$14,000 dog grooming bills and 25% pricier flights: How the K-shaped economy is punishing the middle class

In the face of an increasingly K-shaped economy, businesses are abandoning middle-class buyers (1). Instead, they're catering their products and services toward those who can afford to pay.

In the June Federal Reserve Beige Book, the Federal Reserve Banks of New York, Cleveland, Richmond and Atlanta all reported solid or increasing demand for luxury products, including luxury goods, travel and real estate (2). Many of them also reported weakening markets for similar lower-end products.

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Because of that, luxury goods providers such as Rolex have been able to get away with raising their prices, even as middle-class customers increasingly abandon the brands (3). For Rolex, its price increases hinge on the brand's successful pitch that its products are investments, thanks to rising gold prices (4).

But these price increases aren't just impacting luxury goods.

Everything from flights to animal care has seen similar pivots to luxury, leaving middle-class households increasingly stranded.

"Companies are saying, 'Let's just jack up the price as high as we possibly can and extract as much from the small set of wealthy people,'" says former U.S. Department of Treasury director Kitty Richards (5).

Here's what's being impacted by what the Fed calls "unapologetic luxury" and what that means for the people who are left behind.

Companies such as Rolex and Cartier already cater to a wealthy clientele.

And indeed, overall jewelry prices have increased dramatically (6). As the prices of precious metals have skyrocketed, jewelers have adjusted their prices accordingly and wealthy investors have responded favorably, leaning on jewelry as an investment.

"Brands and retailers who cater to a higher-end clientele are doing quite well," says Abe Sherman, chief executive of California-based jewelry consulting firm Buyers Intelligence Group. "There is a clear trend toward higher price points."

Pet wellness is trending upward, too. High-income pet owners are paying as much as $14,000 per year on dog grooming, giving their pets peptides and treating them to fur-brightening masks (7). They're also having to deal with mounting vet costs at the same time.

But not every market facing a similar problem is luxury-only.

Flights have also been getting more expensive (8). Faced with rising oil costs due to the Iran War, airlines have had to raise prices — or fold, as with Spirit Airlines (9). As a result, ticket prices are up 25%. Car prices are also up across both the new and used markets (10).

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