Provided by Joseph V. Curatolo
We often hear in the media that consumer spending is crucial to the overall health of the U.S. economy, but exactly how important is it? Representing approximately two-thirds of overall GDP, consumption — the almighty consumer — is the largest driver of economic growth in the United States. Of the nearly $18 trillion in U.S. GDP (2015), American shoppers are responsible for a piece of the pie worth about $12 trillion.
Consumption is tracked by the Bureau of Economic Analysis, and is reported as Personal Consumption Expenditures (PCE) in its monthly “Personal Income and Outlays” news release. Since the late 1960s, PCE as a percentage of overall GDP has crept up from a low of approximately 58 percent to nearly 70 percent today.
PCE is divided into goods and services. The services category typically represents the largest part of PCE, accounting for more than 65 percent over the past two years. Examples of services include health care, utilities, recreation and financial services.
Goods are broken down further into durable and nondurable goods. Durable goods are those that have an average life of at least three years. Examples include cars, appliances and furniture. Nondurable goods are those with an average life span of less than three years and include such items as clothing, food and gasoline.
Durable goods represent approximately 10 percent of total PCE, while nondurable goods make up about 20 percent.
So the next time you’re out shopping for anything from a bottle of ketchup to a new car, consider that you’re doing your part to fuel our nation’s growth.
Joseph V. Curatolo is president of Georgetown Capital Group, 5350 Main St., Williamsville (phone: 633-9800, toll-free 1 (800) 648-8091, fax 633-9789, www.georgetowncapital.com).
Insurance services offered by Georgetown Capital Group, which is independent of Royal Alliance Associates, Inc., with separate ownership, and is not registered as a broker-dealer or investment advisor.
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