CIBC Capital Markets economist Andrew Grantham warned on Jan. 26, 2026, that Canada is showing less of a K-shaped split in consumer spending than the United States — and that this apparent equality may actually signal trouble, because it suggests lower-income households are dipping into savings to sustain their spending.
Two countries, two patterns
In the United States, Grantham said, high-income earners are driving most of the growth in consumer spending compared with middle- and lower-income earners, producing the diverging pattern economists call K-shaped: one arm of household finances rising, the other flat or falling.
Canada looks different on the surface. Spending across all income groups has seen similar percentage increases over the past few years. Read one way, that is the healthier picture — no widening gap between rich and poor at the checkout. Grantham’s caution is that the similarity may be misleading: if lower-income households are keeping pace only by drawing down savings accumulated earlier, their spending is being propped up by a cushion that eventually runs out.
He said the divergence between the two countries may not be surprising given that Canada’s high-income earners don’t have the same degree of wealth and income compared to their U.S. counterparts, so the top arm of the American K has no equivalent engine in Canada.
Concern at the top, too
Grantham also pointed to cautious behaviour among higher-income Canadian households as its own cause for concern, because those households may be more sensitive to borrowing costs. If the earners best able to absorb higher rates are also pulling back, the spending floor under the economy is softer than the headline numbers suggest.
The overall trend, he said, may be a bad sign — but fresh data on income and spending scheduled for release this week may change the narrative, one way or the other.
A pattern borrowed from the pandemic
The “K-shaped” label entered the economic vocabulary during the COVID-19 pandemic, when analysts used it to describe a recovery in which some households and sectors surged while others fell behind — the two diverging strokes of the letter. It has since become shorthand for any economy splitting along income lines.
That is what makes Grantham’s Canadian reading counterintuitive. In the current U.S. version of the story, the split itself is the problem: consumption is increasingly carried by affluent households whose wealth has been buoyed by asset prices, while lower-income spending power stagnates. In Canada, by contrast, the absence of a split is what draws his scrutiny. Similar growth rates across income groups can mean lower-income households are spending beyond their current incomes — financing groceries, rent and debt payments partly out of savings.
Economists watch the household saving rate for exactly this reason. Savings built up or preserved earlier in the decade give households a buffer, but a buffer is a stock, not a flow: once drawn down, spending must fall back to what income alone can support, unless wages accelerate or borrowing costs drop.
Why it matters now
The warning lands in a week when household finances dominate the political agenda. Parliament returned Monday with opposition parties pressing the government on affordability; Statistics Canada’s latest figures showed food prices up five per cent in December from a year earlier; and the Bank of Canada was preparing a rate decision at which economists expected no relief for borrowers, with the policy rate expected to stay at 2.25 per cent.
For the Bank, Grantham’s analysis cuts both ways. Households dipping into savings can keep consumption — and inflation — alive longer than incomes alone would support. But savings buffers are finite, and when they are exhausted, spending can fall quickly. That is the quiet risk inside Canada’s flatter K: the pattern looks more equal than America’s, right up until it doesn’t.
