monthly personal consumption expenditures and retail sales. Although lower earners make up a larger portion of the sample population, their spending often trends in the opposite direction of the more widely reported government metrics. Middle-income households, earning between $50,000 and $100,000 annually, generally fall just below the highest earners in terms of the correlation of their spending habits with aggregate government measures.

This finding illuminates how, in evaluating and projecting forward the health of the overall economy, higher earners have recently been largely responsible for propelling growth in spending and, consequently, GDP. Their financial health and willingness to splurge are critical to maintaining expansion. At the same time, lower-income adults make up a sizable portion of the population. For businesses serving consumers on the lower end of the income spectrum, it may be the case that the overall economic story playing out in the headlines does not match the experience regarding foot traffic and customer willingness to pay. 

Discretionary spending is particularly driven by high earners

Some categories of spending are relatively more reliant on high-income consumers than others. Adults from households earning $100,000 or more tend to allocate a larger share of their monthly expenditures to discretionary goods and services than lower earners do, and spend higher amounts on these categories. Morning Consult’s data found that high earners direct 3.8 percentage points more of their total monthly spending to discretionary purchases than low-income adults. By amount, high-earning households’ estimated average spend is about 2.5 times that of the lowest income cohort.

A decline in low earners’ spending can easily be offset by a small increase in high earners’ purchasing. For example, if a low-income household decreased discretionary spending by 5%, it would take only a 2% increase on the part of a high earner to cancel out the negative impact on spending that month. Conversely, if a high earner cut back spending by 5%, a low-income household would need to increase purchases by nearly 13% to offset the decline. These scenarios further illustrate how the economic hardships of lower-income households can, at times, fail to penetrate top-line figures that paint a rosier picture of consumer spending and the economy overall. 

Recreation, airfare and hotels are most at the mercy of high earners

Among discretionary services, recreation and travel have some of the most amplified impacts of high earners. Adults earning more than $100,000 reported spending more than three times as much as the lowest income cohort on recreational activities on average over the past year. Airfare and hotels followed a similar pattern. The gaps in spending levels for these categories are driven both by the fact that high earners are relatively more likely to be making these purchases in a given month than other adults, and by larger amounts spent on these purchases (due to higher priced options or greater quantities purchased, or both). Health insurance, which Morning Consult tags as an essential service, also had a large spending gap, in large part due to lower earners being more likely to receive government-subsidized care. 

The outsized impact of high earners on these specific discretionary categories is also evident in government spending data and industry benchmarks. Similar to the trend observed at the topline, high earners’ recreation spending has historically had a stronger correlation with PCE data than that of lower-earning groups. The same pattern plays out for hotel spending in its association with industry benchmark STR’s data on occupancy and daily rates, and for airline spending relative to price-adjusted TSA throughput. 

Risks specific to high earners could threaten spending growth this year

Heading into mid-2025, the high-income cohort is vital to watch due to their strong influence on overall spending and, especially, discretionary categories. The fact that much of this group’s spending is discretionary means they can ramp up or tamp down more easily–a double-edged sword for the economy. So far, the impact of this dynamic has been generally positive, helping prop up consumer spending through headwinds of high inflation, elevated interest rates, and recent market volatility. Going forward, potential adverse events that specifically resonate with high earners, like stock market declines or falling home prices, could carry a greater risk to spending growth, particularly given the relative ease with which this group’s large buffer of discretionary spending can be trimmed from budgets.