Consumer spending accounts for about 70% of the U.S. economy. What Americans buy is divided into two major categories. First, there's spending on necessities such as food, housing and clothing. Second, there's discretionary spending which includes the buying of non-essential goods and services.

Total U.S. consumer spending increased 0.8% in February 2012, according to U.S. Commerce Department data, indicating a modest advance in the slow-moving economic recovery.

The recent increase in consumer spending may be attributed in part to higher gas prices, but it also suggests increased discretionary spending and an upsurge in consumer confidence, as more jobs were created early in the year and consumers took on more debt. By the end of April, however, the economy seemed to weaken again.

America's buying habits have been well documented. In 2009, the latest year for which comprehensive data is available from the U.S. Bureau of Labor Statistics, Americans spent $1.13 trillion on discretionary purchases.

The data provides a reasonably accurate picture of the nation's amusements and entertainment, it's interests, hobbies, indulgences and vices. Below, is a list of the top ten discretionary purchases of goods and services by category. The percentages cited below are based on an average American household income of $63,000.

Apparel Products and Services
Dry cleaning, storage of clothing, rental of clothing, jewelry and watch repair are included in this category. Total Purchases: 0.5%.

Despite the well-known health hazards of smoking and chewing tobacco, Americans continue to use tobacco products. Total Purchases: 0.8%.

SEE: Paying Uncle Sam: From Tobacco to $1 Trillion

Entertainment Equipment and Services
This is a broad category that includes sports equipment, photographic equipment and supplies, hunting and fishing equipment, bikes, boats, balls and other sports equipment. Total Purchases: 0.8%.

Every variety of alcoholic beverage, including straight and mixed drinks, beer and wine are included in this category. Most of these beverages are consumed at home, according to the data. Total Purchases: 0.9%.

Fees and Admissions
Americans love movies, musical concerts and sports events, and spent more in this category than they spent on goods and services for personal care. Total Purchases: 1.3%.

Vacation Lodging
The more income per household, the more is spent on hotels, motels, vacation homes and lodging for weekend getaways, or for longer vacations. Total Purchases: 1.4%.

Hobbies, Toys, Pets and Playground Equipment
This is a catch-all category, with the majority of the money spent going for pets - their food and veterinary care. Total Purchases: 1.4%.

Television, Radio and Sound Equipment
Also included in this category are video games (hardware and software), cable TV connections, and DVD and CD players. Total Purchases: 2%.

Americans are a generous people, and this virtue - or extravagance - is illustrated in the amount they spend annually on gifts. Total Purchases: 2.2%.

Food Not Consumed at Home
Eating out, including fast food and traditional restaurants, and leisurely venues, account for a larger percentage of meals not consumed at home. This category also includes food obtained from vending machines, mobile food vendors and delivery services.

SEE: Cut Wasteful Spending For A Rich Retirement

Some essential purchases for the same period included the following:

Expenses Total Purchases (%)
Doctors and Dentists 3.0%
Groceries 8.6%
Hospitals and Nursing Homes 1.7%
Rent or Mortgage 31.5%
Utilities 5.3%

The Bottom Line
Consumer spending and the U.S. economy go hand in hand. When one increases, so does the other. What Americans buy and what percentage of their purchases are spent on non-essentials reflects their interests, habits and vices. What America buys, therefore, is an economic self-portrait of the average American consumer.

Related Articles
  1. Stock Analysis

    Top 3 Stocks for the Coming Holiday Season

    If you want to buck the bear market trend by going long on consumer stocks, these three might be your best bets.
  2. Investing News

    This is the Fastest-Growing Consumer Complaint

    There’s no way to guarantee that your Social Security number won’t fall into the wrong hands. Here are some ways to make yourself less of a target.
  3. Investing Basics

    Tiny House Movement: Making Market Opportunities

    The tiny house movement throws all assumptions about household budgeting and mortgage management out the window, and creates new market segments too.
  4. Budgeting

    Top 7 Money Saving Tips for Eating Out

    Discover seven money-saving options available to consumers who are looking to partake in the luxury of dining out while cutting down on cost.
  5. Economics

    What's the Velocity of Money?

    The velocity of money measures the rate at which money goes from one transaction to another in an economy.
  6. Investing News

    3 Stocks to Play a Falling Unemployment Rate

    Three stocks to consider as the unemployment rate falls.
  7. Economics

    What are the Four Ps?

    The four Ps of the marketing mix are product, price, place and promotion.
  8. Home & Auto

    7 Mistakes to Avoid When Buying an Engagement Ring

    Understand why the purchase of an engagement ring is so important. Learn about seven key mistakes to avoid when purchasing an engagement ring.
  9. Economics

    Calculating the Consumption Function

    The consumption function shows the level of consumer spending as it relates to disposable income.
  10. Economics

    Is a Recession Coming?

    In the space of a week, the VIX Index, a measure of market volatility, spiked from 13, suggesting extreme complacency, to over 50, evidencing total panic.
  1. Is Japan an emerging market economy?

    Japan is not an emerging market economy. Emerging market economies are characterized by low per capita incomes, poor infrastructure ... Read Full Answer >>
  2. Are Social Security payments included in the US GDP calculation?

    Social Security payments are not included in the U.S. definition of the gross domestic product (GDP). Transfer Payments For ... Read Full Answer >>
  3. What economic indicators are important to consider when investing in the retail sector?

    The unemployment rate and Consumer Confidence Index (CCI) rank as two of the most important economic indicators to consider ... Read Full Answer >>
  4. How do changes in interest rates affect the spending habits in the economy?

    Changes in interest rates can have different effects on consumer spending habits depending on a number of factors, including ... Read Full Answer >>
  5. What is the difference between an OEM (original equipment manufacturer) and a VAR ...

    An original equipment manufacturer (OEM) is a company that manufactures a basic product or a component product, such as a ... Read Full Answer >>
  6. How much does seasonality affect the net sales figures of companies, such as retailers?

    Seasonality affects both sales and net sales figures of companies in different ways. For some companies, seasonality has ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  2. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  3. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
  4. Operating Cost

    Expenses associated with the maintenance and administration of a business on a day-to-day basis.
  5. Cost Of Funds

    The interest rate paid by financial institutions for the funds that they deploy in their business. The cost of funds is one ...
  6. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!