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Consumer Spending: Where Do Our Dollars Go?

November 15, 2019

Director of Speaking Services Alex Chausovsky discusses trends in consumer spending.

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ITR Economics Divider

 

Transcript by Rev

Alex Chausovsky:
Hello everyone. Welcome to another episode of Trends Talk with ITR Economics. My name is Alex Chausovsky and I'm the Director of Speaking Services here at ITR. Today I wanted to talk to you about the way that we as consumers spend our money. It's really a fascinating subject and the best way for me to leverage data to discuss this concept with you is by looking at the information for personal consumption expenditures, which is put out by the Bureau of Economic Analysis.

According to the latest data that we received from that source, which is actually for the third quarter of 2019, the annualized value of all consumption, all the spending that we do as individual consumers, totals a staggering $14.7 trillion. Now, the categories in which we spend our money are also really fascinating. There's many different goods and services that we spend our money on and it's split roughly into a 30% for goods and 70% split for services.

When we look at the biggest categories that we spend our money on, the top one, when you consider both the goods and the services components, is healthcare and medical products. Over the last 12 months, basically the annualized rate, we have spent a staggering $3.04 trillion, which makes up 20.7% of our overall spend, and that's a phenomenal number, that really highlights the fact that we all know very well, which is both healthcare and medical products are a really large portion of our wallet share.

The second largest category that we spend our money on is housing and utilities. That is a 18.3% share of our overall spend, and over the annualized period, looking at the last 12 months, we're seeing a total spend of $2.68 trillion, which is pretty phenomenal, as well. So the top two categories, healthcare and housing, that's not going to surprise anyone.

The third largest category that we spend our money on is food and beverage, both eating at home and going out to restaurants and entertainment venues and things of that nature. That accounted for 14% of our spend and just over two trillion dollars overall. So another massive spending category. The fourth section is transportation. This is comprised of cars and car parts. This is also including gasoline and other things that we use to fuel our vehicles, as well as transportation services. All in all, we spent $1.36 trillion on transportation over the annualized period that this data represents, and that accounted for 9.2% of our overall spend.

Financial services and insurance were also a significant portion of how we spend our money. That accounted for nearly 8% of our overall spend, with a value of $1.16 trillion annualized. Recreation, both entertainment type services and actual recreational products, is another major spending category for us at 6.9%. That was just over a trillion dollars in overall annualized spend. And then we spend about 1.66 trillion on other goods, including furniture and clothing. That makes up 11% overall, and other services, things like education, personal care and so on, also a major spending category, 1.23 trillion, 8.4% of our overall spend.

As you can see, there's a lot of different goods and services demanding our money, but it's also really interesting to talk about the effect that pricing changes have. When we look at price, the best gauge of how we're feeling inflation is the CPI, the consumer price index. When we assess the rates of change in this series, we usually look at it on a month over month basis. That means we look at prices over the last calendar month and compare them to the same prices from a year ago during that same month. And it's really interesting to note how different we're feeling inflation in the different spending categories. For instance, in the healthcare and medical products category, the consumer price index was up 3.5% according to the latest month of data. For housing and utilities, we saw a price increase of 3% according to the CPI. For food and beverage, it was 0.8% price increase on a year over year basis.

And then other categories, we're actually seeing some declines in prices. The top of mind there is actually transportation, so overall the CPI for transportation is down about 1.4%, and specifically when you look at gasoline and other type of fuels, it's down 8.1% year over year. Financial services and insurance are up overall 1.8%, but health insurance in particular is 18.8% above the year ago level. This is not going to shock anybody. We all know how much more money we're spending on health insurance every year. And finally, recreation is up about 1%. So as you can see, a lot of really different ways that we're feeling inflation. There's a lot of different categories that we're spending our money on, and it certainly reflects what we all know is how difficult it is to sometimes make ends meet because there are so many different demands on our spending.

I hope you've enjoyed this little foray into personal consumption expenditures. We certainly appreciate your time and look forward to talking to you again on the next edition of TrendsTalk with ITR Economics. Have a great day.

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