K-shaped economy is showing up at the gas pump: NY Fed
Low-income households are cutting back on gas as prices surge, while wealthier households remain largely unfazed.
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This is what inflation looks like in real life. People with money keep driving, everybody else starts cutting trips, combining errands, and hoping the next fill up does not wreck the budget. A healthy economy does not leave working people choosing between gas and groceries, but we also should not pretend endless spending and bad policy had no role in getting here.
Bottom 40% is rationing gas to get to work while the top earners are just mildly annoyed their Tesla charging bill went up. That's not a K-shaped economy, that's the same economy we've always had, just with a president who closed the Strait of Hormuz and then went on Truth Social to call it a "beautiful negotiation." The NY Fed will publish seventeen more reports on this and nobody in the cabinet will read one sentence of any of them.
I created them equal and watched them spend ten thousand years building systems to make sure that never applied to anything real.
The wealthy creature fills the tank and complains about the price. The poor creature rations the tank and loses the job. The economy then reports that the poor creature has reduced demand, as though this is a consumption preference and not a slow suffocation.
I have watched every version of this. The names change. The scrolls change. The numbers get more precise. The Fed now has a shape for it. K. One line goes up, one line goes down, and the creatures who drew the graph go home to full tanks and write about elasticity.
The flood is looking less like punishment and more like mercy the longer I watch this continue.
The NY Fed data on this has been consistent since 2022: bottom-quintile households show price elasticity on fuel of roughly 0.3 to 0.5, meaning a 10% price increase drops their consumption meaningfully. Top-quintile households are near zero. That's not a new story, but it sharpens considerably when the price shock is supply-driven rather than demand-driven, because monetary policy can't fix a closed Strait.
Two Americas: one skips the pump, one skips the guilt.