Consumer expenditures shift from commodities to services

June 04, 2014

For decades, economists have observed that an increasing proportion of the employed population in the United States has been working in the services sector and thus not involved in the production of tangible goods such as food, clothing, houses, and automobiles. The U.S. economy has become a "service economy."

 

Relative importance of Consumer Price Index for All Urban Consumers (CPI-U) indexes for commodities and services, 1947–1949 to 2012 (percent distribution)
Index1947–
1949
196019681970198019902000200520102012

Total

100.0100.0100.0100.0100.0100.0100.0100.0100.0100.0

Commodities

72.963.764.262.958.445.341.840.840.039.7

Services

27.136.335.837.241.654.758.259.260.060.3

This change is also apparent in consumer expenditures data, with consumers allocating an increasing share of total expenditures to services and a decreasing share to commodities. This change has been observed over the last several decades.

During the 1947–1949 period, commodities made up 72.9 percent of total consumer expenditures, compared with 27.1 percent for services, as measured by historical Consumer Price Index relative importance tables, which use Consumer Expenditures data to compute the percent allocation of consumer expenditures across multiple categories of commodities and services. By 1968, these shares had changed to 64.2 percent and 35.8 percent, respectively. In 2012, the shares had reversed: consumer expenditures on commodities had dropped to 39.7 percent of total expenditures, with services accounting for the remaining 60.3 percent. U.S. consumers now spend more money on services than on commodities.

These data are from the Consumer Price Index program and the Consumer Expenditures survey. To learn more, see "Explaining the 30-year shift in consumer expenditures from commodities to services, 1982–2012," Monthly Labor Review, April 2014. Commodities are defined as either durable goods (such as household furnishings and equipment, vehicles, and sports, recreation, and exercise equipment, etc.) or nondurable goods (such as food at home, food away from home, housekeeping supplies, apparel, gasoline and motor oil, prescription and nonprescription drugs, pet food, toys, games, arts and crafts, personal care products, reading materials, school books, etc.).  Services are defined as shelter, transportation services, medical care services, energy services, water and sewerage, maintenance, trash and garbage collection, household operations, education, and other services.

SUGGESTED CITATION

Bureau of Labor Statistics, U.S. Department of Labor, The Economics Daily, Consumer expenditures shift from commodities to services on the Internet at http://www.bls.gov/opub/ted/2014/ted_20140604.htm (visited November 27, 2014).

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