Consumption Surprise

Commentators have been exclaiming over the decline in consumer spending in recent months. It’s true that spending in dollars is down, but an interesting fact has escaped attention: In November, the volume of consumption rose, despite a decline in spending. The reason is that prices fell. We used to talk about adjusting consumption and other components of GDP for inflation, but now we have to consider adjustments for price declines. The two pictures show durables and non-durables consumption, adjusted for price declines.


 Consumption of durable goods, adjusted for price declines



Consumption of non-durables and services, adjusted for price declines

It’s way too early to say what this means. The December data will be helpful. We may get some grip on the question of how much of the drop in consumption was the reaction to the spike in oil prices during the summer and how much from the financial events of the fall.


3 Responses to Consumption Surprise

  1. […] Thoma linked to this post from Susan Woodward and Robert Hall, in which they point out that though spending on consumption is […]

  2. […] might want to check out their article on prices and consumption in November. They postulate that the volume of consumer purchases actually increased while the […]

  3. […] Rob Walker, the Times’ estimable columnist on all things related to consumerism, seems awfully dismissive of the idea that thrift is the new black. I don’t know which set of abysmal numbers he’s not looking at — consumer confidence (in the tank), retail sales (ninth circle of hell), deflation (snake’s belly @ wagon rut) or the Fed’s hard data on personal savings rates (volcanic). Iconoculture has spent a lot of time researching this trend, and maybe we take it a little personally, but dude is being willfully clueless. Just the other day, he stood behind another contrarian fig leaf when referencing Woodward and Hall’s blog. […]

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