Shifts in consumer spending
Tarek M. Harchaoui and Faouzi Tarkhani
- Consumer spending, which accounts for almost 60% of GDP, has shifted markedly over the last 20 years, reflecting changes in lifestyle and the economy.
- Between 1981 and 2000, consumer spending grew 2.6% annually, slightly less than GDP. Consumer spending remained strong even during the slowdown of 2001.
- Higher incomes and wealth have resulted in higher spending on discretionary items. Between 1981 and 2000, much of the rise in discretionary spending was for financial services, with mutual funds becoming the fastest-growing item in the consumer household basket.
- Home ownership has also become more important, accounting for 47% of non-financial household assets in 2000, up from 41% in 1981.
- Technological innovation has resulted in a plethora of new products and services whose share grew 6%. Consumer spending on health and education also increased rapidly.
- These shifts in consumer spending were accompanied by a fall in the personal savings rate and a rise in consumer debt.
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The authors are with the Micro-Economic Studies and Analysis Division. Tarek Harchaoui can be reached at (613) 951-9856
and Faouzi Tarkhani at (613)951-5314, or both at email@example.com.
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