Household Consumption

Think of it this way

It is what the household spends on living: the part that cannot be postponed.

What is Household Consumption?

What households spend on goods and services: rent, food, health care, leisure, cars. It is by far the largest of the four components of GDP, on the order of two thirds of the total, and that share changes very little from one decade to the next.

How to read Household Consumption

Its line is almost GDP's line at a different height: if this rises, the total rises. It rises even in most recessions, because people keep eating and paying rent even when construction and machinery purchases come to a halt.

What Household Consumption means for the market

It is the component that gives the least warning. By the time it finally falls, the recession is already underway. To anticipate, look at investment, which moves earlier and much more sharply.

Where the money flows

No money moves between accounts here: it is an accounting breakdown. GDP can be measured by what is produced, by what is earned or by what is spent, and this is the third path: who bought what the country produced. The four components are exactly that —households, businesses, government and the rest of the world— and they add up to the total with nothing left over. It matters for this section because it tells where the denominator of the series over GDP comes from: when GDP falls in a recession, it is almost always investment that collapses, not consumption, and that is worth knowing before interpreting a jump in debt to GDP.

What to watch in Household Consumption

Its share of the total more than its level. Whether it gains or loses ground against investment tells you what kind of economy is being built.

It does not measure liquidity: it is one of the four components that make up GDP.