Where Americans Can Cut Back

Where can Americans cut back if the economy slips back into recession again?  After all the talk about the “new frugality” and the deepest recession in 75 years, it might seem like households have tightened their belts as much as possible.

Surprisingly, however,  the economic figures show several key areas where Americans have actually increased consumption compared to 2006, the year when housing prices peaked.  Judge for yourself whether we can cut back more or not.   (Note: all consumption changes are measured in inflation-adjusted 2005 dollars, comparing the 2nd quarter of 2011 with the second quarter of 2006)

1. Clothing                 Consumption: + 8.9% since 2006

Despite the economic weakness,  Americans spent on clothing at an almost $350 billon annual rate in the second quarter of 2011. Nothing seems to stop the waves of inexpensive shirts, dresses, and coats  coming from overseas.  Clothing imports from China, especially, are up 37% since 2006, and Americans are snapping them up.  Perhaps we could buy a a few less t-shirts with funny sayings on them?

2. Personal care products    Consumption: +14.4% since 2006

We like to look our best, even in a recession. Perfume, makeup, shampoo,  shaving cream and razors, body gels–Americans spend about $100 billion a year on these personal care items.  Not only that, we’re spending more on imported cosmetics,  which are up 26% since 2006.  Are all those goos and gels  really necessary?

3. Televisions    Consumption: +287.4% since 2006

No, that’s not a misprint.  The government adjusts for the size of the television, among other things, and the average size screen has soared since 2006.   If we don’t adjust for size and other variables,  Americans are spending 12.7% more on televisions today compared to 2006.  Total personal consumption outlays on televisions, according to the BEA: About $40 billion, pretty much all imported.  Do you really need an even bigger TV?

4. Alcoholic Beverages (off-premises)    Consumption: +10.7% since 2006

Perhaps it’s not surprising that Americans need an extra drink these days. Still, the total home spending on alcoholic beverages is about $110 billion, at annual rates, according to the Bureau of Economic Analysis. A few less glasses might put a few extra dollars in the pocket.

Remember, all these figures apply to Americans in the aggregate. Those people who have been out of work for months or years don’t have room to cut back at all.

And remember–when journalists write that “consumer spending is 70% of economic activity,”  they are completely wrong. What the U.S. economy needs is more production, not more consumption–and in a globalized economy, the two are not synonymous at all. And that, my friends, will be the subject of tomorrow’s post.


  1. These patterns of spending are unremarkable and if you’d ever lived in a permanently depressed area, what was called The Ghetto when I was growing up, you’d gradually set aside your bias. People focus on looking good when they have no other way to assert their value as persons of status. They need something in their living room that says the same. And they drink to dull the pain. Nothing new here, folks. Move along.

  2. Sir Mandell:

    Look how well our taxes cuts spurred the consumptions of TVs and of look how many more janitors small business needed to hire. Look how many bridge inspectors that become inactive so that new bridges would no longer be needed.

    Production is the target. That is in infrastructure, defense, government, exports as well as consumption made within our borders. Look at world and how a VAT tax and corporation support helps the quality of the jobs to be increased. Another target when production can become a target.

    It’s good to see someone opening up pictures of what I been talking about for the last 4 years. Maybe someone will look at the tax cuts and see if there is possibilities of some actually have a negative effect on the Economy.


  3. deathsinger says:

    Do televisions include computer monitors or would they be in addition to the $40 billion?

  4. liberalarts says:

    But the purchases of alcohol are up in dollar terms. People looking for a cheap buzz can do that while spending less than in 2006. I wonder if that datum is partially determined by people eating out less, thus eating (and drinking) more at home.

  5. trading, correct financial preparing can be quite necessary and it can make or break your business”


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