Americans don’t spend money the way they used to.
In a recent note to clients, a Bank of America Merrill Lynch team led by Beijia Ma shared a chart showing US consumption broken down by age in 1960, 1981, and 2007.
The most notable thing is the huge spike in spending on both public and private healthcare, especially for older Americans.
“With the expansion of public programs and increasing healthcare costs, the consumption of the elderly population has risen dramatically in places like the US,” the BAML team wrote. “Medicare and Medicaid programs created in the 1960s were meant to serve as publicly funded healthcare for the elderly and poor. Between 1960 and 2007, the ratio of consumption of a US 80-year-old to that of a 20-year-old doubled. This is likely to continue to increase without reform.”
Another notable thing is the increase in public and private education – especially for people in their late teens through their 20s. Of course, anyone who has had to pay college tuition in recent years may not find this to be particularly striking.
Notably, spending on healthcare since 2007 has increased as well. Last week, Societe Generale’s Aneta Markowska shared a chart detailing just how Americans’ spending has changed since June 2014 (when oil was over $100 a barrel), as well as how spending changed since 2007.
According to her data, the share of income allocated to clothing/footwear and furnishings/household equipment over the past two years declined, while the share of income spent on healthcare and restaurants has increased.
“Evaluating the changes since 2007 reveals similar results,” she wrote. “The post-crisis consumer is more health-conscious and experience-seeking, favouring services over goods.”