Consumer Expenditures in 2023

Today BLS released the annual update to the Consumer Expenditure Survey, which is exactly what it sounds like: a survey of US consumers about what their spending. The sample size is “20,000 independent interview surveys and 11,000 independent diary surveys” so it’s a pretty big sample. And this is a really great data source, because versions of it go back over 100 years (though the current, annual survey with a lot of detail starts in 1984).

What does this new data tell us? One area that has received a lot of attention lately is food spending (including a lot of attention on this blog), especially the cost of groceries. According to the CPI food at home index, grocery prices are up almost 26 percent since the beginning over 2020. That’s a lot! But incomes are up too, so how does this affect spending patterns?

Here’s what food and grocery spending for middle-quintile households looks like:

Compared to the pre-pandemic 2019 levels, consumers are spending slightly less of their income on food (12.7% vs. 13.2%), though a slightly larger share of their income is being spent on groceries (8.1% vs. 7.8%). Those changes are noticeable, though this isn’t the radical realignment of spending patterns you might expect from such a big change in food prices. The reason is clear: while grocery prices are up about 26%, middle-quintile incomes are up a similar 25% since 2019. That’s falling behind a little bit, but incomes have roughly kept pace with rising food prices. And from 2022 to 2023, both of these percentages decreased slightly, by about 0.3 percentage points.

Another major expenditure category of interest is housing. We all know that housing prices have gone up recently, as well as interest rates, which means that households might be spending more on housing. We might especially be worried about renters, who typically see rents change annually to account for changing housing prices in their area, while homeowners are more insulated from price changes (though not necessarily taxes and insurance, which have increased lately).

The Consumer Expenditure Survey is very useful for this question, because it allows us to distinguish between three categories of households: renters, homeowners with a mortgage, and homeowners without a mortgage (though only back to 2003 for these last two categories, before that they were combined). Housing spending here includes not just rent or mortgage payments, but other housing expenditures such as property taxes, insurance, repairs, utilities, appliances, and furnishings, so it’s very comprehensive (you can get detailed data for these subcategories too).

It might surprise you to learn that 2023 actually looked pretty good compared to recent years:

Compared with 2022, all three categories of households are spending less on housing, with the biggest decline for renters (1.3 percentage points). Compared with the pre-pandemic 2019 data, renters are spending slightly less, owners without mortgages are spending slightly more, and owners with mortgage are spending exactly the same amount. But overall, not a very dramatic change in the share of spending going to housing, despite the median sales prices of homes increasing by around 30% and mortgage rates rising from around 4% in 2019 to almost 7% in 2023.

How is this possible? Once again, because incomes have also increased. Average incomes for renters are up 25% since 2019, while for homeowners it’s up a bit less at around 21%.

Of course, these are just the share of income that goes to food and housing. They tell us nothing about the quantity or quality. Maybe people are buying less food or lower quality food. Maybe the houses are smaller or in worse shape. The expenditure data can’t tell us this information. And no doubt consumer spending patterns have changed in some important ways since 2019 as some products saw very large increases (like eggs, which almost exactly doubled from 2019 to 2023), others had more modest increases compared to incomes (e.g., telephone services including cell service only increased 7 percent), and a small number of goods saw falling prices (men’s suits, women’s dresses, and both computer hardware and software are actually cheaper than 2019).

But when you look at where the household budget is going in total, food and housing take up about the same share of income as 2019.