Food Spending

A Special Report from USDA’s Economic Research Service:

The 2007-09 recession was the longest period of economic decline since the Great Depression of the 1930s. Faced with falling incomes and economic uncertainty, many Americans economized on their food purchases in 2007-09. The decrease in aggregate food spending by all U.S. households during the recession, which officially began in December 2007 and ended in June 2009, represents the largest inflation-adjusted drop recorded by the Bureau of Labor Statistics’ Consumer Expenditure Survey since the survey began in 1984.

A salient feature of the recent recession was a significant and sustained increase in unemployment. National unemployment averaged 9.3 percent in 2009, up from 4.6 percent in 2006. Real (inflation-adjusted) average household income fell from $60,533 in 2006 to $59,067 in 2009 (in 2006 dollars). In addition, food prices increased substantially during the early part of the recession. Food prices peaked in 2008, when the annual rate of food price inflation was 5.5 percent. Even though food prices started to decline in February 2009, the average annual growth rate was still almost 3.8 percent between 2007 and 2009. This double squeeze of lower incomes and higher food prices put pressure on consumer expenditures.

Two public data sources—ERS’s Food Expenditure Tables and the BLS Consumer Expenditure Survey (CE)—track U.S. food spending over time, and both showed declines during the 2007-09 recession. The CE data allow a look at household-level spending and trends. According to the CE, real total food spending by U.S. households declined 5 percent between 2006 and 2009. In 2006, before the recession began, total food spending by all households peaked at $726 billion, according to calculations based on the CE and the BLS Consumer Price Index. By 2008, real food spending in 2006 dollars was down to $709 billion, and in 2009, spending dropped even more, to $690 billion.

Annual reductions in food-away-from-home spending, such as at fast food places and sit-down restaurants, were largely responsible for the decrease in household food expenditures during the recession. Real away-from-home spending declined 11.5 percent between 2006 and 2009. Spending in the grocery aisle (food at home) increased from 2007 to 2008, as consumers replaced restaurant meals with at-home eating. In 2009, however, real at-home food spending dropped, as consumers economized further on their grocery bills.

Trends in per capita food expenditures over this period echoed the aggregate trends. Real average annual per capita food spending declined 6.6 percent, from $2,444 in 2006 to $2,283 in 2009 (in 2006 dollars). Food away from home fell 12.9 percent, accounting for most of the decline in per capita spending. At-home per capita food spending, on the other hand, decreased only 1.6 percent.

A look back at previous recessions shows that spending patterns varied. In the 1990-91 recession, spending responses were similar to those in the 2007-09 recession. During the 8-month 1990-91 recession, aggregate spending on total food declined 3.5 percent, with a 4.0-percent increase in at-home spending and a 13.8-percent drop in away-from-home spending.

The 2001 recession also lasted 8 months, but the increase in unemployment in that timeframe was less than in 1990-91. For the milder 2001 recession, there were smaller adjustments to food expenditures. Away-from-home food spending declined 0.4 percent, while at-home food spending increased 2.2 percent. Thus, overall food spending went up 1.1 percent.

Aggregate expenditures can mask spending adjustments made by different types of households. CE data disaggregated by household demographics reveal that during the 2007-09 recession, middle-income households cut total food spending by more than any other group. Households in the middle quintile of income (the middle 20 percent of the income distribution), with an average income of $46,012, decreased their real food expenditures by 12.5 percent from 2006 to 2009. Households in the lowest quintile (average income of $9,846) cut spending 1.8 percent, while the highest quintile (average income of $157,631) reduced food spending 5.7 percent.

Food expenditures at home and away from home followed similar patterns, with away-from-home spending declining more than at-home spending among all five income levels. Real expenditures by middle-quintile households fell the most for both food at home (6.4 percent) and food away from home (20.8 percent). The lowest quintile households actually increased their real food-at-home spending during the recession by 3.2 percent, and they reduced food-away-from-home spending by 11.9 percent. The highest quintile households, on the other hand, trimmed their budgets for both food at home (2.8 percent) and food away from home (8.8 percent).