Third-Quarter Earnings Reveal Divergence in Consumer Spending
New York, Monday, 3 November 2025.
Major companies report a split in consumer spending, highlighting a “two-tier economy” amid ongoing inflation and economic pressure, prompting strategic pivots for the holiday season.
Economic Disparity Evident in Consumer Spending
Recent third-quarter earnings reports reveal a pronounced divergence in consumer spending patterns, indicative of a ‘K-shaped’ recovery. Companies like JPMorgan Chase & Co, Yum! Brands Inc, and McDonald’s Corp have highlighted this bifurcation, where wealthier consumers continue to spend, buoyed by stock market gains and appreciating real estate values, while lower-income consumers are cutting back on expenditures [1]. The U.S. consumer price index (CPI) increased by 0.3% in September 2025, maintaining an annual inflation rate of 3%, further exacerbating the strain on lower-income households [1].
Sector-Specific Challenges and Opportunities
The impact of these spending trends varies across sectors. For instance, Chipotle has reported a 0.8% decline in customers earning less than $100,000 annually, a demographic that comprises 40% of its customer base [1]. Meanwhile, Coca-Cola and Procter & Gamble are witnessing increased spending from wealthier customers, while lower-income shoppers retract [1]. This scenario underscores the challenges companies face in adjusting their strategies to accommodate the shifting economic landscape.
Macroeconomic Influences and Corporate Responses
The Federal Reserve’s recent interest rate cut, which lowered the benchmark rate to a range of 3.75% to 4%, aims to stimulate economic activity amidst these challenges [1]. However, the ongoing U.S. government shutdown, extending over five weeks, has left many federal workers without pay, adding to the economic pressures faced by lower-income groups [1]. Companies are now forced to adapt their strategies, as evident from McDonald’s expansion of its value menu to attract more price-sensitive consumers [1].
Outlook for the Holiday Season and Beyond
As the holiday season approaches, businesses must navigate these complex consumer dynamics. Hilton Worldwide Holdings Inc, for instance, reports a decline in revenue from its affordable brands, while its luxury offerings perform well [1]. CEO Christopher Nassetta anticipates that the current economic bifurcation may not persist much longer, suggesting potential shifts in consumer behavior as we move into 2026 [1]. This period will be crucial for companies to reassess their market strategies and align themselves with evolving consumer preferences.