What are Personal Consumption Expenditures?
Sometimes referred to simply as consumption, personal consumption expenditures are any payments made by households in exchange for the ability to acquire goods and services that are needed or at least desirable. A wide variety of products are included in the calculation of these expenditures, including durable and non-durable goods, and any type of ongoing or on-time services that are purchased by the consumer. This type of measure excludes any product offerings that are targeted primarily toward businesses, and focuses on those products that are more likely to attract the attention of individual consumers.
A wide range of products may be included in an measure of personal consumption expenditures. Essentials such as food, clothing, and shelter are commonly found in any assessment of consumer purchasing and consumption. Utilities and entertainment are also often included in the calculations. The purchase of personal electronics such as computers, handheld devices, or even television or radio equipment is also often included in this type of assessment. Depending on the purpose for the evaluation of consumer spending habits, just about any product consumed by individuals may be considered.
In some nations, a formal report of personal consumption expenditures is prepared on a routine basis. The findings of the report often help to determine the consumer price index as it relates to that nation, as well as provide data that helps to assess the impact of current economic conditions on the spending habits of households. 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 expendable goods and services, saving their resources for the purchase of necessities. In like manner, the report may indicate that the average expenditures per household increase when a given location undergoes a period of prosperity, especially if the cost of various goods and services is remaining fairly stable.
Since economic conditions can shift due to a number of factors, analysts often evaluate the current status of personal consumption expenditures of a fairly regular basis. In some areas, it is not unusual for this type of report to be prepared monthly or semi-monthly. This is especially true if there is a desire to determine if some specific event in the recent past, such as a political election, has had an impact on how households make purchases, causing the spending to increase or decrease for certain goods or services.
You know, I use personal consumption expenditures all the time -- in my budget sheet. When I went through college, I got into the habit of spending more than I had. After taking a few business classes, I realized how horrible my spending habits had gotten.
I took the same principles explained here, only I used them to make a very detailed monthly budget sheet. I tracked all of my expenses. Just by tracking everything, I figured out what my worst habits were and where all my money was going.
You don't have to be a business expert to care about personal financing.
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