(The opinions expressed here are those of the author, a columnist for Reuters.)

ORLANDO, Florida - As corporate America continues to ride the AI boom, huge swathes of the U.S. population are struggling to keep up, with savings levels plunging. This widening chasm could have serious ​political ramifications for President Donald Trump.

However you ⁠describe the inequality issue - K-shaped economy, two-speed economy, haves and have-nots - it is clearly getting more pronounced. Two data points last week put this in stark relief: personal savings and ‌corporate profits.

The personal savings rate fell to a four-year low of 2.6% in April. It has halved in the past year and, excluding the single month of June 2022, is now the lowest since 2008.

Zoom out ​further, and one can see just how flimsy U.S. consumers' savings cushion really is. Aside from 20 months in the 2005-08 period, consumers' savings rate has never been lower since comparable records began in the 1950s.

What's more, ​inflation - ​boosted by the ongoing energy price squeeze - is now outstripping wage growth for the first time in three years. The rapid rate at which Americans are running down savings to maintain spending simply can't last.

At the same time, some closely watched measures of consumer confidence have also dropped to the lowest on record. So it's reasonable to assume ⁠that household consumption - the biggest and most important pillar of the economy - could soon come under intense pressure.

But for now, Wall Street isn't asking too many questions, with U.S. equities continuing to hit record highs.

That's understandable given what's happening in corporate America. Figures released last week showed that U.S. corporate profits as a share of output in the first quarter rose to 18.4%. That's the second-highest reading since comparable records began in the 1940s. Pre-tax profits as a share of GDP also held steady near a record-high 14%.

Whichever way you slice it, corporate profitability has never been higher, even as ​many Americans are seeing their financial situations ‌become more precarious.

"I don't ⁠think that these trends are economically ⁠or politically sustainable," says economist Phil Suttle. "How they get resolved is an open issue but, in my view, both profits and consumption have significant forward-looking downside risk."

MASKING THE PAIN

This makes intuitive sense. But the question ​is, who is doing most of the spending?

Moody's analysts' estimates that the top income decile accounts for 50% of all consumer spending are disputed, ‌and the more accurate share may be around 35-40%. But that's still substantial.

The richest 10% of Americans account for 90% ⁠of U.S. equity holdings, with the top 1% representing half of the country's entire stock market wealth. These asset owners have seen U.S. equities jump 30% in the past 12 months.

As long as stock prices stay high, the asset-owning rich can likely continue to support aggregate spending and thus keep headline GDP running near a healthy 2% clip.

But this masks the mounting strain across the bottom half of the U.S. population, which is being squeezed by inflation, rising borrowing costs and dwindling savings.

Just look at consumers' increasing struggle to keep up with debt repayments. As Troy Ludtka at SMBC Nikko Securities Americas notes, auto loan delinquencies of 90 days or more rose to a record-high 5.6% in the first quarter and credit card delinquencies rose to 13.1%, the highest since 2011.

"The interesting question is at what point does the lower point of the K break the entire economy? What is the limit to this inequality?" Ludtka argues.

UNSUSTAINABLE PATH

The limit may be less an economic issue than a political one.

Trump's approval ratings on the economy have collapsed since he ordered military strikes on Iran three months ago, largely due to rising price ‌pressures. Meanwhile, polls suggest the Republicans will lose the House of Representatives in the midterm elections, and perhaps the Senate ⁠too – with many voters pointing to "cost of living" as a primary concern.

These political pressures may grow even if the economy continues ​to hold up relatively well because of the AI-fueled capex boom in tech and rapid corporate profit growth.

So the ultimate questions are, how much longer can average Americans stay afloat – and continue spending – now that their savings buffers are rapidly disappearing? And how much more extreme will U.S. voters allow this "K-shaped" dynamic to become before pushing back with policy demands?

Trump's Republican Party may find this out in November.

(The opinions expressed ​here are those of the ‌author, a columnist for Reuters)

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(By Jamie McGeever Editing by Marguerita Choy)