Low-income consumers hit by gas-price squeeze as high earners worry

Bank of America Institute’s payments analysis shows rising gasoline and shelter costs are disproportionately squeezing lower-income households, prompting cuts in discretionary categories such as clothing and furniture.

The BofA study highlights that inflation pressures remain concentrated at the lower end of the income scale and that spending baskets differ markedly across cohorts: lower earners allocate more to necessities while higher earners have grown their share of discretionary outlays like dining and travel. These patterns are visible in aggregated debit and credit card flows.

Meanwhile, data reported by Fortune and based on the University of Michigan and Morning Consult surveys indicate a notable decline in sentiment among the highest income tercile. Market volatility and growing worries about the labor market have dented confidence among wealthier consumers, who are more exposed to financial-asset swings.

From a market perspective, reduced spending by lower-income households risks weaker demand in core retail and durable goods sectors, while lower confidence among high earners could temper discretionary and service-sector recovery. The asymmetric hit to consumption across income groups creates downside risks for growth even if headline spending figures remain resilient.

Analysts say the near-term outlook will hinge on energy price trajectories, incoming labor-market data and equity-market behavior. If gasoline and housing costs stay elevated, the squeeze on lower-income budgets may deepen; conversely, a sustained market recovery would help restore confidence among higher earners and support discretionary spending. Policymakers and corporate strategists are advised to monitor income-segment dynamics closely.