December 3, 2010

ARE YOU TRYING TO SAY THE MEDIA CENTER IN THE HUMVEE MY SON TOOK TO HARVARD ISN'T A NECESSITY?:

Are Americans as Poor as They Feel? (Venessa Wong, 12/02/10, Business Week)

For many Americans, thinking back to the days of 99¢ gas and 50¢ cups of coffee, it may be cathartic to grumble about how expensive life has become, especially during the current economic downturn. The reality, however, is that a lot of things aren't as expensive as we think—and many things actually cost less in relative terms.

A look at the cost of living between 1980 and 2010 shows that nominal income rose more than overall consumer prices (nominal income is income not adjusted for inflation). The price of many day-to-day expenses such as food and even energy increased at a slower pace than overall consumer prices, which means their relative costs are lower, while some big-ticket items, such as education and health care, became more expensive, causing a shift in spending. [...]

Car ownership jumped 14.3 percent, to 1.91 vehicles per household, from 1983 to 2009, according to a report by the U.S.Energy Dept.. Also, new technologies such as computer hardware and software, Internet service, and cell phone service rose from near zero to 2 percent of total spending, according to the BLS.

Food as a proportion of total expenditures decreased to 13 percent in 2009, from 15 percent in 1984, the BLS says. The CPI for food grew less than overall prices. From 1980 to 2010, the average price in real dollars for one pound of coffee dropped 55.9 percent, to $3.70, BLS data show. The price for one pound of ground beef dropped 31.7 percent (inflation adjusted), to $2.72, according to Council for Community and Economic Research.

In 2010, the price of agricultural commodities has been rising, but retail prices for food do not increase in tandem with commodity prices. A 10 percent change in the commodity price for coffee, for example, is likely to result in a 3 percent change in the retail price, according to a report by the U.S. Agriculture Dept.

Other categories with spending decreases include energy—although prices are volatile. BLS data show that in inflation-adjusted dollars, 2009 real spending on natural gas was 21.2 percent below 1984 levels and spending on gasoline fell 9 percent. Also, apparel and services such as dry cleaning fell to 4 percent of total annual expenditures, from 6 percent in 1984, according to the BLS.

In the downturn, expenditures have been cut and savings have increased, yet Bosworth notes that the U.S. "is still an extraordinarily rich society where Americans maintain outsize consumption 'needs' relative to other societies." Even as prices fluctuate, how much one spends can depend less on what individuals need than on what they want.

Enhanced by Zemanta
Posted by Orrin Judd at December 3, 2010 6:09 AM
blog comments powered by Disqus
« SORRY, PAUL, ELECTIONS HAVE CONSEQUENCES: | Main | THANKS, W: »