Companies want to keep their biggest customers happy, so they often provide accommodations to do so. And, as it turns out, the government — if it doesn’t already do so — probably wishes it did because the wealthiest households have become an utterly critical part of the economy through consumer spending.
Gross domestic product — the total market value of all goods and services produced in a country — is, at least in the U.S., increasingly dependent on consumer spending. Data from the Bureau of Economic Advisors shows that personal consumption expenditures, another name for consumer spending, is currently 69.8% of GDP.
It wasn’t always this way. Other parts of the economy were more prominent aspects of GDP in the past. Below is a graph from the Federal Reserve Bank of St. Louis using data from the BEA to show the percentage of GDP that consumer spending represents.
The numbers on the vertical axis are decimal representations of percentages. To understand the percentage, take the number on the left and shift the decimal point to places to the right: 0.690 means 69.0%.
However, numbers that seem statistical don’t necessarily mean much if you don’t know how the results are distributed. Here is where Moody’s Analytics comes in. The firm recently analyzed data from the Federal Reserve and found some interesting facts that The Wall Street Journal subsequently reported.
First, the top 10% of earners are those households that make at least $250,000 a year and go up from there. They’ve been spending a lot, as in almost half (49.7%) of all consumer spending. Thirty years ago, the percentage was about 36%.
The high earners increased their spending by 12% between September 2023 and September 2024 at a much faster rate than inflation. Over the last four years, prices were up by 21%. The top 10% of households upped their spending by 58%. The bottom 80% of households increased their spending by 25%, and they had far fewer resources to manage the change.
First, the top 10% of earners are those households that make at least $250,000 a year and go up from there. They’ve been spending a lot, as in almost half (49.7%) of all consumer spending. Thirty years ago, the percentage was about 36%.
The high earners increased their spending by 12% between September 2023 and September 2024 at a much faster rate than inflation. Over the last four years, prices were up by 21%. The top 10% of households upped their spending by 58%. The bottom 80% of households increased their spending by 25%, and they had far fewer resources to manage the change.
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