Business and Marketing / Economics Essay

he dynamics of consumption in the US market

Consumption has always been at a high in the US market compared to that of other countries. Amid the latest Covid-19 pandemic, the US economy dipped by 34.1 percent in the second quarter of 2020. Does this hint at a possible decrease in consumption going forward? Is America still maintaining its position at the top of the consumer chain?

Why is Consumer Spending Important?

Consumer spending, or personal consumption expenditure, is the accumulated value of all the goods and services purchased by all the residents of a country. Everyone who makes a purchase in the country is a consumer. The more goods bought, the higher the demand to up production rates, thus creating more jobs in the country and employing more people. Consumer spending also comprises a large part of a country’s gross domestic product (GDP), and as such is an important indicator of a country’s economy. If consumer spending is on the decline, people may be worried that an economic recession is imminent. It is generally assumed that the higher the consumer expenditure of a country, the better their economy.

After World War II, the federal government began encouraging people to spend on consumer goods, believing that this would help the US economy recover from depression. The patriotic citizen was defined as the American who would keep purchasing as many consumer goods as they wanted, namely automobiles and home appliances, with millions sold each year. America became a country of rapid production and plentiful jobs. As advertising made its way into the numerous televisions in people’s houses, Americans were persuaded to keep buying more and more.

However, consumption is not without its drawbacks. Although high consumption and production rates in a country can boost its economy, it also means that the country consumes more of the earth’s resources and produces more waste, in disproportion to the population living in that country. For instance, the United States constitutes only five percent of the world’s population, but uses more than 20 percent of its energy. Ultimately, this implies that not everyone in the world has the same amount of resources at their disposal. Some people may be suffering from a lack of resources, while people in the US may be using more than they actually need.

In recent years, continued elevated levels of consumption has also raised the issue of environmental sustainability. The earth has limited stores of non-renewable resources which are dwindling as the years go by, such as fossil fuels. More people have become aware of the liberal use of disposable plastics which require crude oil and high amounts of energy to manufacture, only to end up being buried in a landfill for centuries as the material is non-biodegradable. It is clear that if the current trend of consumerism goes on, the earth will soon run out of depletable resources, which could greatly impede our daily lives and the lives of the generations after us.

Current State of Consumer Expenditure

America has always had a high consumer expenditure compared to other countries. In fact, the annual consumer expenditure had been steadily increasing by around two to three percent each year ever since the financial crisis of 2010.

However, this number seems to be going down in the recent year. The Bureau of Economic Analysis reported that the personal consumption expenditure of the US was at $13 trillion in the second quarter of 2020 – a 31.7 percent decrease from the first quarter of 2020, which was itself a five percent decrease from 2019.

This huge dip in 2020 can largely be attributed to the spread of the coronavirus pandemic. Businesses considered to be non-essential were forced to close by governments, resulting in many employees being laid off their jobs to cut the companies’ expenditure. In turn, consumer spending dropped because the businesses were closed. The decrease was different depending on the nature of the products or services offered. For instance, the overall spending on goods decreased by 10.6 percent. Spending on automobiles specifically dropped by only 1.3 percent. Non-durable goods such as groceries saw a drop of 14.9 percent, while “non-essential” services such as hair care were affected the most, suffering a drop of 43.1 percent.

Retail was another industry that suffered from the closure of businesses due to the pandemic. Some shops were not allowed to physically open, while others that did open saw a decrease in the number of customers anyway, as more residents were staying at home. Many consumers took to the Internet to purchase their goods, feeling that they would be safer that way. Not surprisingly, online sales increased by 24.9 percent. The online market has already been on the rise, with online sales for Black Friday in 2019 being 19.6 percent higher than the previous year. We can see a clear bias towards online shopping here, as the physical store sales went up by only 1.6 percent between 2018 and 2019.

A Look at Some Industries in the US Market

Coffee

Coffee is a common beverage among Americans. The consumption of coffee has been on the rise for decades, owing to the busier lifestyles and longer working hours that people are dealing with. Additionally, people do not just settle for any cup of coffee – many have a strong preference for high-quality and premium coffee. As a result, there is high demand for gourmet coffee, constituting 59 percent of the coffee consumed daily. A growing trend is adding another demand for coffee machines and brewers, with 70 percent of consumers preferring to make their own coffee at home. According to the National Coffee Drinking Trends survey, 41 percent of homes and 28 percent of offices have at least one single-cup coffee brewer.

Bottled Water

88 percent of Americans drink water every day. With the growing population, the demand for water has been rising, particularly bottled water. Part of the appeal of bottled water was the added nutritional value such as calcium, magnesium and iron, making it a cheap and easy way to get one’s daily intake of minerals. In fact, in 2017, bottled water was named the most popular drink in America by the Beverage Marketing Corporation. Long been the subject of controversy, some believe that bottled water is nothing more than a gimmick, while other consumers swear by it. Nevertheless, bottled water sales steadily grew, forcing the popular soda companies Pepsi and Coca-Cola to dive into the market of bottled water too. Today, the per capita consumption of bottled water in the US is 43.7 gallons, a steady increase since years ago.

Paper

The US is one of the top three paper producing countries in the world, alongside China and Japan. Additionally, the US is on par with Germany as the two leading importing and exporting countries in the paper industry. More than half of the global paper production is used for packaging purposes, compounded by the increasing trend in sales of consumer goods, requiring more paper to pack. The foresthe dynamics of consumption in the US market, paper and packaging industry in the US earns a hefty annual revenue of $96.1 billion.

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