Posted by: Michael Mandel on March 02
Here’s a question for you. What are Americans consuming less of these days?
We all know that they are buying fewer cars and SUVs. But what category of spending is the second biggest contributor to the decline in consumption? Hint: It isn’t clothing.
Surprisingly, reduced consumption of food is the second biggest contributor to the decline in personal consumption.
Take a look at this table. It is the change in real personal consumption, measured in billions of 2007 dollars, from January 2008 to January 2009 (based on the data released this morning).
|Less Driving, Less Eating, Less Spending?|
|Change in personal consumption|
|billions of 2007 dollars|
|Food excluding alcoholic beverages||-55.7|
|Clothing, accessories, and jewelry||-18.1|
|Purchased intercity transportation||-6.7|
|Purchased local transportation||0.8|
|Religious and welfare activities||3.4|
|Education and research||7.4|
In real terms, Americans are spending $164 billion less (in 2007 dollars) in January 2009 compared to January 2008. Out of that, $112 billion is user-operated transportation--purchases of cars and trucks, and spending on gas and oil.
But another $56 billion of decline came from food! That is to say, adjusted for inflation, real personal consumption of food fell by $56 billion. That's the second largest contributor to the decline in personal consumption. Number 3, clothing, was only $18 billion down.
In part, the fall in food consumption comes from high prices (The Law of Demand takes hold!).
But I also wonder whether the incessant public drumbeating about "fat Americans" and obesity is helping propel the decline in food consumption. The easiest way to save is to spend less on things you know you shouldn't be consuming anyhow, like too much food.
I'm going to look for other evidence of this.
Michael Mandel, BW's award-winning chief economist, provides his unique perspective on the hot economic issues of the day. From globalization to the future of work to the ups and downs of the financial markets, Mandel-named 2006 economic journalist of the year by the World Leadership Forum-offers cutting edge analysis and commentary.