Personal consumption expenditures are payments made by households for goods and services, excluding those aimed at businesses. This measure includes a wide range of products, from essentials to entertainment, and is often used to assess the impact of economic conditions on household spending habits. Reports on personal consumption expenditures are prepared regularly to determine the consumer price index and evaluate changes in spending habits.
Sometimes referred to simply as consumption, personal consumption expenditures are the payments made by households in exchange for the ability to acquire necessary or at least desirable goods and services. A wide variety of products are included in the calculation of these expenses, including both durable and non-durable goods and any type of ongoing or on-time services purchased by the consumer. This type of measure excludes any product offering aimed primarily at businesses and focuses on those products that are more likely to attract the attention of individual consumers.
A wide range of products can be included in a measure of personal consumption expenditure. Essentials such as food, clothing and shelter are commonly found in any assessment of consumer purchases and consumption. Utility and entertainment are often included in the calculations. The purchase of personal electronics such as computers, portable devices, or even television or radio equipment is often included in this type of assessment. Depending on the purpose for evaluating consumer spending habits, any product consumed by individuals can be considered.
In some countries, a formal report on personal consumption expenditure is prepared on a regular basis. The report’s findings often help determine the consumer price index for that nation, as well as provide data that helps assess the impact of current economic conditions on household spending habits. For example, a detailed report of personal consumption expenditures in an area where unemployment has risen significantly will often show that households have reduced spending on consumer goods and services, conserving their resources to purchase goods of first necessity. Similarly, the report may indicate that average household expenditures increase when a given locality experiences a period of prosperity, especially if the cost of various goods and services remains fairly stable.
Because economic conditions can change due to a number of factors, analysts often assess the current state of personal consumption expenditures on a fairly regular basis. In some areas, it is not uncommon for this type of report to be prepared on a monthly or semi-annual basis. This is especially true if you want to determine whether a specific event in the recent past, such as a general election, has had an impact on the way households shop, by increasing or decreasing spending on certain goods or services.
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