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Bank of America warns America now has 2 economies

Published July 8, 2026 at 6:52 PM UTC

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Bank of America has highlighted a growing divide in the U.S. economy, describing it as a "K-shaped" recovery. In its mid-year outlook, the bank noted that while the overall economy shows resilience, the benefits are not evenly distributed. Wealthier households continue to spend robustly, supported by strong balance sheets, asset gains, and job security. In contrast, lower-income households face challenges such as persistent inflation, higher borrowing costs, and increased gas prices. This disparity is evident in consumer spending data; for instance, in the week of June 6, spending by lower-income consumers rose by 5.5% year-over-year, while higher-income spending increased by 6.1%. The top 5% of earners saw a 7.8% increase, and the top 1% experienced a 9.0% rise in spending. This uneven economic landscape raises concerns about the sustainability of the recovery and the potential for increased economic inequality. Additionally, Bank of America cautioned that the current economic strength might not be sufficient to prompt the Federal Reserve to ease interest rates, as inflation remains above target levels. The bank also highlighted the role of artificial intelligence (AI) in driving economic growth, noting that AI investment is becoming a significant engine of domestic demand. However, the benefits of AI are not evenly distributed, with potential job impacts in certain sectors and uncertainties regarding productivity gains. Overall, while the U.S. economy shows signs of strength, Bank of America's analysis underscores the importance of addressing the disparities between different income groups and the broader implications of technological advancements.