Released November 3, 2009

RALEIGH, N.C. – One of the economic numbers we frequently hear is that we consumers account for 70 percent of all spending in the economy, and therefore, the economy moves as consumer spending moves. Is this accurate?

Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"Some economists say it's not accurate, and they give two reasons. One is health care expenditures, which actually takes up 20 percent of consumer spending . . . well, if you look at who actually makes health care expenditures, it's not you and me, it's not the consumer; 85 percent of that comes from a third party, either insurance companies or government. So consumers here aren't the driving force.

The other factor is consumer spending on imports, on imported products. That takes up 18 percent of consumer spending. So when this spending slows, it's not domestic producers who are hurt, it's foreign producers. So if you take out these two factors, and you look at the out-of-pocket consumer spending that directly affects the U.S. economy, it comes to about 43 percent of all spending, not 70 percent.

That's still important, still very important, but perhaps not as dominant as you might think."

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http://www.ncsu.edu/project/calscommblogs/news/archives/2009/11/economic_perspe_482.html