A New Dataset for Consumer Spending in the New York Fed EHIs

The New York Fed has added consumer-spending metrics to its Economic Heterogeneity Indicators using Numerator’s 200,000-member U.S. panel reweighted to Census aggregates; Numerator aggregates align well with the Census MARTS. The data show a divergence by education: nominal retail spending for households with a college graduate respondent was about 2.4 percentage points higher than for non-graduate households by December 2025, and after deflating with demographic-specific inflation indices real retail spending was up roughly 6% for college-graduate households versus about 4% for nongraduate households since January 2023, consistent with a K-shaped consumption dynamic.

Analysis

Market structure: The EHI cohort split (college vs non-college) implies demand is concentrating in higher-income, higher-education households—benefiting premium discretionary, experiential services, luxury travel and fintechs serving affluent customers. Over 2023–Dec 2025 grads outspent nongrads by ~2.4pp nominal (≈+6% vs +4% real since Jan‑2023), supporting SKU premiumization and allowing selective firms to expand margins and raise prices without volume loss. Mass‑market and mid‑tier department stores that rely on broad-based, lower‑education consumers face volume risk and margin compression if the divergence persists.

Risk assessment: Tail risks include data bias from Numerator panel reweighting, a sudden macro shock (Fed tightening or labor pain concentrated in grads) that collapses the premium cohort’s spending, or rapid credit stress (90+ day card delinquencies >3%) that spreads down‑market. Near term (days–weeks) market moves will be driven by incoming CPI/unemployment prints and monthly EHI releases; medium term (3–6 months) by Fed path and consumer credit trends; long term (>12 months) by structural labor market and wage dispersion. Hidden dependency: many premium purchases are financed or substitutional (credit lines, margin, stock‑based wealth), so equity wealth or credit squeeze can rapidly reverse the trend.

Trade implications: Favor long positions in high‑end discretionary retailers and experiential names with durable pricing power and affluent customer bases, and short mid‑tier department stores and select subprime consumer finance exposure. Use options to cap downside (calendared call spreads into Q3 earnings/corporate travel season) and put spreads on low‑quality retailers. Rebalance if cohort spread narrows below 1pp or if credit indicators deteriorate beyond stated thresholds.

Contrarian angles: The market may overreact to a 2.4pp nominal gap as structural when it is modest in absolute terms—this leaves opportunities where earnings expectations already price perpetual outperformance. Historical parallels (post‑2010 K‑shaped recoveries) show reversals once credit tightens or labor weakens for grads; complacent credit markets and tight valuations in premium names are vulnerabilities. Unintended consequence: over‑allocating to premium names while ignoring rising off‑price winners (if nongrads trade down) can produce style risk.

Key Decisions for Investors

• Establish a 1.5–2.5% net long position in premium consumer discretionary: LULU (Lululemon) 1.0–1.5% and ULTA 0.5–1.0% sized positions ahead of Q2–Q3 2026, using 3‑month bull call spreads (buy ATM, sell +10% strike) to cap cost; trim if monthly EHI 3‑month rolling spread (college minus non‑college nominal growth) falls below 1.0pp.
• Open a pairs trade: long TJX (TJX) 1.0% vs short Kohl’s (KSS) 1.0% to capture value‑trade‑up/ trade‑down dynamics; add if nondiscretionary cohort real spending growth lags by >1.5pp for two consecutive months, unwind if TJX underperforms by >8% relative.
• Reduce exposure to subprime consumer credit and private‑label reliant lenders: underweight Synchrony Financial (SYF) and Capital One (COF) by 1–2% each; increase cash or swap into high‑quality BBB/IG corp bonds if 90+ day credit card delinquencies rise above 3.0% or unemployment for non‑college cohort increases >1.0pp in 3 months.
• Implement protective puts (buy 3‑month put spreads) on mall‑anchored retail names (Macy’s M or Kohl’s KSS) sized 0.5–1.0% to hedge downside if headline retail sales fall >1.5% MoM or CPI surprise >+0.5ppt versus consensus, and add risk to premium longs if grads’ real spending exceeds +8% YoY in any quarterly print.