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Economy in Brief

Consumer Spending by State
by Charles Steindel  October 3, 2019

BEA has released estimates of current-dollar consumer spending by state for calendar year 2018, along with revised figures for earlier years. It's useful to keep in mind what these figures are and are not:

1. As noted, they are annual estimates, released with some considerable lag.
2. They are estimates of overall consumer spending, not for instance, retail sales. Anybody interested in seeing how these numbers may help explain, say, state sales tax revenues, will need to make considerable adjustments. For example, the largest single component of consumer spending is owners' equivalent rent, which is not subject to sales tax!
3. In many categories, initial estimates of state consumer spending are assumed to be tied to growth in compensation in a corresponding retail store type—obviously, a somewhat questionable assumption, though it is hard to come up with a better alternative.

In per capita terms, DC far and away leads the nation, with an estimated $63,151 in consumption per resident in 2018. This clearly is linked to high housing costs in the nation's capital. Massachusetts is number one among true states, at $55,095. Other high-housing cost Northeastern states are in the top ranks, including New Jersey and New York (property tax payments will enter into the consumed portion of rent). Two very high cost states to live in—Hawaii and Alaska--are high in the ranks, as are North Dakota, Minnesota, and Vermont. Minnesota ranks high because spending on many services is estimated to be high. Vermont also reports high spending on services, but it's interesting to see that both the Green Mountain State and North Dakota show unusually high spending levels on goods. It may be the case that compensation of retail employees is unusually high in both places (certainly, the shale boom could have produced that situation in North Dakota), and this is reflected in high estimates of spending on many goods.

On the low side, unsurprisingly poorer states are in the bottom grouping, with Mississippi the lowest, at $31,083.

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