Monday, May 24, 2010
It's illuminating, in thinking about future economic events, to have a fairly concrete and specific idea of what the economy is used for. What exactly do we make with all these factories, fantastic amounts of fossil fuels, raw materials, etc? Hence, in this post, I present a few graphs just showing some basic breakdowns for the United States economy. Other advanced economies would be broadly similar, though some things in the detail would differ quite a bit. These all come from BEA table 2.4.5, and I have expressed everything as a fraction of GDP. All graphs are 1950-2008.
The first graph above shows the breakdown of "Personal Consumption Expenditures" (PCE) - ie final spending by households. I've just shown the major components: "Durable Goods" - cars, furniture, etc., "Non-Durable Goods" - groceries, clothing, etc, and "Services" - healthcare, financial services, etc, etc. Obviously the major takeaway is that PCE has been about 2/3 of the economy, and a gradually increasing share, though possibly stabilizing after 2002. And services have been an increasing share of that.
Next up is the durable goods part:
As you can see, these are about 9% of the economy, though slightly declining over time. The major categories are new vehicles (cars and light trucks), household furnishings (which includes things like TVs and computers in addition to appliances and furniture), and recreational equipment and vehicles (everything from junior's soccer boots to the family RV). Striking features are the steady growth in recreational equipment spending, and dramatic decline in the fraction of the economy going on cars since 2002 or so.
Next up is the non-durable goods:
The big story here is that as we gradually got wealthier through the second half of the century, a smaller and smaller fraction of the economy was spent on non-durable goods. However, you could certainly argue this started to turn around after 2000, as the long decline in groceries as a fraction of the economy started to stabilize and spending on gasoline increased (note that for reasons that are quite unclear, some energy products, particularly gasoline and fuel-oil, show up here in non-durable goods, while others - electricity and natural gas, show up under utility services).
Finally, we have the services. Having other other people, or businesses, do stuff for us has been an exploding trend:
Obviously, the big growth areas are healthcare and financial services (banking, insurance, etc). But all service categories have tended to grow. "Housing" includes not just spending on rent by renters, but also "Imputed rental of owner-occupied nonfarm housing" which is slightly odd - the implied ongoing benefit of your car is not included in PCE, but the equivalent for your house is.
Finally here is that last graph as individual lines so it's easier to see the trends in each category:
Indeed, healthcare for the aging baby-boom seems likely to eat the economy alive. Somebody better invent some robots to take care of them...