The K-Shaped Economy and Rising Consumer Credit Stress: Insights from the April Market Pulse

Highlights: 

• The K-shaped economic divide is accelerating, characterized by significant credit strain—including a 40 basis points year-over-year increase in credit card delinquencies—for lower-income consumers whose excess pandemic savings are depleted.

• The income disparity is worsening, with real year-over-year earned income actively falling for the lowest-income households (a $631 loss in spending power), while the highest earners gained $4,000 annually.

As the second quarter of the year hits its stride, the current market continues to be impacted by a range of economic headwinds, including a widening k-shaped economy, global conflict, and environmental challenges, and organizations need to know the factors affecting consumers and businesses to stay competitive in today’s crowded landscape..  

During the April Market Pulse webinar, Emmaline Aliff, Advisory Leader at Equifax, shared a breakdown of what the current K-shaped economy looks like for consumers and how it may impact the organizations serving them.

Dr. Amy Crews Cutts, President and Chief Economist of AC Cutts & Associates, provided a deep dive into the biggest macroeconomic factors impacting today’s environment. 

Finally, both panelists were joined by Dave Sojka, Senior Advisor at Equifax, for a Q&A answering attendees’ burning questions on the K-Shaped economy, the factors impacting today’s market, and how to stay ahead in this complex economic environment.

What’s Happening with the K-Shaped Economy?

The ongoing "K-shaped" economic trend highlights a stark divide in the financial state of U.S. consumers. While many consumers remain resilient, lower-income households—defined as those earning less than $50,000 annually—are facing significant strain. This group has seen its excess savings from the pandemic era completely depleted, leading to a "tightening of the belt" as they struggle to keep up with rising costs.

The data reveals that this financial pressure is translating into higher credit stress for the lower-income segment. Specifically, credit card delinquencies have risen by 40 basis points year-over-year, and subprime auto delinquencies have reached 5.5%. These metrics underscore the widening gap between different consumer groups, as those at the lower end of the "K" find it increasingly difficult to manage debt and maintain their standard of living in the current economic environment, while higher income consumers—defined as those earning more than $100,000 annually—remain resilient and continue to drive spend.

Macroeconomic Update 

Dr. Amy Crews Cutts, President and Chief Economist of AC Cutts & Associates, provided an analysis of the broader economic factors influencing consumer behavior and market stability. Here are the top five insights from her presentation: 

1. Shifted Economic Forecasts: Economists have lowered their forecasts for economic growth (Real GDP), with the consensus matching 2025’s GDP growth of 2.2%, and raised their forecasts for inflation (CPI) for 2026, with the consensus sitting at 3.2%, over half a percent over last year’s rate of 2.6%.

2. Slowing Income & Falling Savings: The University of Michigan Consumer Sentiment Index has reached the lowest point in its history, indicating that consumers across all income levels are feeling stressed. Disposable Personal Income growth is slowing, increasing the share consumed by expenditures and causing the personal savings rate to fall.

3. Worsening K-Shape Income: Real year-over-year earned income is rising fastest for households with annualized incomes over $75,000 and is actively falling for those making under $42,500. Based on annualized data, this bottom group lost $631 in spending power in the last 12 months, while those at the highest income levels gained $4,000.

4. Persistent Everyday Inflation: Consumers are feeling the effects of prior inflation on core, everyday items, as the stabilizing effect of gasoline prices is no longer lowering the overall inflation rate.

5. Water Stress to Increase Food and Utility Costs: Over 56% of the lower 48 states are experiencing drought conditions. This is expected to lead to greater food and water price shocks, higher water utility bills, and continued pressure on beef prices due to further reductions in cattle herds. 

Keep Your Business Goals Within Sight

We hope you will join us for our next Market Pulse webinar. To ask questions in real time and gain deeper insights before anyone else, you have to be there. Don’t miss it! Stay tuned to register, plus find our monthly Small Business Insights, National Consumer Credit Trends reports, the Market Pulse podcast, and more at our Market Pulse hub. 

Source:

Equifax, April 2026 Market Pulse Webinar