American Consumers Newsletter

by Cheryl Russell, Editorial Director, New Strategist Press
November 2008

The Great American Shopping List

1. Hot Trends:  THE GREAT AMERICAN SHOPPING LIST
2. Q & A:  ARE WE CUTTING BACK ON HEALTH CARE?
3. Cool Research Links:  HOW MUCH DO WOMEN WEIGH?
4. All New:  HOUSEHOLD SPENDING, PRE-ORDER NOW AND SAVE!

1. Hot Trends

The Great American Shopping List

Oh, American consumer, how we miss you!

Consumer spending is falling at a 3.1 percent annual rate, according to the latest statistics from the Bureau of Economic Analysis. Many of the nation’s retailers reported double-digit declines in October sales, with the New York Times calling it a “collapse” in spending. Since consumer spending accounts for two-thirds of our economy, the belt tightening hurts all of us. To weather what looks like a prolonged economic downturn, businesses large and small need to brush up on consumer spending patterns. There is no better place to start than with The Great American Shopping List.

You can learn most of what you need to know about consumer spending by taking a look at the list–the inventory of every product and service purchased by American households, ranked by how much the average household spends on each item. The federal government collects the information by surveying thousands of households each month, asking them how much they spend on everything from cookies and crackers to video games and recreational vehicles. The Consumer Expenditure Survey data are used to create the all-important Consumer Price Index. Although the list is long, with more than 350 products and services, just 10 items consume more than half of the $50,000 spent by the average household each year. Here they are.

1. Social Security payroll taxes The bad news is that Social Security is our single biggest expense. The average household paid $3,811 into the Social Security trust fund, according to the 2006 Consumer Expenditure Survey. The good news is that this flow of funds reverses direction when you retire. If you don’t believe it, join the crowd–only 31 percent of today’s workers think Social Security will be their most important source of income in retirement, according to the Employee Benefit Research Institute. The rest will be surprised. The fact is, most American workers do not have a 401(k) or an IRA. Those who do have managed to save very little–and that was before the stock market crash. You don’t have to be a number cruncher to realize that Social Security will be even more important tomorrow than it is today. Among people aged 65 or older, 68 percent receive at least half their income from Social Security.

2. Mortgage payments Hyperbole is the word that best describes the media narrative about the dire financial straits of the nation’s homeowners. In fact, most homeowners have a manageable, fixed-rate mortgage. Most owe far less on their mortgage than their home is worth. Although there are plans afoot to help homeowners renegotiate their mortgage payment, few will need to take advantage of these efforts. Nevertheless, because mortgage payments are the second largest expense for the average household–an expense that is pretty much non-negotiable–household budget cutting will target items further down the list.

3. Car payments U.S. auto sales are plummeting, down 32 percent in October. Further declines are likely as households cut costs. The automotive industry is caught in a perfect storm–a severe recession, a paradigm shift in what consumers want (hint: better gas mileage), and a demographic transition as SUV-loving baby boomers morph into downsizing empty-nesters. The car payment is one item on which the average household can and is cutting back, forcing car manufacturers to beg the federal government for handouts to stay afloat.

4. Groceries Food prices have been rising at a pace not seen for decades, and forecasters say costs will continue to climb. Americans do not like paying higher prices for food, but they have little choice unless they want to plow up the backyard. Groceries are the fourth largest item in the Great American Shopping List. For grocery stores, the cutback in consumer spending could be good news, since a growing proportion of budget-minded shoppers are likely to head to a grocery store rather than a restaurant. In the grocery aisles, private labels will flourish, as will fresh prepared food–the grocery store’s answer to the demand for fast-food convenience. Fresh prepared food is already the single biggest item on America’s grocery list. Average household spending on fresh prepared food from the supermarket deli climbed an enormous 53 percent between 2000 and 2006, after adjusting for inflation.

5. Restaurant meals Eating out is a necessity, not a luxury, for busy two-earner and single-parent families with children. Convenience drives them to restaurants and price steers them to fast-food. This is why fast-food restaurants will weather the downturn far better than full-service establishments. At McDonald’s, same-store sales were up 8 percent in October. Meanwhile, full-service restaurants such as Bennigan’s are filing for bankruptcy.

6. Gasoline Even before prices soared, gasoline was one of the biggest household expenses. Now that Americans are desperately seeking savings, gasoline is an obvious target. Memo to Detroit: Fuel efficiency will be the number-one priority for American car buyers from now on, regardless of the price of a gallon of gas.

7. Federal taxes Taxes are a perennial political issue because they are one of the biggest household expenses. Middle class tax cuts may be on the way, but do not expect this line item to fall much lower in the list.

8. Property taxes With home values declining and local governments strapped for cash, property taxes will become one of the most contentious local issues of the economic downturn.

9. Health insurance The average household devoted $1,465 out-of-pocket to health insurance in 2006, 27 percent more than in 2000 after adjusting for inflation. Most Americans will do just about anything to avoid losing their health insurance, which guarantees budget cutting elsewhere as the cost of health insurance rises.

10. Electricity The average household spent $1,266 on electricity in 2006, placing it 10th on the Great American Shopping List. Consumers are eager for ways to reduce this major expense. This desire will fuel green businesses that can help them save them money.

Every item at the top of The Great American Shopping List is a necessary expense. This is not good news for the hundreds of items further down the list–such as women’s clothes in 16th place, television sets in 69th place, ice cream in 123rd place, whiskey in 285th place, or dating services in 359th place. With jobs disappearing, incomes falling, and consumers cutting back, necessities will command a growing share of household spending, leaving less for everything else. Take a look at the list and see where you stand.

By Cheryl Russell, editorial director, New Strategist Publications
If you have questions or comments about the above editorial, e-mail New Strategist at demographics@newstrategist.com.

Get a head start on figuring out what consumers are buying by pre-ordering your copy of the all new Household Spending: Who Spends How Much on What, 13th edition. Save $10 by ordering the print edition today, yours for $84.95 if you order before December 1. (ISBN 978-1-933588-98-8; December 2008; 614 pg.; $94.95).

To get a copy of Cheryl Russell’s book, Bet You Didn’t Know, click here.

 

BET YOU DIDN’T KNOW

Rank of cell phone service among the items on which the average household spends the most:

2000:  73
2006:  22

 

 

2. Q & A

Are We Cutting Back on Health Care?

The government releases many of its statistics at a snail’s pace, producing answers years after we started to ask the question. One of the questions is, will Americans consume less health care as costs rise? Now we know the answer, and it is yes. Americans are cutting back on doctor visits, a trend that started in 2006 and has certainly intensified since then.

In a recently released report, the National Center for Health Statistics finds a decline in the number of doctor visits in 2006. This is a surprising reversal of a long-term trend, considering the aging of the population and the fact that older Americans visit doctors far more frequently than younger ones. The number of physician office visits in the United States fell from 964 million in 2005 to 902 million in 2006–a 6 percent decline.

The physician visit rate, or the number of visits per 100 persons per year, fell by an even larger 7 percent between 2005 and 2006–from 331.0 to 306.6. The rate declined in most age groups. Among Americans aged 65 or older, the physician visit rate fell from 704.7 per 100 persons in 2005 to 645.3 per 100 in 2006.

Largely because of the decline in physician visits, doctors wrote fewer prescriptions–1.9 billion in 2006, down from 2.0 billion in 2005. There was no change in the percentage of visits in which doctors provided a prescription, at 71 percent.

Americans are tightening their belts, and everyone–including doctors and pharmaceutical companies–is feeling the pinch.

For more on doctor visits, see the report National Ambulatory Medical Care Survey: 2006 Summary.

By Cheryl Russell, editorial director, New Strategist Publications. If you have any questions or comments about the above Q & A, e-mail New Strategist at demographics@newstrategist.com.

 

BET YOU DIDN’T KNOW

Annual amount spent by the average household on women’s clothes: $629.

 

 

3. Cool Research Links

To keep up-to-date on ever-changing demographics and lifestyles, check out this useful link.

New Report on the Weight of Americans
The average American woman weighs 164.7 pounds, according to new measurements taken by the National Health and Nutrition Examination Survey.  Since she is only 5 feet 4 inches tall, the average woman has a body mass index of 28.4 (calculated as weight in kilograms divided by height in meters squared). A body mass idex of 25 or more is considered overweight. Here is how much women weigh when they get on the scale:

Women’s weight by age (in pounds)
aged 20 to 29: 155.9
aged 30 to 39: 164.7
aged 40 to 49: 171.3
aged 50 to 59: 172.1
aged 60 to 69: 170.5
aged 70 to 79: 155.6
aged 80-plus: 142.2

If you want to know how much men weigh, see table 6 of the report Anthropometric Reference Data for Children and Adults: United States, 2003-2006.

 

BET YOU DIDN’T KNOW

Percent increase in average household spending on college tuition, 2000 to 2006, after adjusting for inflation: 23 percent.

 

 

4. ALL NEW: The 13th Edition of Household Spending: Who Spends How Much on What

Pre-order the print edition of the new 13th edition of Household Spending: Who Spends How Much on What before December 1 and save $10 off the cover price.

Consumers are slashing their spending, making it more important than ever to understand what they buy, how much they spend, and what they will cut as expenses rise. The new 13th edition of Household Spending: Who Spends How Much on What, is your guide to consumer spending.

You can’t get this information anywhere else! Based on unpublished data from the Bureau of Labor Statistics Consumer Expenditure Survey, Household Spending is your exclusive guide to dollar-for-dollar answers to the all-important questions, Who buys? What do they buy? How much do they spend?

You get these spending answers for hundreds of products organized into chapters on apparel, entertainment, financial, food and alcohol, gifts, health care, household operations, shelter and utilities, transportation, personal care, reading, education, and tobacco–in other words, everything a household might buy, from laundry detergent and milk to big-ticket items like homes and cars.

And you get your answers by the demographics that count–age, income, household type, high-income households, region of residence, race and Hispanic origin, and education.

Pre-order the 13th edition of Household Spending between now and December 1 and save $10 off the $94.95 cover price. Just $84.95 plus $6.00 shipping (ISBN 978-1-933588-98-8; December 2008; 614 pages).

Note: Searchable pdf, single-user pdf, multiple-user pdf, and Excel versions of Household Spending will be available in December.

For household spending trends by single-product category, the new Who’s Buying reports will also be available in December.