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Consumer Spending Definition

Consumer spending is money spent by consumers on products and services. In developed societies, consumer spending makes up a large part of the economy and is one of its main driving forces.

  1. Definition

    • Consumer spending is spending by private individuals (as opposed to governments) on any products or services, everything from basic necessities like food to luxury products like wide-screen TVs.

    Portion of the Economy

    • According to economist Michael Mandel in a BusinessWeek.com column, consumer spending is often described as making up around 70 percent of the U.S. gross domestic product (GDP). This number, however, often includes government spending on health care, so the actual figure is lower. Consumer spending is still the largest single part of the GDP.

    Effects

    • Consumer spending is often seen as stimulating the economy. Money spent by consumers passes to businesses that use it to pay employees who spend more, keeping the economy running.

    Necessary Spending

    • According to U.S. Bureau of Labor statistics, for the average U.S. family in 2005 transportation was the largest single part of consumer spending (taking up around 18 percent), as Wired Magazine reports. Shelter took up 16 percent, clothing 4 percent, health care around 4 percent and food 13 percent.

    Luxury Spending

    • According to the same statistics, other spending (each category making up less than 1 perecent of total spending), mostly on luxury goods, made up 37 percent of consumer spending. Technology products alone made up 5 percent.

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