Spending on healthcare services, which blew by housing in 2023, continues to soar. But the big splurge on recreational goods & vehicles flipped this year.
By Wolf Richter for WOLF STREET.
Inflation has been rough, rising by 3.7% year-over-year in July. But consumers – an amazingly hardy and resourceful bunch that nothing seems to be able to knock down – out-spent even this rough inflation. Consumer spending in July, not adjusted for inflation, jumped by 5.9% year-over-year. Adjusted for inflation, it edged up in July from June on top of the jump in the prior month, and was up by 2.1% year-over-year, according to the Bureau of Economic Analysis today.
Of the total amount spent, 66% got spent on services; 13% on durable goods (expected life span of over 3 years); and 21% on nondurable goods (expected life span of less than 3 years). Healthcare services (not including healthcare products) and housing costs combined account for over one-third of total consumer spending. That’s where inflation bites the most.
All figures here are annual rates, adjusted for inflation, and expressed in 2017 dollars.
But on what did this money get spent?
Spending on services, adjusted for price changes (inflation) in the specific services, grew by 0.29% in July from June and by 2.5% year-over-year. As we’ll see in a moment, spending on healthcare was by far #1 and spending on housing and utilities was #2, far ahead of the next categories.
“Healthcare services,” which includes health insurance but excludes pharmaceutical products and other healthcare products, surpassed “housing and utilities” three years ago, and the gap has continued to widen. In July, healthcare services accounted for 18.2% of total consumer spending.
Housing and utilities accounted for 16.2% of total consumer spending. Combined, they accounted for over one-third of total consumer spending. It’s in healthcare and housing where inflation bites the most.
But these spending figures here are adjusted for price changes (inflation) in the specific services. So these are the spending increases after inflation.
Inflation-adjusted spending on services by major category:
- Healthcare services: +0.41% monthly; +4.2% YoY (red in the chart below).
- Housing and utilities: +0.15% monthly; + 1.2% YoY (blue).
- Other services: +0.23% monthly; +0.5% YoY (double gold).
- Financial services and insurance: +0.14% monthly; +2.9% YoY (big dotted green).
- Food services and accommodation: +0.36% monthly; +1.0% YoY (small dotted dark-blue).
Spending on nondurable goods, adjusted for price changes (inflation) in those specific goods, dipped in July from June by 0.2% and rose by 1.4% year-over-year.
“Other nondurable goods” is the biggest category of nondurable goods. It is dominated by pharmaceutical products and medicines, including over-the-counter medications, medical products and supplies; games, toys, pet items, etc.; household supplies; personal care products; tobacco products; magazines, newspapers…
Spending on gasoline, adjusted for gasoline price changes (inflation), was slightly down, in part following the years-long trend of falling gasoline consumption in the US, as ICE vehicles have become more fuel efficient and as EVs have become a larger part of the national fleet. Measured in million barrels per day, gasoline consumption peaked in 2018 and has since fallen by 4.5%.
Inflation-adjusted spending on nondurable goods by major category:
- Other nondurable goods: -0.32% monthly, +3.4% YoY (red)
- Food and beverages: -0.1% monthly, no change YoY (blue)
- Clothing and footwear: -0.23% monthly, +2.4% YoY (double gold)
- Gasoline: -0.1% monthly, -2.5% YoY (big dotted green).
Spending on durable goods fell by 1.4% monthly, adjusted for price changes in durable goods (inflation). Year-over-year, it rose by 1.0%. This data is always very volatile month-to-month, as the jagged line in the chart below shows.
“Recreational goods and vehicles” – the stuff our hardy and indestructible consumers buy to have fun with – have become the #1 durable goods category, adjusted for price changes (inflation) in those products, surpassing motor vehicles in 2021. At the peak late last year, they accounted of over 5% of total consumer spending.
They include motorhomes, travel trailers, snowmobiles, ATVs, dirt bikes; video, audio, and photographic equipment; computers, tablets, and software used for entertainment; bicycles; hunting, fishing, and camping equipment; musical instruments; recreational books; and other stuff.
But after the enormous splurge on recreational goods and vehicles during and after the pandemic, spending peaked late last year and has since then fallen, adjusted for price changes (inflation) in those products.
The 5.5% drop in spending on recreational goods and vehicles since the peak in November, including the 1.4% plunge in July, adjusted for inflation, has been the big move in durable goods this year (red line in the chart below).
Inflation-adjusted spending on durable goods by major category:
- Recreational goods and vehicles: -2.9% monthly, -5.5% since November, -1.1% YoY (red).
- Motor vehicles: 1.6% monthly, +0.3% YoY, roughly flatlining for years after price changes (blue).
- Furnishings and household equipment: +0.17% monthly; +4.3% YoY (double gold).
- Other durable goods: +0.13% monthly; +2.2% YoY (big dotted green).
In case you missed it: Credit Card Delinquencies, Payment Volume, Balances, Debt-to-Income, Credit Limits in Q2 2026: Americans and their Plastic
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When “other” is the #1 subcategory, it makes me think they should split it up. Is that in the works? Other nondurable is huge
“Other durable goods” includes the subcategory of pharmaceutical products, medicines, over-to-counter drugs, medical supplies, etc., which has ballooned over the decades and has become huge. That wasn’t always so. These categories have been that way for decades, so it seems they should split them up. If I tried hard enough and dug long enough and hard enough, I could probably do it myself, but that wasn’t on the top of my priority list today.
Is that still a thing?
“photographic equipment”
Digital cameras? Lots of them out there, going up all the way to a Hasselblad X2D for $8k?
What do companies like Stellantis do with massive inventories on hand while soon to be 2027 models running out? It seems like even with massive markdowns and other perks they can’t move them. Do they eventually just have to take a massive haircut at auction?
Rolling out!