Consumer spending has always been an important part of our nation’s GDP. In fact, consumer spending currently makes up about 70% of the GDP. That’s a lot.
Has it always been that way? I wanted to find out so I did some research and found the GDP and Other Major NIPA Series, 1929–2009: II (PDF) on the Burreau of Economic Analysis’ website. The numbers are in that report but I still had to do some calculations to find out the relationship between the GDP and Consumer Spending. Once I ran the calculations, I created this graphic:
Although it’s hard to tell, consumer spending has grown to become a bigger slice of the GDP.
Here are the hard numbers if you’re interested:
From 1929 through 2008…
• the GDP has an annual growth rate of 3.32% (through 2008)
• consumer spending has grown at 3.22%.
From 1979 through 2008…
• the GDP has an annual growth rate of 2.79% (through 2008)
• consumer spending has grown at 3.06%.
So, in recent years, the gap has narrowed and consumer spending has become a more significant part of our GDP. This is due to the fact that manufacturing jobs are moving overseas and are being replaced by service jobs.
The troubling part to all this (at least to me) is that if consumers are up to their ears in debt and are working to pay down their debts, how can they keep up their spending? Not only that, but if consumers were borrowing in the past in order to fuel consumption, where are we headed for the future?