Health Care Spurs Consumer Surge in U.S. GDP: Chart of the Day

Consumer spending has surged as a proportion of the U.S. economy since the mid 1960s, and it’s not because Americans splurged on cars, clothes or vacations. Instead they were looking after their wellbeing.

The CHART OF THE DAY shows household purchases as a share of gross domestic product climbed from about 61 percent in the mid 1960s to about 71 percent today. Excluding expenses for health care, the portion would have been little changed, rising from 57 percent to about 60 percent.

Medical payments now account for about 16 percent of total consumer spending, more than food and clothing combined, which make up about 11 percent, or housing, which accounts for about 15 percent. The rising cost of health care means it will consume an even bigger share of the world’s largest economy as the population ages, according to economists like Jay Feldman.

“At the consumer level, it may squeeze out other discretionary spending,” Feldman, an economist at Credit Suisse in New York, said in an e-mail. “At the government level, rising Medicare and Medicaid spending will inevitably put pressure on other government spending priorities. At the business level, it could curtail investment, or more likely, suppress wages.”

The baby boom, the population bulge between 1946 and 1964, added 9.4 million people in the 16-24 age group during the 1960s and 7.3 million in the 1970s. Boomers started turning 65 last year, and every day for the next 18 years, about 10,000 more will hit the age that historically has been associated with retirement, according to the Pew Research Center in Washington.

To contact the reporter on this story: Alex Kowalski in Washington at akowalski13@bloomberg.net; Ilan Kolet in Ottawa at ikolet@bloomberg.net

To contact the editors responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net; Alex Tanzi at atanzi@bloomberg.net

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