The K-shaped consumer looks different this time

Retailer Bottom Line: The K-shape persists, but lower-income consumers have increased their spending versus last year. The question is whether they can sustain this momentum into the second half of the year. 

I wrote about the K-shaped consumer in February, using data and analysis from the Consumer Insights Studio, a partnership between Affinity Solutions, Pyxis by Bain and Company, and NRF. Our data showed an extremely clear K-shape then, so we decided to replicate the analysis using 2026 data from the CIS and see if these conditions were still holding in 2026. 

The new analysis still shows a clear K-shape — but it is a very different “K” from what we saw last time around. The 2025 data showed negative growth across many of the lower-income segments. The January-June 2026 data actually shows that none of the cohorts reduced spending in the first six months of 2026 versus last year. Yes, higher spenders are still responsible for the bulk of the growth, but lower spenders aren’t that far behind.  

Even more interesting, when we look at staples versus discretionary spending, we see much higher growth in discretionary categories than in staples. Discretionary spending has grown 3.9% year over year versus only 2% for essentials. We normally see this type of behavior when the economy is running hot and consumers are feeling confident about the economy and their jobs — not when sentiment is low and gas prices are at historically high levels. 

Spending has been completely disconnected from sentiment for a while now, so I don’t put too much stock in the weak sentiment data; it is still surprising to see not only strong retail growth, but also strong growth in discretionary spending. I attribute this (in part) to the impact of tax refunds, which I wrote about in a previous blog. Consumers are clearly feeling (despite their sentiment) positive enough to spend on non-essentials. 

And it’s not just the higher-income consumers that are spending on discretionary categories. Our analysis shows that discretionary spending has outpaced staples spending for six of the bottom eight spending deciles; the majority of consumers seem to be willing to focus more of their spending on the things they want rather than the things they need. 

The big question is whether this is sustainable as we move into the second half of the year. Analysis by Oxford Economics shows that higher gas prices will completely offset the benefits of higher tax refunds at some point between July and August. As long as gas prices remain high, softening wage growth coupled with sticky inflation mean that the second half of the year might not be as rosy as the first half.