What the World Cup revealed about America

Many visitors to the United States for the recently completed World Cup were struck by America’s mass affluence. Those conditioned to believe economic resources were concentrated in the hands of a tiny elite encountered broad-based abundance: massive and elaborately stocked supermarkets, sprawling suburbs, and, of course, packed, state-of-the-art stadiums. While such impressions hardly invalidate the notion of a “K-shaped” economy, they helpfully contextualize a dynamic typically subject to caricature.

Economists are accustomed to being asked about the health of “the consumer.” But there is no “representative” or uniform consumer today. Shocks impact households discrepantly due to heterogeneity in asset ownership and liability structures. Likewise, companies once thought to have their finger on the pulse of “the consumer” have provided misleading signals about the direction of aggregate consumption and GDP.

Since the start of 2023, spending on products and services targeting the top third of consumers – high-end travel, live events, fine dining and, especially, the top price tiers within categories – has substantially outperformed mass-market outlays (Figure 1). Inflation sharply reduced households’ purchasing power, contributing to a 46% rise in outstanding credit card balances and a concomitant 2.7x increase in the incidence of financial stress among the bottom third of households. As these consumers cut back on spending to repair balance sheets, the financial results of many traditional bellwethers flashed red even as aggregate US consumption and GDP powered ahead.

Figure 1: Divergence in fortunes

We see a similar pattern in response to the Hormuz-related price shock. Spending among the top tercile grew at 2.5x the rate implied by other cohorts in the first half of the year, and the incidence of financial distress among the bottom third ticked up by 20 basis points. Preliminary Q2-2026 public financials tell the same story. Operating revenue growth at Delta and United was in the mid-teens, with the increase in premium seat revenue nearly twice that of economy class. Conversely, mass market consumer goods wholesalers reported weak results, as price increases ate into volumes (Figure 2).

Figure 2: Hormuz shock digested differently

It is not household income that explains these divergent trajectories so much as differences in financial resources. Shocks to prices and interest rates matter less to households hedged against those risks.

Of the roughly 135 million US households, over 50 million own a mortgaged home, virtually all of which (96%) have been financed by long-term fixed rate loans. Fixed mortgage payments hedge against rising housing costs – since the onset of the pandemic, primary rents have increased by 32% on average – and higher interest rates. Measured by the current distance between rates on new mortgages (6.55%) and the effective rate paid on the outstanding stock of mortgages (4.28%), disposable income among these households is $300 billion higher than it would be if mortgage rates automatically reset to market levels, as is common in other economies. Ownership also provides participation in the 50% increase in house prices since 2020, padding net worth and increasing the collateral available to support additional spending: outstanding balances on home equity lines of credit have increased by 35% since Q1-2022.

Figure 3: Fixed-rate mortgages, surging asset prices boost spending power

Roughly 73 million US households have retirement accounts (primarily defined-contribution plans like 401ks) that consist primarily of claims on businesses whose revenue growth and market values provide another hedge against inflation. Balances in defined contribution plans have increased by $6.7 trillion (+12.7%, annually compounded) since the start of 2019. US personal savings rates have fallen sharply over the past year (from 5.5% in April 2025 to 3% in May 2026) but that seems entirely rational. If your retirement balance is far above where you expected it to be, why not spend a bit more of your current income than previously intended?

If we net across these overlapping cohorts and exclude recent first-time home purchases, we’re left with 45 million households that combine to account for nearly $15 trillion in annual outlays. That’s an extraordinary sum, equal to nearly 3x the size of the entire German economy and 70% of the GDP of China (Figure 4). And this third of the population has not only been insulated from the inflation shock but also exhibits the propensity to spend out of wealth and income to an extent that’s sustained a far higher rate of GDP growth than observed in economies with comparable living standards.

Figure 4: Total outlays of 45 million US households equal to nearly 70% of the entire Chinese economy

The situation in the US is far from anyone’s egalitarian ideal. The cost-of-living shock squeezed the finances of millions of households and the hoped-for catch-up in real incomes has been imperiled by recent hostilities. But rather than a “K-shape,” the US economy could best be analogized to one traveling at two speeds: one at roughly the same rate as Europe's and another that’s racing far ahead.