Goods Consumption
More than burgers
Sadly, this is as deep as we are going to go down the consumption rabbit hole. But, there is a lot of good information here. Since the previous post showed the change of consumption between goods and services over time with a line chart, I thought it would be easier to dig into the eight separate components of goods consumption (as a portion of total GDP) with a bar chart comparing 1960 and 2018:
It’s quick to see the one massive bar sticking out here, which shows that food and beverages made up an absurd 11.5% of GDP in 1960. People living in the US get made fun of a lot for loving their burgers but, wow, at the time the US was basically a burger-driven economy. Remember too that this chart represents proportions of GDP, so while we eat more burgers today in total than in 1960, the proportion of economic activity for burger consumption to the total is smaller.
This is actually pretty amazing when you think about it. Imagine a super basic economy, like a small hunter-gatherer tribe. While they probably don’t calculate GDP, they have to eat food to live and probably make some sweet loincloths and so there would be a theoretical GDP that could be calculated if there was an elder economist of the group. Since they are simple, they aren’t making cars or buying computers or doing all the stuff that a more advanced economy is doing and so they would have a high food-to-GDP ratio. So, for an economy with a smaller food-to-GDP ratio, there is an implication that they are doing other, likely more advanced, things other than meeting their basic survival need to eat. In the same way, we are a more technologically advanced society in 2018 than in 1960 and we see that same decrease in the food-to-GDP ratio from 11.5% to 4.9%.
At the end of the day, we need food, shelter, and water to live (and arguably now the internet too, at least I do). That basic, you-have-to-do-this-or-you-die portion of our economy is shrinking. And, when you compare the change in food to the other components of goods consumption, the magnitude of that difference is drastic. Welcome to the future, where we still eat a lot of burgers but we do other stuff too like play addicting, microtransaction-based games on our phones.
Besides the giant 1960 food bar in the chart, there is also a note for the first four items on the chart which describes them as “durable” and a note for “non-durable” for the other four. Durable is just a fancy way of economists saying that something consumed will last a long time. So, buying a car is a one-time consumption and it is durable because it will last for years whereas the gas for that car is non-durable because it will probably be used fairly quickly.
Though, I don’t know about these fancy-dressing, seasonal-fashion-trend-wearing economists but, when I buy clothing, I tend to keep my clothes for several years. Also, what about Twinkies which are food but last forever? Just more reasons why Economics is not a perfect science.
Other than that, since we already saw that the portion of overall goods consumption has decreased over time, we know that at least some of the underlying components should decrease as well. We see that with durable goods like motor vehicles and home furnishings (think dishwashers etc.). We also see that with non-durable goods like clothing and gas. The only increases were for recreational goods and the other durable and non-durable categories. I did my best to research those to give more insight but gave up after five tough minutes of Googling, so I don’t have a lot to say about the details on those.
In the next post, I’ll do a deep dive on the bigger component of overall consumption and the main driver of US GDP: Services!