A Surprise: What Are Americans Consuming Less of?

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.

Answer below.

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 
january08-january09
User-operated transportation -115.2
Food excluding alcoholic beverages -55.7
Clothing, accessories, and jewelry -18.1
Household operation -15.9
Alcoholic beverages -11.2
Purchased intercity transportation -6.7
Tobacco products -2.3
Personal business -2.0
Purchased local transportation 0.8
Personal care 2.9
Religious and welfare activities 3.4
Education and research 7.4
Recreation 9.7
Housing 12.3
Medical care 35.6
Data: BEA

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.



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Reader Comments

Kartik

March 2, 2009 01:12 PM

Reduced consumption of food is good! Obesity costs the US economy $200 Billion a year. This does not account for subjective costs such as the fact that fat people can't get dates.

One area where Americans have saved up well is in fat - they are well prepared to be able to literally tighten their belts and consume less food, relying on the fat they have stored up.

Greg Ransom

March 2, 2009 01:20 PM

We've cut our spending on housing ...

How did that one get overlooked?

CompEng

March 2, 2009 01:34 PM

Isn't the first thing people want to do when they want to save money is stop eating out? Would that fit the figures?

fatfriday

March 2, 2009 03:17 PM

The OFFICIAL unemployment level in California has reached 10.2%. Do you suppose those folks increased expenditure on foods? What about their friends and neighbors?

Zach

March 2, 2009 04:03 PM

I have a few comments.

First @ Greg, it appears that we've increased our consumption of housing. Perhaps that's what you meant. If so, you've asked a great question. How are housing expenditures increasing?? Maybe this could prompt another post.

Second, the statement "In part, the fall in food consumption comes from high prices" makes little sense in this context. These data are dollars spent figure, not some given amount of food. Yes, high prices will potentially decrease the amount of food consumed, but this figure is the product of quantity and price. What these data suggest is that food demand is actually more elastic than we might have previously thought. In other words, the fall in quantity demanded was larger than the rise in price.

Third, we cannot draw the conclusion that lower food spending is associated with a lower caloric intake. Higher food prices often encourage people to switch to cheaper but more calorie-dense food. It may be true that we are eating fewer calories, but we'd need more detailed data to make that claim.

LAO

March 2, 2009 04:03 PM

Thanks for the opportunity to bring up a point that has been bugging me. Even though it has intriqued me for some time, I think I've hit the limit of how much time I'm willing to spend digging for a reasonable explanation.

The 2007 Bureau of Labor Statistics consumer expediture numbers show that 300 million Americans spend $6 trillion. That's it. After-tax income was $7.3 trillion. According to the BEA, however, personal consumption and expenditures were $10 trillion in 2007. That must be what makes so many people say that consumers are responsible for 70% of the $14 billion GDP.

Some of the numbers do not differ by much, but the BEA says that both medical and food expenditures were dramatically more than the BLS says. I do realize that these agencies address things differently.

Examining the medical numbers reveals a difference that could very easily be about equal to what employers are spending to subsidize employee health insurance -- consumed but not directly paid for by households. It is believable.

The difference in the food numbers is staggering: $623 billion. That is 12 times the amount of annual food subsidies, or enough to bail out the banks or buy every new house built that year, or enough to provide a decent diet to every American for a year for free, or enough to provide an AIG style >$1 billion bash every day for well over a year, or enough to stock America's soup kitchens for maybe 10 years, .... To me, it is not believable, Wall Street power lunches, gigantic prison populations, and good meals for Iraqi troops not-with-standing. Where did all this food come from, who paid for it, and where did it go? It suggests expense reports beyond wildest imagining. It suggests caviar in nursing homes and hospitals, massive recalls that we never hear about, or food waste far beyond the worst estimates. It suggests something fraudulent or out of control. Evaporation of tax write-off motivation that might have tempted business and institutional abuse in a profitable environment is as credible an explanation as obese Americans suddenly eating a lot less.

Lord

March 2, 2009 04:36 PM

Dining out has certainly suffered a lot. The rise in pasta sales has been notable, but that grocery stores are cutting back is remarkable. One would expect them to benefit from the reduction in dining out. That people are avoiding even small luxuries (especially imported ones I would guess), is disturbing. It suggests how devastating it is.

spencer

March 3, 2009 12:35 PM

The housing increase is a function of how housing enters the data. Unlike other items housing is not simply how much housing we purchased last year. Housing is treated as an investment and new homes are included in fixed investment not consumption. You buy a new home and consume it over 30-50 years so the consumption of housing is treated like the depreciation of capital equipment in a business. Each year part of that one huge purchase is allocated to that year's consumption.
So consumption of housing this year is a function of new homes built over the last so many years, not a function of how many new homes were built this year.
Consequently, unless we go out and destroy a bunch of houses and write them off this year housing consumption in the personal consumption data will always increase.

Jen

March 3, 2009 05:20 PM

You also should consider the possibility that this decrease is a result of Americans eating food in their pantries rather than buying more. To the extent that these inventories are being depleted, this decrease may not be sustainable.

gabber

March 3, 2009 05:33 PM

The decrease in spending on User-operated transportation could be largely attributed to to the stratospheric oil prices seen before the financial meltdown.

JohnOfCharleston

March 3, 2009 05:34 PM

This is easy. The "Food" line in that report accounts for ALL food, be it purchased in a grocery store, a 7/11, a sandwich shop, a restaurant. It has been widely reported that restaurant business is down at all levels, more people are foregoing fancy meals and more people are brining lunch from home. People still need to eat; I'll bet (though haven't seen numbers) that supermarkets are doing better. These numbers report only DOLLARS SPENT ON FOOD, it does not track how many potatoes are consumed. The title is a bit misleading, it should be "Personal Spending", not "Personal Consumption". As people trade down, consumption stays the same (consumption in the way we normally talk about consuming food: eating it) but spending goes down. I sincerely doubt people are consuming fewer calories, except perhaps as a byproduct of avoiding large restaurant portions.

Ralph

March 3, 2009 05:48 PM


As someone with a relative in the restaurant business, I think you're missing the obvious here.

When spending on food drops, it's not because people are starving themselves or buying lots of celery.

When the going gets tough, the first thing that comes out of a typical family's budget is eating out. It's the most expensive of the easily-cut household costs.

And I seriously doubt that the recession will help America's waistlines. The cheapest food at the grocery store (in terms of money and preparation time) is generally the high-carb, high calorie stuff.

Mike Mandel

March 3, 2009 05:58 PM

Jen,

Good thought..I hadn't considered that.

Jeebus

March 3, 2009 06:00 PM

Where does "eating out" fit into the list of items? In "Food ex. Alcohol", right? Isn't that a really, really obvious point? Just check out the results from any public restaurant company (e.g., CAKE--"sales at restaurants open at least 18 months fell 7.1% overall, due to a 7% decline at the Cheesecake Factory and an 8.1% drop at Grand Lux Cafe"). That tells you almost everything you need to know.

Bob

March 3, 2009 06:02 PM

For User-operated transportation, do you have the data on what is the split between cost of gas vs. purchases of new vehicles?

Mandy Cat

March 3, 2009 06:03 PM

It would be nice to think that people are spending less on food by buying and subsequently cooking actual ingredients instead of buying pre-processed factory food. I don't shop in the typical grocery store very often but when I do it's not at all unusual to see shoppers with full carts that do not contain a single staple item, unless you count milk and margarine. Everything is ready to eat. If you call that "eating".

I suppose we'll know when the economic is truly doomed: when people under the age of 30 suddenly realize they can make very good coffee at home for about 30 cents a cup.

Melissa

March 3, 2009 06:36 PM

There are many ways to cut back on food purchases. First you downsize from steak to burgers, then stretch out the ground beef with beans and tomato sauce to make chili, and eventually serve the chili without the meat. You keep the stale bread and make bread pudding. American women know how to do these things. What we can't really do anymore is sew. That will take some real learning but is completely possible. And personal care is going up because you can't look for a job or keep one when you are a mess.
I think the housing costs going up represents difficulty in changing course. If your interest costs escalate on a home, you pay it or lose it. It takes money to insulate a house to decrease your energy bill, etc. My housing costs have gone up on maintenance and taxes.

Tom

March 3, 2009 08:12 PM

My family's weekly groceries run around $150-200. That's one of the biggest *weekly* expenses so of course we've taken a harder look at how we spend that money and look for ways to hit the $150 mark rather than the $200 mark.

That doesn't mean we're eating less, just planning and shopping smarter.

I agree with some of the other commenters: a decline in dollars spent on food can mean (a) we're eating out less often (b) eating at cheaper restaurants (c) ordering less extravagantly when we go out--maybe that extra glass or wine (d) looking for bargains at the supermarket (e) spending more at Trader Joes and less at Whole Foods.

In my family's case, it's all of the above.

Kartik

March 3, 2009 09:30 PM

"You also should consider the possibility that this decrease is a result of Americans eating food in their pantries rather than buying more. "

Who has more than 10 days worth of food in their pantries? This is 2009, after all.

Kartik

March 3, 2009 09:33 PM

"American women know how to do these things. "

I think you mean KNEW. Most urban unmarried women have zero culinary skills.

Also, I still see people going to Starbuck's and plunking down $5 each morning. Until that practice drops by 90%, no one is considering real belt-tightening.

GK

March 3, 2009 09:35 PM

"But I also wonder whether the incessant public drumbeating about "fat Americans" and obesity is helping propel the decline in food consumption."

I doubt it. If a mirror cannot reduce obesity, regardless of the state of the economy, nothing can.

Nelson

March 3, 2009 10:23 PM

death to Engel's law?

dada

March 4, 2009 12:39 AM

Cat food is cheap.

And good!

JCHo

March 4, 2009 03:18 AM

The flaw in your obesity argument is that healthy food is more expensive - people may reduce their spending on food, but that doesn't mean that they are buying healthful options. Mac and cheese, potato chips and processed junk is cheaper than fruits and veggies.
I actually predict higher obesity rates of under-nourished Americans.

Mike Mandel

March 4, 2009 06:35 AM

JCHo,

I'm still mulling over the obesity argument. I'm not invested in it yet, for the reasons that you say.

Mike Mandel

March 4, 2009 06:37 AM

LAO,

Interesting point about the difference between the BLS and BEA figures. I'll poke into that.

seebee

March 4, 2009 07:30 AM

The food numbers probably reflect reduced restaurant spending. Sales of cheap processed food (meat in a can, concentrated soups) is going up. Expect American health and overweight to increase, not decrease, as people eat more of the saltier, fattier, more high-fructose-corn-syrup high foods because they're thought of as "cheaper" (when they're really not, if you run the numbers.)

Never mind that, though - fat bashing is more fun!

Angela

March 4, 2009 07:54 AM

I'll just toss in this one thing that keeps staring me in the face: people are going hungry. Yes, some people are paying $5.00 in the morning for a Starbucks coffee, but other people are going hungy. Witness the calls from food pantrys and food banks that report that requests far outstrip their capacity to help. We have people in this country not buying food, or buying far less fodd, because they cannot afford to feed themselves.

LAO

March 4, 2009 11:10 AM

Kartik, I don't know who has 25 or 50 pound bags of rice in their pantry, but don't forget that West coast stores were prompted to start rationing their sale during the 2008 rice shortage, i.e. it appears that some people do stock more than 10 days of non-perishable food.

Michael, It was food shortage curiosity that initially led me to the significant disconnect between BLS and BEA data. Thanks for overlooking my GDP blunder; I meant $14 trillion.

CompEng

March 4, 2009 03:18 PM

Kartik,
your experience is just one data point. We make our own bread and stock weeks' worth of particular foods so we can buy at sale prices. I have a farm less than 1 mile away fro my house, I have neighbors who keep chickens, and I know people who make their own grain. Not everybody can sew, but I knew number of women in college who could, mostly because of theatre experience.

Some people I work with own $500K houses but bring their lunch to work, and there are small town produce and grocery stores right near me that appear to my eye to be cutting back inventory.
And many of the local charities that deal with the actual hungry people so you don't have to are struggling to keep inventory (of course, others are doing well).
The US is far more diverse than you think, I'm not even talking about poor or uneducated areas.

Patricia Eddy

March 4, 2009 03:40 PM

So can someone educate me on how these numbers are calculated?

I'm asking because in many areas, people are shifting their food spending. Especially in the Pacific Northwest, farmers markets (which typically deal in a cash business rather than credit cards) are booming even as grocery stores are hurting. I'm not at all surprised that spending is down on just about everything, and I certainly wouldn't be surprised that Americans are consuming less overall calories, however I also wonder if maybe the spending is shifting to non-standard retail locations.

Joe Cushing

March 4, 2009 05:14 PM

Do restaurante tabs count in the food statistics? If so, the reduction could be because people are learning to cook instead of eating out. Food prices are starting to fall too. People are trading down. McDonald's is doing well.

Brian

March 5, 2009 06:51 PM

Please remember that we're not all urban.

I have a small diversified "cash" agriculture venture, and I can verify that a lot of the reduction may be due in part to a submersion of these purchases to a local cash market, and hence, a withdrawal from the macro statistics.

Dry beans, milk from the farm, chicken futures (really. I'm taking orders for advance livestock purchases of the sumer growing season), garden shares (again, selling futures based on proportional output of a diversified garden).

These are all organic, and the prices are below retail "traditional" prices. And as the days get longer here in New England, look for egg purchases at groceries to fall as local farmers sell more directly to consumers.

Remember, please, that there are lots of markets, and to look at only the transparent ones and form conclusions based on those data might be obscuring a movement toward more local, cash-based, and barter markets.

Of course, this isn't going tohelp my 401k :)

stearm

March 9, 2009 04:48 PM

I am actually spending less on food. How? I spend more time cooking (hand-made pastas, experimenting), I spend more time and energy and I save money. And if I only had a small piece of land, I could produce what I need. There is life outside the market economy.

Ann

March 11, 2009 09:42 AM

Our seed coop here in Maine has had explosive sales in seeds this year. There was a major increase last year, too. I agree with Brian that things go on in rural areas that urban people don't know about. Truth is, most of the buyers I see when I buy from small farms here are affectedly urban people - uncomfortably out of place, but happy to be there buying everything they see and asking lots of questions.

Ann

March 12, 2009 11:21 AM

Just saw this: less trash being collected in California, especially food waste and packaging.

http://www.latimes.com/news/la-me-trash25-2009jan25,0,2260179.story?track=rss

Sorry. I don't know how to make that clickable. LA Times Jan 25, 09. I'm sure you can find it.

Mike Mandel

March 12, 2009 11:18 PM

Ann...thanks for the link.

jason

March 20, 2009 05:14 AM

I am Spending less on food, beer gas and every thing else plus loss my job circuit city, and california is broke, im not even receiving unemployment, i dont want unemployment, but there are no jobs here in california

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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.

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