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75 Years of How Americans Spend Their Money

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75 Years of How Americans Spend Their Money

75 Years of How Americans Spend Their Money

Consumers are the foundation of the U.S. economy, and how they choose to spend their money is a telling indicator of the overall American economic story.

The above chart from HowMuch.net, a cost information site, plots data from the Bureau of Labor Statistics (BLS) for 12 different consumer categories over a period of nearly 75 years to show the changing way in which Americans spend their money.

The data reflects median spending, and is adjusted for inflation.

Back in the Day…

One of the most interesting things about this chart is the data from 1941. What did Americans spend their money on before entering WWII, and how does that contrast with today?

Interestingly, in 1941, more money was spent on food than anything else. That year, the cost of putting food on the table averaged $8,311, coinciding with a time when nearly 15% of the workforce was working in agriculture. Today, farming is obviously much more technologically advanced, and food is also grown cheaply in other countries for consumption in America.

Food is now only the third-most important spending category for Americans at $6,759 per year, and only 1.6% of Americans now work agriculture, according to the World Bank.

Housing has also changed dramatically over time. While it has always been a key component of spending, shelter was actually cheaper ($7,537 per year) than putting food on the table in 1941. Since then, rents and house prices have risen substantially, and Americans now spend $17,798 per year on housing. This makes it by far the largest expenditure, on average, for each person.

Trending Up, Trending Down

Over the years, cost reductions can be seen the most in both clothing and food categories, which have benefited from new technologies and cheap labor in other countries.

Meanwhile, significant increases in spending can be found in healthcare, education, and transportation categories.

Healthcare spending in the U.S. is a global outlier (and not in a good way), and we previously noted that textbook and tuition costs have increased 207% and 197% respectively since 1996.

Lastly, the trend for money spent on transportation appears to reflect the cost of oil, which hit its highest points in the early 1980s and late 2000s. The most recent year of data from 2014 shows a notable decrease in transportation costs, which likely reflects the collapse in oil prices that occurred in mid-2014.

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Markets

The Dominance of U.S. Companies in Global Markets

U.S.-based companies have a heavy weighting in global equity markets. In most industries, their market capitalization exceeds 50% of the total.

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global markets

U.S. Companies Dominate Global Markets

Are global indexes as “global” as you think they are?

With the aim of tracking market performance around the world, these indexes incorporate securities from various regions. However, while the number of securities may be relatively well diversified across countries, a dollar perspective tells a different story. When market capitalization is taken into account, country weightings may become much more unbalanced.

Today’s visualization is based on a concept by S&P Dow Jones Indices that shows the percentage of U.S.-based companies in global sectors and industries as of December 31, 2019. The calculations reflect the market capitalization of companies in the S&P Global Broad Market Index (BMI), an index that tracks over 11,000 stocks across 50 developed and emerging economies.

Percentage of U.S. Companies by Sector

U.S-based companies—those that maintain their primary business affairs in the U.S.—are a major component of many global sectors and industries.

Here’s how it breaks down:

Sector% of U.S.-based CompaniesMost U.S.-heavy Subsector
Information technology73%Software (86%)
Health care65%Health care providers (82%)
Utilities53%Electric utilities (57%)
Real estate51%Equity REITs (69%)
Consumer discretionary49%Specialty retail (73%)
Consumer staples46%Household products (74%)
Industrials46%Aerospace & defense (73%)
Energy44%Energy - other (73%)
Financials44%Financials - other (73%)
Materials30%Chemicals (41%)

U.S.-based companies make up a staggering 73% of the information technology (IT) sector. However, China may soon threaten this dominance. The Made in China 2025 plan highlights new-generation IT as a priority sector for the country.

The U.S. is still the world’s leader, but China is coming up very fast.

Rebecca Fannin, Journalist & Author of Tech Titans of China

Healthcare is also heavily skewed towards U.S-based stocks, which make up 65% of the sector’s market capitalization. This weighting is perhaps not surprising given the success of many U.S. healthcare companies. In Fortune’s list of the 500 most profitable U.S. companies, 41 healthcare organizations made the cut.

The materials sector has the smallest weighting of U.S.-based stocks, but they still account for almost one-third of the overall market capitalization. Three American companies are in the sector’s top 10 holdings: Air Products & Chemicals, Ecolab, and Sherwin-Williams.

U.S. Equity Views in a Global Context

Given the high weighting of U.S. stocks in global sectors and industries, having a U.S. view is important. This refers to investors gaining a clear perspective on the risks and opportunities that exist in the country. Investors can consider the trends influencing American companies in order to help explain stock performance.

U.S. stock dominance also impacts geographic diversification. While it helps non-U.S. investors overcome their home bias, American investors may want to consider targeting specific international markets for well-rounded exposure.

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Demographics

Mapped: The Ins and Outs of Remittance Flows

Every year, migrant workers send billions of dollars back to their home countries—reaching $550 billion in 2019. Where do these remittance flows wind up?

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Mapped: The Ins and Outs of Remittance Flows

The global immigrant population is growing at a robust pace, and their aggregate force is one to be reckoned with. In 2019, migrants collectively sent $550.5 billion in money back to their home countries—money transfer flows that are also known as remittances.

Remittances serve as an economic lifeline around the world, particularly for low- and middle-income countries (LMICs). Today’s visualization relies on the latest data from the World Bank to create a snapshot of these global remittance flows.

Where do most of these remittances come from, and which countries are the biggest recipients?

Remittances: An Origin Story

Remittances are a type of capital flow, with significant impacts on the places they wind up. These money transfers have surpassed official aid being sent to LMICs for decades, and in this day and age, are rivaling even Foreign Direct Investment (FDI) flows.

Remittance flows mainly help improve basic living standards such as housing, healthcare, and education, with leftover funds going towards other parts of the economy. They can also be a means for increasing the social mobility of family and friends back home.

Altogether, 50% of remittances are sent in either U.S. dollars, or the closely-linked currencies of Gulf Cooperation Council (GCC) countries, such as the Saudi riyal. It’s not surprising then, that the U.S. is the biggest origin country of remittances, contributing $68.5 billion in 2018—more than double that of the next-highest country, Saudi Arabia, at $33.6 billion.

Remittance Flows As A Safety Net

The impact of remittances on LMICs can vary depending on what you measure. In absolute terms, the top 10 LMIC recipients received $350 billion, or nearly 64% of total remittances in 2019.

Top Remittance Recipients in 2019 (USD)

RankCountryRemittance Inflows% of Nominal GDP
#1🇮🇳 India$82.2B2.8%
#2🇨🇳 China$70.3B0.5%
#3🇲🇽 Mexico$38.7B3.1%
#4🇵🇭 Philippines$35.1B9.8%
#5🇪🇬 Egypt$26.4B8.8%
#6🇳🇬 Nigeria$25.4B5.7%
#7🇵🇰 Pakistan$21.9B7.9%
#8🇧🇩 Bangladesh$17.5B5.5%
#9🇻🇳 Vietnam$16.7B6.4%
#10🇺🇦 Ukraine$15.9B11.8%

India tops the chart as the largest remittances beneficiary, followed by China and Mexico. Interestingly, these three countries are also the main destinations of remittance flows from the U.S., but in the reverse order. Mexico and the U.S. have one of the most interconnected remittance corridors in the world.

However, the chart above makes it clear that simply counting the dollars is only one part of the picture. Despite these multi-billion dollar numbers, remittances are equal to only a fraction of these economies.

By looking at remittances as a percentage of nominal GDP, it’s clear that they can have an outsize impact on nations, even if the overall value of flows are much lower in comparison.

Top Remittance Recipients in 2019 (% of GDP)

RankCountryRemittance Inflows% of Nominal GDP
#1🇹🇴 Tonga$0.19B38.5%
#2🇭🇹 Haiti$3.3B34.3%
#3🇳🇵 Nepal$8.6B29.9%
#4🇹🇯 Tajikistan$2.3B29.7%
#5🇰🇬 Kyrgyz Republic$2.4B29.6%
#6🇭🇳 Honduras$5.3B21.4%
#7🇸🇻 El Salvador$5.6B20.8%
#8🇰🇲 Comoros$0.14B19.3%
#9🇼🇸 Samoa$0.17B18.4%
#10🇵🇸 West Bank and Gaza$2.6B17.6%

It’s clear that the cash influxes provided by remittances are crucial to many smaller countries. Take the Polynesian archipelago of Tonga, for example: even though it only saw $190 million in remittances from abroad, that amount accounts for nearly 40% of the country’s nominal GDP.

Will The Remittance Tides Turn?

The World Bank projects remittance flows to increase to nearly $600 billion by 2021. But are such projections of future remittance flows reliable? The researchers offer two reasons why remittances may ebb and flow.

On one hand, anti-immigration sentiment across major economies could complicate this growth, as evidenced by Brexit. The good news? That doesn’t stop immigration itself from taking place. Instead, where these migrants and their money end up, are constantly in flux.

This means that as immigration steadily grows, so will remittance flows. What’s more, fintech innovations have the potential to bolster this progress, by making money transfers cheaper and easier to access.

Tackling [high transaction costs] is crucial not only for economic and social development, but also for improving financial inclusion.

UN ESCAP, Oct 2019

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