Americans Spend Less and Less on Groceries Each Year. So Why Are We Broke?

by Darwin on March 3, 2013

During my weekend BusinessWeek reading (the only periodical worth receiving in print still IMO), I came across this chart of household grocery spending over the past few decades which I found intriguing.  It shows that as a percent of annual post-tax income, Americans continue to spend increasingly less each year.  Less than ANY OTHER COUNTRY in fact.  Half as much as those in France and 1/4 of those in India.  Yet we’re broke.  First, take a look at the chart to see where we’re getting more “value” or basically just spending less, then some thoughts:

(click to enlarge)




  • I assume the Bush tax cuts have a lot to do with helping out the denominator since this is “after tax spending”.  And for most Americans, tax deductions, credits and low tax rates have continued to stay low since the early 2000s.
  • This “decreasing spending” pattern contrasts with my presumption that real inflation is much higher than the government routinely reports.  After all, this inflation indicator [Everyday Price Index] is through the roof compared to the contrived government numbers.  But maybe it’s not all that bad.  Another possible explanation though, is that the chart ends at 2011 and we may well be seeing much higher inflation in 2013 than at the end of the chart.  After all, we’re coming off a record year for gas prices, which certainly impacts food prices.
  • Why are we broke?  We have such a low burden on both groceries AND gas compared to so many other nations, yet we just stink when it comes to saving and personal responsibility.  Is it the easy credit?  Peer pressure to own a big home and big car?  Going to college without regard for the bill? ($1 Trillion in Student Debt – time for a bailout?]Americans are really in a class of their own on everything from gun ownership to religiosity to horrific financial responsibility   Somehow, we’re still “leaders” in the world.
  • I think it all starts in the home.  Most people I know that are either tightwads or fiscally responsible had frugal parents.  Similarly, many of our friends that make really poor financial decisions have parents that have a screwed up balance sheet in their sixties now.  The apples don’t fall far from the tree.  We’ve done our best to impose some semblance of restraint and frugality in our children.  We also have them very excited about saving due to this Bank of Mom and Dad I set up for them.

What Are Your Thoughts On This Dichotomy?


{ 12 comments… read them below or add one }

Kevin @ Invest It Wisely March 3, 2013 at 11:36 pm

Food feels like it’s gotten more expensive in the past 2-3 years; as a % of after tax income I’m probably at 10% to 15% for groceries alone.


Darwin March 4, 2013 at 7:49 pm

We buy a lot of organic and entertain a fair amount. really adds up! Now that I think of it, we’re north of $1200/mo a lot of months.


The Weakonomist March 4, 2013 at 8:56 am

Don’t know much about the chart (can’t see it at the moment) but my first thought is we eat out considerably more than we used to. So we need less groceries.


Darwin March 4, 2013 at 7:43 pm

I guess we are; has that changed much over the past decade? I feel like all the bad press with the crappy ingredients and maltreatment of animals forces people to rethink fast food.


JT March 4, 2013 at 12:15 pm

I think it’s partly to do with the distribution in income. Whereas those at the top are doing just fine, those at the bottom have much less relative income. If I remember correctly from the article, this graph uses the average household income, not median income.

Student loan debt is definitely making more of an impact than one could have ever thought. Being employable today means stepping out with an average of $23k in student loan debt, which on the basic amortization schedule works out to something like $260/month for 10 years. That’s a car payment…except there’s no car in a 20-something’s driveway. Asset poor, paper rich!

I think one of the most interesting trends is at the bottom – alcohol. While consumer spending on alcohol is down, consumption is up. People are swapping bars for at home liquor, and drinking twice as much. Bars are going under; liquor companies are posting record profits. I wouldn’t be surprised if there was a similar shift in food consumption among lower income people.


Darwin March 4, 2013 at 7:36 pm

Well, that’s a disturbing trend…the alcohol and of course college debt’s going to look worse and worse over this coming generation. Will suppress homebuying as well.


PK March 4, 2013 at 12:48 pm

It seems to counteract the whole “Middle Class Squeeze” theory, if you think about it. Even gas takes up, what, 4% of the average American’s budget? If Weakonomist’s theory is correct, that’s a pretty bullish sign on the middle class – you’d think that if households were increasingly squeezed you’d see less eating out, more Ramen.


Darwin March 4, 2013 at 7:34 pm

I suppose more of total income is going toward college loan debt, but not sure what else is comprising the difference. I don’t see restaurant stocks killing it


krantcents March 4, 2013 at 1:51 pm

If you are not spending it on groceries, maybe you are spending it on dining out. Worst yet, maybe you are spending it on things that depreciate such as clothes and other stuff. The money is going somewhere because our savings rates are not going up.


Darwin March 4, 2013 at 7:34 pm

Good point on savings rates; we’re not stellar in that department by any means.


Caesar F March 6, 2013 at 2:15 pm

I agree with your point about it to consider inflation, and I think it’s also because of the fact that more and more Americans rely on credit cards to purchase stuff and then they don’t really pay it back.


Natalie F March 14, 2013 at 2:00 pm

We don’t buy a lot of groceries but we buy a lot of fast food. Which is also why obesity is such a huge problem in the states.


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