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Consumer expenditures in 2020

Consumer Expenditures in 2020 will highlight spending patterns and expenditure changes for 2020, the most recent data processed by the U.S. Bureau of Labor Statistics (BLS) Consumer Expenditure Surveys (CE). Consumer expenditures were noticeably affected by the COVID-19 pandemic, which began in March 2020. Some changes were expected (for example, expenditures for food away from home and public transportation decreased sharply), but others are surprising (for example, expenditures for healthcare were nearly unchanged, decreasing slightly). (See chart 1.)

This report includes tables and charts featuring integrated data from the Diary and Interview Survey portions of the CE. (For details about the CE, see the technical notes.) The text includes analyses of data from several of these tables. The incomes and expenditures shown in these tables and throughout this report are expressed as nominal values, representing spending in U.S. dollars as reported by survey consumers.¹ The CE survey collects information from the reference person of consumer units.²

Overview

The onset of the COVID-19 pandemic in 2020 affected spending across 14 major spending categories differently from 2019 to 2020.³ (See chart 1.)

Average annual expenditures decreased 2.7 percent between 2019 and 2020 (from $63,036 to $61,334, respectively), compared with a 3.0-percent increase from 2018 to 2019 (from $61,224 to $63,036). At the same time, income before taxes increased by 1.8 percent between 2019 and 2020 (from $82,852 to $84,352, respectively), compared with a 5.4-percent increase from 2018 to 2019 (from $78,635 to $82,852).

Prices rose by 1.2 percent from 2019 to 2020, as measured by the average annual change in the Consumer Price Index for All Urban Consumers (CPI-U, U.S. city average, all items, base period 1982–84=100), compared with the aforementioned 2.7-percent decrease in spending. From 2018 to 2019, prices increased by 1.8 percent, compared with the 3.0-percent increase in spending.

Developments in 2020

The onset of the COVID-19 pandemic in 2020 affected consumer spending patterns across the United States. Stay-at-home orders affected expenditures for retail outlets, entertainment venues, and even transportation providers, as people worked from home and stopped commuting. Out of the 14 major expenditure categories, 9 exhibited declines in spending: food, apparel and services, alcoholic beverages, transportation, healthcare, entertainment, personal care products and services, education, and tobacco products and smoking supplies. Average annual expenditures increased for only five major categories: housing, reading, cash contributions, personal insurance and pensions, and miscellaneous. (See table A.)

The largest percentage declines in expenditures were 23.8 percent in apparel and services, followed by 17.8 percent in personal care products and services, 17.4 percent in alcoholic beverages, 11.9 percent in education, and 10.4 percent in food. The largest percentage increases in spending were 23.9 percent in reading, followed by 14.4 percent in cash contributions.

Two categories exhibited moderate expenditure decreases: entertainment (5.8 percent) and transportation (8.5 percent). Moderate to small decreases were observed for tobacco products and smoking supplies (1.6 percent) and healthcare (nearly unchanged, at 0.3 percent). Categories that exhibited small to moderate increases included miscellaneous (0.9 percent), personal insurance and pensions (1.1 percent), and housing (3.5 percent).

Expenditure shares

Expenditure shares are important both in the short run, to provide a snapshot of the typical allocation of family spending, and in the long run, to reflect the changes in the economic standard of living. For example, smaller shares spent on food and other life necessities mean more is available to spend on entertainment, education, cash contributions, or other items that are not considered essential.

The eight largest categories by dollar spent (housing, transportation, food, personal insurance and pensions, healthcare, entertainment, cash contributions, and apparel and services) accounted for 93.7 percent of total spending in 2020, with the housing share alone accounting for more than one-third (34.9 percent) of total spending. Therefore, small percentage changes in housing expenditures may drive the change in total spending. (See chart 2 and table B.) The six smallest categories by dollar spent are combined into all other expenditures category, which accounts for 6.3 percent of total spending. The all other expenditures category includes: alcoholic beverages, personal care and products, reading, education, tobacco products and smoking supplies, and miscellaneous expenditures. Shares of selected expenditure categories from 2017–20 are in chart 2.

Expenditure shares of all 14 major categories from 2017 to 2020 are shown in table B. Expenditure shares decreased for seven major categories, increased for six categories, and were unchanged for one category. (See table B.) The largest increase in expenditure shares was a 2.1-percentage-point increase in housing to 34.9 percent in 2020, driven by double-digit growth (11.8 percent) in household furnishings and equipment, and 9.9 percent growth in owned dwellings from 2019 levels. Expenditures on miscellaneous household equipment, a key component of household furnishings and equipment, increased by 20.1 percent.⁴ The main portion of owned dwellings is mortgage interest and charges, which increased by 7.3 percent while the spending on rent, the main portion of rented dwellings, declined slightly by 0.8 percent. The decline in total non-housing expenditures combined with the increase in total housing expenditures results in the increased share of housing expenditures.

The largest decrease in spending share was a 1.1-percentage-point decline in food, driven by an almost one-third decline (32.6 percent) in the level of spending for food away from home, followed by decreases of 1.0 percentage point in transportation, and 0.7 percentage point in apparel and services.

Expenditures by income quintiles

Consumer units (CUs) in all except the highest income quintile experienced increases in income before taxes in 2020. (See table C.) Income growth across income quintiles displayed a pattern such that the lower income quintiles had higher increases. The lowest income quintile had the largest income growth of 9.9 percent followed by the second, third, and fourth income quintiles. Income declined for the highest income quintile CUs in 2020 compared to 2019. The highest income quintile includes both 9th and 10th income decile CUs, where the 9th decile experienced income increases and the 10th decile experienced income declines. The income declines for the 10th decile CUs were in wages, self-employment, and interest, dividends, rental, and other property income.⁵

Consumer expenditures decreased for the second, third, and highest income quintiles in 2020. These were the first declines in expenditures for any quintiles after 4 consecutive years of increases in all individual quintiles. (See chart 3.) The largest decline in spending was a 5.5-percent decrease in the highest income quintile. Despite the increases in income by the second and third income quintiles, their expenditures declined due to sharp decreases in food away from home, apparel and services, and transportation expenditures. The lowest and the fourth income quintile had increases in incomes and spending, while the highest income quintile had decreases in income and spending. The spending decline with the highest income quintile was greater than the combined increases by other income quintiles, resulting in the overall decline in average annual expenditures in 2020 for all CUs.

Housing was the only major expenditure category for which all income quintiles spent more in 2020 than in 2019 (table C). The lowest income quintile had the largest increase in housing expenditures, at 6.8 percent, and the highest income quintile had the smallest increase in spending, at 0.9 percent. However, spending in housing by other income quintiles did not display any patterns. Regardless of quintile, average annual spending declined in all quintiles for three major expenditure categories: food, apparel and services, and transportation in 2020. The largest declines were in apparel and services. Those declines occurred in the fourth income quintile (34.8 percent), second income quintile (30.8 percent), and the highest income quintile (21.0 percent). In some quintiles, double-digit declines in spending occurred. In the third quintile, there were declines of 17.5 percent in apparel and services, 16.1 percent in food, and 10.3 percent in entertainment. In the second income quintile, spending declined by 13.2 percent in both transportation and all other expenditures. In the highest income quintile, there were declines of 13.0 percent in entertainment, 12.5 percent in food, 12.4 percent in transportation, and 10.5 percent in all other expenditures.

Cash contributions increased in the first through fourth income quintiles, but declined slightly in the highest income quintile.⁶ The largest increases in cash contributions were 35.3 percent in the third income quintile, followed by 32 percent in the fourth income quintile, 18 percent in the second income quintile, and 15.6 percent in the lowest income quintile.

Expenditures on housing

On average, housing expenditures account for the largest share of total expenditures. For this reason, it is worth noting that housing expenditures increased by 3.5 percent from 2019 to 2020 (table A), and the share of housing expenditures increased by 2.1 percentage points to 34.9 percent of total spending (table B). Total expenditures declined by 2.7 percent, while non-housing cost, an estimate deducting housing spending from total spending, declined by 5.7 percent, supporting the increase in the share of housing expenditures. The homeownership rate increased by 2 percentage points to 66 percent in 2020, recovering to 2000–02 and 2008–10 levels (chart 4). The rate of renters declined to 34 percent in 2020, the lowest rate since 2010. This may not reflect the real change in housing tenure, and instead may be attributable to change in data collection methodology during the COVID-19 pandemic.⁷ The homeownership rate between 2003 and 2007 was higher than the current level, peaking in 2004. In the last two decades, the homeownership rate was lowest in 2015 and 2016, when the percentage of renters was at its peak.

Expenditures on gasoline

As noted before, the COVID-19 pandemic directly affected how consumers lived and worked. Stay-at-home orders, increased teleworking, and individual concerns about being exposed to or transmitting the COVID-19 virus outside the home meant that consumers drove less. As a result, it is not surprising that gasoline expenditures fell from 2019 to 2020. In fact, overall, expenditures for gasoline declined more than 24 percent in that period.⁸

Prices for gasoline also fell during this period. (See chart 5A.) Whether or not a decline in purchases caused the drop in price, expenditures and price are directly related. Gasoline provides a simple example of this. That is, expenditures on gasoline (G) equal the price per gallon (P) times the number of gallons purchased (Q); that is, G = PQ. Therefore, it is not clear that a drop in expenditures is the result of a drop in price, quantity purchased, or both. It is even possible for expenditures to drop when price drops and quantity purchased increases, if the percentage drop in price is larger than the percentage increase in quantity. (Similarly, if price rises by a smaller percentage than quantity purchased drops, expenditures fall when prices rise.)

For this reason, chart 5B shows gasoline expenditures from the Consumer Expenditure Surveys (CE) divided by average prices of gasoline, as published by BLS as part of the CPI. This ratio yields the estimated average gallons of gasoline purchased. This initial ratio is then divided by 52, the number of weeks per year, because the gasoline expenditures in CE are annual, and, presumably, most readers are more accustomed to thinking of their gasoline purchases (expenditures or gallons) in weekly rather than annual terms. Also, note that because BLS produces price indexes and average price estimates only for urban consumers, the CE data in charts 5A and 5B are for urban consumers only. Similarly, the CPIs and average price estimates are for gasoline only and not for gasoline, motor oil, and other fuels as shown in the published CE tables. Therefore, gasoline data from CE are taken from the detailed tables that are described near the end of this report. (See section titled, “Detailed tables, 1984–20.”)

Taken together, charts 5A and B display some interesting findings about gasoline expenditures. First, chart 5A shows that in percentage terms, gasoline prices declined less from 2019 to 2020 than did expenditures. The only other time this happened in the period covered by the graphs (2008 through 2020) was from 2012 to 2014 (i.e., 2012 to 2013, and then 2013 to 2014), although the difference in rates of decline for prices and quantities purchased was less sharp than it was from 2019 to 2020. In all other periods, the rate of change was either the same for prices and expenditures, or prices fell more sharply than expenditures, indicating that quantities purchased usually rose when prices fell. This is borne out when looking at results for 2014 to 2015. Chart 5A shows a much sharper decline in prices than expenditures over this period, and chart 5B shows an increase in gallons per week purchased in this period. The results in 2020 are consistent with the presumption that consumers were driving less because of the COVID-19 pandemic, regardless of how prices changed.

Similarly, the charts offer an opportunity to compare two different periods of economic contraction. According to the National Bureau of Economic Research, a recession started in December 2007 and ended in June 2009.⁹ The next recession was much shorter, starting in February 2020 and ending in April that year.¹⁰ The first of these was largely attributed to financial developments, such as the bursting of a housing bubble that preceded it.¹¹ The second was during the onset of the COVID-19 pandemic.

Chart 5A shows that in the financial recession, declines in gasoline prices and expenditures were indistinguishable. Consistent with this, chart 5B shows that quantities purchased were nearly unchanged from 2008 to 2009.¹² However, the decrease in quantity purchased for gasoline between 2019 and 2020 (1.28 gallons per week) is second only to the decrease shown between 2009 and 2010 (1.36 gallons per week), a period when gasoline prices rose sharply (more than 18 percent). Again, prices declined from 2019 to 2020, and gallons per week purchased (12.3 gallons per week) were lower than at any time in the period covered in chart 5B.

Finally, the detailed tables show some interesting changes in purchasing patterns. Gasoline expenditures are collected both in the Interview Survey and the Diary Survey but are published in tables based solely on Interview Survey results. The detailed tables that are available online show that the quarterly percent reporting expenditures for gasoline for all consumer units (urban and rural) was virtually unchanged from 2019 to 2020: nearly 89 percent each year.¹³ However, the Diary Survey results tell a different story: the percent reporting weekly expenditures fell nearly 9 percentage points (from 56.71 to 48.01).¹⁴ In contrast, from 2018 to 2019, the percent reporting fell just over 2 percentage points (58.84 to 56.71). Putting the results of the Interview and Diary Surveys together, consumers were still using vehicles to the extent that they continued needing to purchase gasoline at least once every 3 months (Interview Survey); however, their use was reduced, as evidenced by fewer purchases each week (Diary Survey).¹⁵

Expenditures on food

This section of the report includes data on expenditures on food by income quintile and by generation.

By income quintile

In 2020, expenditures on food away from home declined for all income quintiles. Expenditures on food at home decreased only in the third income quintile. Food away from home expenditures declined by all income quintiles, which offset the increases in expenditures in food at home in four income quintiles, resulting in a double-digit decline in food expenditures. (See table C.)

The largest percentage decline in total food expenditures, 16.1 percent, appeared for the third income quintile, and was driven by a decline of 32.9 percent in food away from home expenditures, and a 4.3-percent decline in food at home expenditures. The largest declines in food away from home were 37.9 percent in the lowest income quintile, and 35.4-percent in the highest income quintile. Declines in food away from home expenditures ranged from 27.8 percent for the second income quintile to 37.9 percent for the lowest income quintile.

By generation

In addition to quintile, BLS provides Consumer Expenditure Surveys (CE) tables based on the birth year of the reference person. The CE data are categorized into distinct generational groups: post-Millennials (1997 or later), Millennials (1981–96), Generation X (1965–80), Baby boomers (1946–64), and Silent and Greatest (GI) generations (1945 or earlier).¹⁶ Generational tables are available from 2016 onward.¹⁷ However, starting in 2019, BLS adjusted generations of birth years by merging the Silent and GI generations into one age group (born 1945 or earlier) and separating the Millennial and post-Millennial generations into two groups (those born 1981 through 1996 and those born 1997 or later). These changes reflect the decreasing number of living persons born in the first period and the increasing number born in the last period.

Spending on food at home and food away from home show distinctive patterns across generations in the 2020 CE data. Following the patterns of 2018 and 2019, the share of total food spending allocated to food at home increases with age of reference person, while the share allocated to food away from home decreases with age of reference person. (See chart 6.) Compared with 2019, the proportion of total food expenditures allocated to food away from home declined in 2020 for all CUs. Even so, the post-Millennials generation spent 44 percent of total food expenditures on food away from home, while the Silent and GI generations spent 25 percent in 2020. (See chart 6.) Some of the difference may be directly attributable to life-cycle effects. For example, the youngest members of the Silent and GI generations turned 75 in 2020, well into the retirement age range, and retirees may have more time to prepare meals at home than those still working. In addition, members of these generations may have age-related health constraints that limit their access to restaurants. Silent and GI generations households may have higher risks from COVID-19 that further limited their access during the pandemic period. Nevertheless, other factors, such as income and family size, differ by generation and undoubtedly influence the allocation of the food budget as well.

Expenditures on apparel and services by size of consumer units

The largest percentage decline in spending was in apparel and services, where average spending declined 23.8 percent for all consumer units (CUs) from 2019 to 2020. (See table A.) The declines occurred regardless of the size of the CU. (See chart 7.) Percentage declines in spending by size of the CU ranged from 14.0 percent for one person CUs to 37.4 percent for three person CUs. The magnitude of the decline increased with CU size for one, two, and three person CUs but diminished for four and five person CUs, each of which had similar declines, respectively at 20.6 percent and 20.5 percent.

Expenditures on healthcare and its components by age of reference person

Although the Consumer Expenditure Surveys (CE) do not collect information on health status, they do collect information on age. Older people are generally assumed to be at higher risk of incurring healthcare expenditures than younger people, especially during a pandemic. Therefore, an exploration in spending changes by age group from the pre-pandemic year of 2019 to 2020 is expected to be an interesting story.

Healthcare spending is made up of of four components: health insurance, medical services, prescription and non-prescription drugs, and medical supplies. Health insurance alone accounts for more than two-thirds of total healthcare cost in 2019 and 2020. Health insurance expenditures increased by 3.9 percent for all consumer units (CUs), which was offset by declines in the other three components. As a result, total healthcare expenditures for all CUs declined 0.3 percent in 2020. (See table A.)

Given the relationship between health and age, expenditures by age group are interesting to examine. This is particularly true for 2020, when older consumers were disproportionately affected by the pandemic.¹⁸ Across all age groups, those ages 25–34 years and 45–54 years spent more on healthcare in 2020 than in 2019, while all other age groups spent less. The increase in healthcare spending by those 25–34 years old was mainly driven by increases in spending in health insurance and drugs, while the increase in spending by those 45–54 years old was driven by increased spending in health insurance and medical services. (See chart 8.) Not surprisingly, CUs ages 65 and older spent more on health insurance in 2020 than in 2019. Among the healthcare components, the largest decline in spending was 33.1 percent in medical services by those under 25 years, and the largest increase was 55.8 percent in medical supplies also by the under-25-years age group.¹⁹

Among the components of healthcare, spending on health insurance declined only for those under 25 years (4.6 percent) and between the ages of 35–44 years (1.6 percent); for the remaining age groups, expenditures on health insurance rose from 2019 to 2020. The largest percentage increase in health insurance spending, 9.9 percent, was observed for those ages 25–34 years; the smallest increase, 0.9 percent, was observed for those ages 55–64 years. Those ages 45–54 spent more on average in medical services in 2020 than in 2019. However, all other age groups spent less. The declines ranged between 12.4 percent for those aged 25–34 years to 33.1 percent for those under 25 years. Spending on drugs increased only for two age groups: 25–34 years and 65–74 years. Spending on medical supplies increased for three age groups: under 25 years, 35–44 years, and 65–74 years.