Increasing prices for essential goods may further expand the divide between affluent individuals and the rest of the population

Rising Costs of Everyday Essentials Impact Lower-Income Households

A grocery store in Brooklyn, N.Y., on Dec. 12. (Spencer Platt / Getty Images)

In December, the prices of basic household goods increased compared to the previous month, despite overall inflation remaining stable. This uneven rise in costs has hit lower-income families the hardest.

Financial experts on Wall Street welcomed encouraging signs from the latest government inflation data released Tuesday, highlighting a steady trend in "core" inflation, which excludes the more unpredictable food and energy sectors.

However, the areas excluded from core inflation—such as groceries and utilities—are precisely where prices have continued to climb.

Food costs saw widespread increases last month, with five major grocery categories becoming more expensive. Eating out also required a bigger budget.

Utility bills added to the strain, as electricity prices rose nearly 7% over the past year, and natural gas costs jumped by double digits.

After a period of modest growth, health care expenses are starting to contribute more significantly to inflation, according to Bureau of Labor Statistics data.

Additional price hikes related to tariffs have not yet fully appeared in the retail prices of certain imports, including clothing and shoes.

Some categories did see price drops last month, helping to balance out increases elsewhere. Gasoline prices fell in December, providing one of the few noticeable breaks for consumers. Used vehicles, communication services, and household services also became less expensive.

Still, as Rob Holston of EY Global noted, the latest report shows that price pressures are intensifying in key consumer product areas that matter most to shoppers.

Ongoing inflation in essential goods threatens to widen the financial gap that has led to what’s known as a “K-shaped” economy in the U.S.

In this scenario, wealthier households—bolstered by rising home values and stock market gains—continue to spend with ease, while those with lower incomes find it increasingly difficult to afford daily necessities and are forced to cut back sharply.

The divide is also clear in spending patterns. According to Bank of America, the top 5% of earners accounted for most of the growth in consumer spending through late 2025, with these households continuing to spend on travel, dining, and online shopping.

Meanwhile, lower-income families have reduced their spending on nonessential items such as flights, vacation rentals, entertainment, and home furnishings.

The Enduring “K-Shaped” Economic Divide

Bank of America economists recently stated, “The ‘K’ is here to stay.”

When economic growth depends so heavily on a small group of high earners, experts warn of broader risks—especially as hiring slows and wage increases lose momentum.

These trends further restrict upward mobility for people across all income levels.

Glenn Williams, CEO of Primerica, remarked, “Middle-income families have spent the last five years struggling to stay afloat.” He added that these families are frustrated by rising living costs, slow wage growth, limited savings, and growing credit card debt.

This frustration is causing concern at the White House, especially in an election year when affordability is a top issue for voters.

Consumer confidence has dropped sharply compared to last year, reflecting persistent worries about job security and the cost of living.

Other surveys echo this anxiety: New York Fed data shows that more people expect it will be harder to find work in the coming year and remain uneasy about rising prices.

These concerns have prompted President Donald Trump to place greater emphasis on affordability.

“One of our top priorities is making life more affordable,” Trump said Tuesday during a speech at the Detroit Economic Club. “That’s a term the Democrats use, but they’re the ones who created the problem.”

The midterm election season is already underway, with some congressional primaries scheduled as early as March.

In recent days, Trump has introduced several initiatives aimed at reducing household expenses. He has encouraged oil companies to invest in and export Venezuelan crude oil to help lower gas prices, authorized about $200 billion in mortgage bond purchases to reduce home loan costs, and called on credit card companies to cap interest rates at 10% for a year.

Lower interest rates remain a central theme in Trump’s economic agenda, as they can make borrowing more affordable for both consumers and businesses, supporting everything from home and car purchases to business investment and hiring.

However, economists caution that such relief may not arrive soon. Most expect the Federal Reserve to keep interest rates steady in the near future, with the next policy decision due this month.

Trump has repeatedly urged the Fed to cut rates more aggressively, arguing it would spur economic growth. But experts warn that lowering rates too quickly could reignite inflation.