The Consumer State: Personal Consumption 71% of US GDP

[swag]

". . . the US stands alone in the excesses of consumerism, with personal consumption averaging fully 71% of GDP since early 2002 -- well above the 67% norm that prevailed over the 25-year period, 1975 to 2000. That’s a record for America, and undoubtedly a record for any leading economy in modern history. By comparison, other major economies are clear laggards: Europe’s consumption share is only 58%, Japan’s 55%, and China is at the bottom, with private consumption amounting to just 42% of its GDP."


http://www.morganstanley.com/GEFdata/digests/20051003-mon.html

[Sugar Smack]

1. EW, GROSS.

And me, with my luddite-habits and off-brand products. Shame on...somebody. Won't get fooled again.

[swag]

2. Thanks in advance for the global recession.

[SnowGoose]

3. it would be interesting to compare those stats with advertising exposures

I know we're exposed to an awful lot of advertising here - everything has a corporate sponser - even "public broadcasting". Coors light Arlington National Cemetary anyone?

Then again, I get the feeling that Japanese culture is saturated with advertising, too (never been there, so I don't really know).

[swag]

5. I need to track those stats through the years

to try to isolate when pure consumption as a percentage of economic activity in the US really took off, and whether the trend-lines in the rest of the "developed" markets followed, albeit in a lagging manner. If somebody here has already done such a thing, I'd love to see it.

[MADem]

22. Arrrggggggh!!! My head almost exploded

Coors Lite Arlington National Cemetery???

Exxon-Mobile Supreme Court??? Northrop Grumman Pentagon???

The sad irony is, if we got it all out in the open, all of that would not be far off the mark...

[leesa]

23. I am a firm believer that ALL politicians, including the Prez,

should wear patches on their clothes advertising their major corporate donors, just like in car racing. Let's make it clear where their priorities are.

[MADem]

24. What a GREAT idea for a comedy skit!!!!

SNL should JUMP on that!!

[Rex]

4. Capitalism's favorite kind of food.

Consumers! Yumm!

[swag]

8. Yes,

"eat them up, yum."

[AlienGirl]

6. ...so if we're too broke to buy stuff, the economy will crash?

Am I right?

Tucker

[swag]

7. We're already too broke to buy stuff,

and the interest rates on all the money we borrowed to buy all that shit are going up (as are the prices of food, gasoline, natural gas), so the wallet of world's best (almost only) customer is getting a bit thin.

Could be trubba. Could be global synchronized schlowdown.

on edit: retail sales were already starting to slump pre-Katrina. With the post-Katrina blows to consumer confidence preceding a winter of record heating prices and rising interest rates, the big-spending US Consumer faces quite a host of challenges in keeping up with the Joneses, who will have big problems keeping up with themselves.

[smirkymonkey]

28. Also, what percentage of consumption is driven by credit?

We are in deep shit.

[swag]

9. Some recent data points on the capitulating consumer

http://quote.bloomberg.com/apps/news?pid=10000006&sid=aoNVh.deZzZQ&refer=home

U.S. Economy: Consumer Confidence Plummets, New Home Sales Drop

Sept. 27, 2005

Excerpt:

Regular-grade gasoline, averaged nationwide, touched a record $3.057 a gallon on Sept. 2, according to the AAA, the nation's largest motoring organization. While the average pump price fell to $2.755 by Sept. 22, it was still 48 percent higher than a year ago.

``The increase in gasoline prices and the prospect of a long, expensive winter is depressing sentiment,'' said Joseph Abate, a senior economist at Lehman Brothers Inc. in New York, before the report.

New York-based Avon Products Inc., the world's largest direct seller of cosmetics, last week cut its annual profit forecast for the second time in three months, in part because the hurricane and higher fuel costs will hurt demand in the U.S.

The percentage of consumers that saw jobs as hard to get rose to 25.4 percent from 23.1 percent. The percentage who saw jobs as plentiful fell to 20.1 percent, compared with 23.6 percent in August.
. . .
The component of the index that tracks consumers' expectations for the next six months dropped to 71.7 from 93.3. A gauge of optimism about the present situation also fell, to 108.9 from 123.8.
. . .

[OneBlueSky]

10. I once read an old quote from a Native America chief . . .

can't recall which one or the exact wording, but it was something like "all the white men want to do is trade" . . . the context, as I recall, was the chief questioning the Europeans' penchant for accumulating stuff at the expense of the important things in life . . . like appreciating nature and giving thanks for the blessing of the Earth . . .

America in 2005 has taken this penchant to the extreme . . . the entire society revolves around buying and consumption, while the things that really make life worth living -- things like equality, civil rights and liberties, peace, and the environment -- are not even in the equation anymore . . . a sad, sad way for a people and a culture to exist . . .

[swag]

11. "the entire society revolves around buying and consumption"

It's really something: merchandising opportunity begets merchandising opportunity. I can't tell you how stunned I was when I first attended a professional basketball game a few years ago: how could I even see the game through that incredible bombardment of advertisements, electronic and otherwise?

A friend remarked a few years ago while on an errand to the (gak) mall: "I guess the big hobby now is buying shit."

Simple skills like being able to see what is in front on one's eyes have completely atrophied in some poor people. It's all shopping frenzy. Big malls and outlet stores as vacation destinations.

Interestingly, some global economists playing the "blame game" about massive economic imbalances are pointing fingers at those countries whose citizens "don't consume enough," or who "save too much."

[Deja Q]

12. Praise be for China!

Before any freeper has the audacity to call me a communist, perhaps they can mull over the excuses why corporamerica offshores job after job after job TO China.

My applause of China's lack of waste is merely respect for the Earth. We should all be a little more respectful of the things we use and discard. That's not political correctness; that's good old fashioned common sense and caring.

Freepers who applaud corporamerica dismantling America's infrastructure and giving our long-time ENEMY the means to destroy us for good is something reagan would not want. reagan was very much against communism. Or that's what he told us time and time again. Maybe he was a liar? If I was president who was against communism, I sure as hell wouldn't allow the shipment of American jobs over to communist countries. That's trading with the enemy. No better than what Jane Fonda did (she supported the Viet Cong AND pissed on Americans.) Showing Vietnamese women and children is one thing. Narking out American soldiers to the Viet Cong, who in turn got even worse torture because of her actions is despicable.

[Deja Q]

13. Wh@t the bleep does that picture imply anyway?

Drink Pepsi Blue (fremented smurf in carbonated water?!) and you're going to get jiggy with good looking, walking, breathing, make-up advertisements?!

[Tsiyu]

14. Think of the "work" involved!

The marketing research, the brand recognition campaigns, the cheap crap emblazoned with "brand."

"Brand" is King, whether it's Blackwater or Aeropostale.


It's like shooting at fish in a bucket. And Americans are more than willing to be the fish. When they put ads in the public schools, I knew then.

[triguy46]

15. The opiate of the masses, buying things. n/t

[ProfessorGAC]

16. Have To Be A Little Careful With These Numbers, Swag

I don't dispute your premise that we're becoming more and more a consumer society, but there are a couple of factors that skew these comparisons.

Remember, that the consumption element of GDP includes any and all goods and services at the final stage of delivery. So, in the U.S., that includes all medical services. Since many EU countries have socialized medical systems, the money spent there is viewed as GS, not C. Therefore, the U.S. will always show higher numbers for total consumer spending, when compared to Europe. Japan, i'm less sure about. China's health care delivery system is still in a very rudimentary form, so Chinese consumers simply don't spend those dollars, and since the gov't still has many nationalized industries, the GS is VERY high there, which pushes the fraction of Consumption down.

Lastly, the 67% "norm" referenced in the report, is a bit misleading, because it doesn't provide the context for the natural year to year variation which makes a predictable 95% confidence interval. That confidence interval is made up of 2 standard deviations which are each about 1.6%. So, the 67% is plus or minus 3.2% at 95% CI. Or, it's 64.8 - 70.2%. I would be hesitant to conclude anything yet about whether consumption is really rising to a statistically significant degree v. this same 25 year standard.

All that being said, i do agree that the drive in this country to continue the push toward "want it all, want it now" is not a economically healthy vibe. Leverage on personal expenses is not a good recipe for long term economic strength.

The middle class needs to be nurtured by good monetary and fiscal policies that encourage wage growth and expand the scope of middle class America. In fact, that's exactly what happened in the 50's through the 90's which is why the economy was strong 90% of the time over that interval. Increasing consumer debt is not what made that work. Good wages, fairly stable pricing, and high productivity is what made that work. The current policies are anathema to what actually works.
The Professor

[swag]

27. Great point re: health care. Thank you.

I've impertinently emailed my source to see how he would account for the health care payment variations from country to country. If I hear back, I'll report herein.

I would make a crude attempt myself, but he's the economist and I have my own work to do.

Best to you.

[depakid]

17. Consumption of what?

Inefficient health care that leads to bankruptcy? Check.

Shoddy goods manufactured in China via credit card? Check.

Excessive packaging and marketing costs? Check.

What it boils down to is that a whole lot of what's being "purchased" and reflected in GDP doesn't amount to wealth and isn't much of a bargain in the aggregate.

[Tierra_y_Libertad]

18. "The capitalists will sell us the rope with which we will hang them."

Lenin said that and he was right on the mark.

I love the irony that "Communist" China is now poised to bring down "capitalist" America using capitalism and the "free market" as the device to do so.

While our capitalists attempt to exploit the rest of the world, the Chinese undermine our economy by flooding it with cheaply made goods that are, perhaps less flashy, but servicable and desirable. Thus, driving American capitalists out of business or cutting wages and benefits to their workers which causes them to buy cheaper Chinese goods, which gives the Chinese a larger market, which causes the capitalists to cut wages, etc, etc.

Of course the "free market" American capitalists whine about the "free market" as they try to compete in it.

It's all too delicious.

[Pirate Smile]

19. After 9/11 everyone was told to buy, buy, buy. Low interest rates and

home re-financings coupled with a lot of nesting/remodeling kept the economy from tanking even more.

This time, people have already refinanced, interest rates are going up, gas, heating bills, food, health care, etc - everything costs more and income's haven't increased, in some areas they have decreased. They sure as hell haven't kept up with prices.

The consumer wont (can't) save the economy this time.

[apnu]

20. I think the power mad of the GOP want a depression

Why? I can only speculate. My going theory is they want to press the 'reset' button on the country and play the game their way. Another way to look at it is this: they want to get back to a pre-FDR America. :eyes:

[MADem]

25. Because otherwise, the TERRISTS would WIN!!!

I guess the Chinese are the 'terrists' then, because they seem to be top dogs in the economy department of late...

[Czolgosz]

21. Recipe for financial disaster: combine one weakening dollar with one

extra large trade deficit and one overripe threat of rapid inflation. Add a dash of burgeoning consumerism. Eliminate bankruptcy protection for ordinary consumers and mix well with ever rising percentage of the population who cannot afford health insurance while health care costs spiral out of control.

Simmer on low heat for one Bush administration.

[Helga Scow Stern]

26. "Just for me"

I was at a farmers' market the other day and I heard a woman next to me say to a friend, "I'm starting with a personal trainer. I need to do something just for me."

I looked at the woman, in her thirties, not an ounce of fat on her body, and it was like an epiphany, how this concept of "Just for me" has gotten out of hand.

We all feel so beleaguered in this world and we are told that the sane thing to do is take care of ourselves, which leads to doing something Just for me.

Shopping is the way we nurture ourselves and others. The more we hurt, the more we spend.