Wednesday, January 25, 2012

The Great Recession Spending Decline

The average household spent $48,109 in 2010. After adjusting for inflation, this was 8 percent less than in 2006 when overall household spending peaked. How does this spending decline compare with those in the past?

The Bureau of Labor Statistics has been collecting annual household spending data since 1984, a time period that includes several recessions. Nothing compares with the Great Recession. During 28 years of household spending data collection, there have been year-over-year declines 12 times, which is a substantial proportion. Downturns in household spending are not exceptional. But three things are exceptional about the Great Recession spending decline.
  • The Great Recession spending decline is four years old, the longest spending decline on record. No previous decline lasted more than two years. 
  • The Great Recession spending decline includes the largest single-year decline ever recorded (a -3.5 percent drop between 2009 and 2010, after adjusting for inflation). Previously, the largest single-year decline occurred between 1989 and 1990 (-3.2 percent).  
  • The Great Recession spending decline is getting increasingly worse, starting with a small 0.3 percent slip between 2006 and 2007, followed successively by declines of 2.1, then 2.5, then the record-setting 3.5 percent.  
The good news is that, statistically speaking, we are due for an uptick in household spending. The bad news is that, realistically speaking, we may not get one.

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