Inconspicuous Consumption

American Demographics, April 1, 2002

Byline: Michael J. Weiss

Like many Washington bureaucrats, John Rogers works out of a small, windowless office surrounded by a warren of other gray, nondescript work stations. But you can't judge a job by its cubicle. As the supervisory economist of the Consumer Expenditure Survey, Rogers has the Herculean task of trying to answer a question that has baffled philosophers for centuries: Is there no accounting for taste? The CEX, as it is known to Rogers and his colleagues at the Bureau of Labor Statistics (BLS), attempts to show that there is, providing a detailed record of everything Americans buy over the course of a year.

Everything? How much we spend on tattoos?

"Look under the 'other personal services' category," Rogers says.

How about money lost at a weekly poker game?

"That would be in 'miscellaneous fees and pari-mutuel losses.'"

Marijuana? Nose rings?

"Tobacco products. Personal care," Rogers replies, swiveling between precariously perched stacks of government reports. "If people are willing to give us the data, we'll take it."

And willing they are. For more than a century, the CEX has provided detailed information on consumer spending, a force that drives two-thirds of the American economy. This year 15,000 respondents participated in the poll, which asked them to explain how their money disappears, down to the last penny. Conducted by the Census Bureau for the BLS, the CEX is actually two surveys in one. Half the interviewees record their purchases of little-ticket items in paper diaries for two weeks, capturing everything from food (canned corn, vending machine wine) to entertainment (concert tickets, parakeets). The rest agree to five in-person interviews by census pollsters: an introductory session, plus quarterly sit-downs that probe the purchase of big-ticket items in categories such as transportation (diesel fueled cars, airfares to Vegas) and health care (convalescent equipment, dreaded disease insurance). With each session lasting about two hours, CEX respondents often reveal more to interviewers than they would tell their own families.

"We do end up hearing a lot of personal experiences," says Ann Domski, a senior field representative for the Census Bureau's Philadelphia office. "Once we establish a rapport, most people are willing to talk to us about anything." In the 22 years since she began conducting CEX interviews, Domski has heard of splurges on lottery tickets, complaints about steep mortgage payments and out-of-pocket expenses for condoms. "If they buy a stick of gum, we want to hear about it," she says. "But we let people know that the survey is important to the nation."

Ostensibly, the BLS uses the information to update its Consumer Price Index, which in turn helps adjust Social Security payments and federal income tax rates. But the results also prove valuable to businesses that recognize a household budget represents a finite pie which can be sliced only so many ways. With data packaged by demographic characteristics (such as age, income, ethnicity, region and household type), the CEX highlights which consumers prefer what products. And the reverse is also true. The CEX identifies goods in decline faster than you can say double cassette decks and stirrup pants.

The December release of 2000 survey results provides CEOs and researchers alike with a new and exhaustive statistical portrait of recent consumer spending and how it's changed in the past decade. But the numbers also serve as a preview of the hot products and in-demand industries for tomorrow's consumers. Ten years from now, the marketplace will be dominated by a population bulging in different places: Baby Boomers on the eve of retirement will no doubt be cranking up their spending on health care, home remodeling and more elegant takeout than burgers and fries. Their children, Generation Y, will be in the mid-20s nesting phase, acquiring cars, buying new homes and furnishing their rooms with lamps and love seats. The growing number of Hispanics and other ethnic groups will mean larger family budgets devoted to children's clothes, imported food and entertainment with a foreign beat. All this can be seen viewing the CEX through a demographic lens.

"I don't know of any other source on consumer spending that provides this level of detail," says John Stell, manager of national economic consulting at Washington, D.C.-based PricewaterhouseCoopers. Working for a lobbying group interested in tax reform, Stell recently crunched CEX stats to calculate the tax burden placed on Americans. He once tapped CEX property tax figures to help a city interested in luring new businesses showcase its tax-friendly policies. "If the Consumer Expenditure Survey weren't around," says Stell, "there would be nowhere else to turn for solutions to a lot of the questions businesses are trying to answer."

To believe the pundits, the 1990s were a decade of irrational exuberance, a time when Americans, flush with paper wealth from the bull market, blew their money on glitzy dinners, portable wireless gadgets and extravagant home amenities. But the CEX offers a more restrained portrait. Between 1990 and 2000, Americans actually spent less of their budgets on new clothes, jewelry, watches, toys and sound equipment. They cut back on steaks, martinis and cigars. Even as Emeril and Martha Stewart whipped up cappuccinos in cable TV's gadget-filled kitchens, consumers reduced their spending on kitchen appliances by 14 percent.