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The so-called\u00a0K-shaped economy<\/a> is becoming more pronounced, new data shows.<\/p>\n In the aftermath of the Covid pandemic, the K has been used to illustrate Americans’ diverging economic experiences<\/a>: Higher-income households are increasingly better off,\u00a0<\/strong>while lower-income households are falling further behind.<\/p>\n A new report<\/a> by credit reporting bureau TransUnion found that while credit conditions have improved for a large segment of consumers, others are struggling in the face of higher costs and rising debt burdens.<\/p>\n The K-shaped economy is “alive and well,” said Michele Raneri, TransUnion’s vice president and head of U.S. research and consulting.<\/p>\n Read more CNBC personal finance coverage<\/p>\n Over the past several years, more borrowers have become either superprime, with a credit score of 780 or higher, or subprime, with a credit score below 600, according to TransUnion. The dynamic is creating an increasingly\u00a0bifurcated consumer economy<\/a>.<\/p>\n “The top end of the K is very strong,” Raneri said. “Superprime is stable and resilient,” she said. “When people get into that group, they don’t flow in and out very much.”<\/p>\n On the bottom part of the K, lower-income households “are struggling more than they did,” Raneri said. Consumers in this group are carrying higher debt loads with rising debt-to-income ratios, which are signs of potential financial strain, TransUnion found.<\/p>\n “Everyone has seen the effects of inflation somewhat equally \u2014 nobody escaped it,” Raneri said. But when you factor in debt-to-income levels, “that’s where you see that lower-income consumers are hit more,” she added.<\/p>\n Those struggling to make ends meet often turn to credit cards to bridge the gap. The average credit card balance per consumer now stands at $6,519, up 2.3% year over year, TransUnion also found.<\/p>\n Now, consumer spending is driven mostly by high-income households, those earning more than $125,000 a year, according to a new\u00a0blog post<\/a> published Friday by the Federal Reserve Bank of New York.<\/p>\n The highest earners also spend a disproportionately large share of their consumption on luxury goods, high-end restaurants and entertainment relative to any other group.<\/p>\n The start of the K<\/p>\n The economy noticeably diverged in 2023, the New York Fed researchers found, “shortly after many of the pandemic-era subsidies for low- and middle-income households expired.”<\/p>\n Since then, low-income households have been hardest hit<\/a> by prolonged inflation<\/a> while wealth has risen fastest for those at the very top, the researchers found. <\/p>\n Although consumer spending and credit card balances remain relatively healthy\u00a0overall, “reliance on a single segment of the economy has important implications for spending growth and its fragility, as well as for economic vulnerability and policy,” the New York Fed researchers wrote.<\/p>\n