Business
Here’s where the economy is starting to show ‘K-shaped’ bifurcation
Coke beverages are displayed in a 7-eleven convenient store on July 17, 2025 in Austin, Texas.
Brandon Bell | Getty Images
Amid recession fears, a government shutdown and tariff uncertainty, consumers are increasingly diverging in their spending.
Wealthier Americans are engaging their purchasing power, while lower-income Americans are starting to pull back — commonly described as a “K-shaped” economy. Friday’s consumer price index report shed more light on the pressures facing large swaths of the country.
The CPI report, which measures price changes across a range of goods and services, was delayed due to the government shutdown, originally scheduled to be released nine days prior. The report came in cooler-than-expected, showing a 0.3% increase on the month. That put the annual inflation rate at 3% and signals a likely rate cut by the Federal Reserve next week.
A subset of the CPI report also helps determine the Social Security Administration’s cost-of-living adjustment, which the agency said Friday will be 2.8% in 2026.
Lower- and middle-income consumers have been hit hardest by rising costs on daily essentials like groceries and gas. Meanwhile, wealthier investors have benefited from stock market rallies and rising home values. Recent data from JPMorgan’s Cost of Living Survey found that income bracket was a large factor in Americans’ varying views of the current state of the economy.
Here’s where bifurcation is beginning to take hold:
Food and beverage
Coca-Cola, often viewed as a bellwether for the financial health of consumer, has been seeing the divergence across its business.
Pricier products that are more exposed to high-income consumers, like Topo Chico sparkling water and Fairlife protein shakes, are fueling the company’s sales growth, CEO James Quincey told CNBC’s “Squawk on the Street” Tuesday.
At the same time, Coke is seeing higher demand at both dollar stores that cater to low-income consumers looking for deals and higher-end outlets that skew toward wealthier consumers, like fast-casual restaurants and amusement parks.
McDonald’s CEO Chris Kempczinski told CNBC’s “Squawk Box” in early September that the burger chain’s expansion of its value menu was in response to a divided consumer landscape, or what he called a “two-tier economy.”
While Kempczinski said the company is seeing upper-income consumers performing well, its lower- and middle-income diners are “a different story.”
“Traffic for lower-income consumers is down double digits, and it’s because people are either choosing to skip a meal… or they’re choosing to just eat at home,” he said last month.
A similar dynamic is playing out at Chipotle, according to Chief Financial Officer Adam Rymer.
“There are certain cohorts of the consumer, definitely on the lower-income side, that are feeling pressure right now. That’s something that we’ll have to take into consideration when looking at price going forward,” Rymer told Reuters in July.
On Friday, Procter & Gamble said the company is seeing K-shaped shopping behaviors among its consumers, with wealthier shoppers buying bigger pack sizes from club retailers and lower-income shoppers exhausting their pantry inventory before returning to the stores.
“The consumer environment is not great, but stable,” CFO Andre Schulten said on a call with reporters.
Autos and airfare
Last month, the average price for a new vehicle surpassed $50,000 for the first time ever, according to Cox Automotive’s Kelley Blue Book.
The record pricing comes as auto loan defaults and repossessions are on the rise, particularly for those with FICO scores below 620.
“Today’s auto market is being driven by wealthier households who have access to capital, good loan rates and are propping up the higher end of the market,” said Cox Automotive executive analyst Erin Keating in a statement last week.
And though airlines have been piloting premium offerings for years, the higher-cost tickets have gained momentum in recent months.
Delta Air Lines said earlier this month that revenue from its premium offerings is expected to surpass the coach cabin next year, with CEO Ed Bastian saying he’s not seeing any signs of slowdown in the roomier, more expensive seats.
Hospitality
Still, though there are signs of a “K-shaped” economy, some argue it’s not here to stay.
Hilton CEO Christopher Nassetta told CNBC last month that he’s seeing a bifurcation, but he doesn’t expect that pattern to last much longer, partly because he sees inflation and interest rates decreasing.
“My own belief is that as we look into the fourth quarter and particularly into next year, we’re going to see a very big shift in those dynamics, meaning, I don’t think you’re going to continue to have this bifurcation,” Nassetta said. “That’s not to say I think the high end is going to get worse or bad, I just think the middle and the low end is going to move up.”
On Wednesday, the hotel chain reported a drop in revenue for affordable brands like Hampton by Hilton and Homewood Suites by Hilton.
Meanwhile, Nassetta told investors on an earnings call that revenue from luxury offerings performed exceedingly well and remains a focus for Hilton moving forward.
— CNBC’s Amelia Lucas, Michael Wayland, Alex Harring, Luke Fountain and Leslie Josephs contributed to this report.
EBay has turned down a 56 billion US dollar (£41.4 billion) takeover move from GameStop, labelling the proposal as “neither credible or attractive”.
GameStop boss Ryan Cohen launched an unsolicited offer of 125 dollars (£92.40) per share – half in cash and half in GameStop stock – to eBay shareholders last week.
However, the online marketplace’s board confirmed on Tuesday that it had now rejected the move.
In a letter, eBay chairman Paul Pressler said it reviewed the offer but believes that eBay is a “strong, resilient business”.
He added: “We have sharpened our strategic focus, strengthened execution, enhanced our marketplace and seller experience, and consistently returned capital to shareholders.
“With its differentiated global marketplace and a clear strategy, eBay’s board is confident that the company, under its current management team, is well-positioned to continue to drive sustainable growth, execute with discipline, and deliver long-term value for our shareholders.”
GameStop, which runs around 1,600 shops around the US, said it started accumulating eBay shares earlier this year and currently has a 5% stake.
Mr Cohen had previously indicated he would take his proposal directly to eBay shareholders if the company’s board rejected the deal.
Business
India’s retail inflation jumps to over one-year high at 3.48 per cent in April – The Times of India
India’s retail inflation rose to a more than one-year high of 3.48 per cent in April from 3.40 per cent in March, driven mainly by higher food prices, according to data released by ministry of statistics & programme implementation on Monday. Food inflation, measured by the Consumer Food Price Index (CFPI), also accelerated to 4.20 per cent in April from 3.87 per cent last month, indicating broader price pressures across household essentials. Meanwhile, inflation in rural areas stood at 3.74 per cent, higher than the 3.16 per cent recorded in urban India.Among key items, silver jewellery recorded the sharpest inflation at 144.34 per cent in April, though slightly lower than 148.42 per cent in March. Gold, diamond and platinum jewellery inflation also remained elevated at 40.72 per cent. Among key food items, tomato prices surged 35.28 per cent year-on-year in April, while potato and onion prices remained in deflation at minus 23.69 per cent and minus 17.67 per cent, respectively. The personal care and miscellaneous goods category recorded the sharpest inflation at 17.66 per cent, while transport inflation remained largely flat at minus 0.01 per cent. India’s retail inflation has now risen for the second consecutive month, inching closer to the Reserve Bank of India’s 4 per cent medium-term target. The RBI last month projected CPI inflation for 2026-27 at 4.6 per cent and warned that elevated global energy prices due to the Middle East conflict, along with possible El Niño conditions affecting the monsoon, could pose upside risks to inflation.
Business
From buying less gold to cashing in old reserves: How bullion industry plans to cut India’s import bill – The Times of India
As rupee continues to breach multiple record lows, pressure on India’s balance of payments is growing. To protect foreign exchange reserves and help stabilise trade balance, Prime Minister Narendra Modi has urged people to cut down on gold purchases.But if not buying new gold, could household gold be turned into working capital instead?PM Modi’s call has brought fresh attention to an old issue, with major bullion and jewellery bodies once again suggesting steps to the government and the Reserve Bank of India (RBI) to reduce gold imports, use more household gold, and better manage how imported gold is used.Their proposals include limiting imported gold mainly for jewellery exports, bringing jewellers into gold monetisation schemes, making gold metal loans (GML) work more like bank cash credit, and reducing tax on interest earned from gold deposits, ET reported.Meanwhile, India’s gold imports jumped 24% to a record $71.9 billion in 2025-26, with more than 721 tonnes imported during the financial year.What are the proposals:Under the system proposed by the Precious Metals Refineries Forum (PMRF), imported gold would be channelled as one-year gold metal loans (GML) for jewellery exporters, while gold collected from household deposits, once refined locally, would be used to meet domestic demand through jewellers and retailers.The model suggests that depositors could earn 2-2.5%, with GML interest rates set at around 3-4%.Industry players cited by ET have pointed out that some tax changes will be needed to make this work, especially when physical gold is converted into electronic gold receipts (EGR).“The 3% notional loss of GST amount on conversion puts off customers. The government can always recover the tax when EGR is converted back into physical gold for selling. Concessions on capital gains when deposit is encashed on maturity along with income tax relief on accrued interest could be considered,” James Jose, president of PMRF told the financial daily.Why past gold schemes failed Many in the industry believe earlier gold monetisation schemes did not succeed because jewellers were not properly included and because gold deposits and loans did not work together like a banking system. Without that, institutions accepting gold deposits face major risks from price swings and currency changes.This is why trade bodies are calling for a more complete system with bank support, secure vaults in multiple locations, renewable GMLs like working capital, and proper collateral safeguards.Indian households are estimated to hold over 30,000 tonnes of gold, but despite repeated discussions during times of trade deficit and capital outflows, there is still no strong institutional system to bring this gold into the formal economy.Commenting on why earlier schemes did not work, Rajesh Rokde, chairman of All India Gem and Jewellery Domestic Council (GJC) said, “I feel the schemes did not take off because jewellers were not part of them. About 10-20% of the gold with families would be in bullion form. Most don’t sell, expecting prices to rise. If some gold can be tapped, if necessary purified and converted into digital gold in a system where jewellers are involved, imports would dip significantly,” According to one representation, collection and purity testing centres (Cptcs) and related agencies have said that collected gold can be processed within 48 hours before being moved by logistics firms to secure bank-approved vaults.Sources said members of the Indian Bullion and Jewellers Association (IBJA) held discussions with central bank officials last week on exports and monetisation, though the IBJA spokesman declined to share details.
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