Statistically Speaking: Characteristics of Top Spending Households

April 1, 2019  by HFBusiness Staff in Business Strategy, Industry   

Furniture purchases detailed in the Consumer Expenditure Survey (CE) include all indoor household furniture and bedding purchases plus outdoor furniture sold to consumer units. The data excludes all other home furnishings, including lamps, accessories, tableware, textiles, window treatments, carpets and rugs, televisions and major appliances.

The definition of consumer unit is closely aligned to households. (As noted in the Methodology, the survey data collected by the CE generally reflects 63 percent of the final furniture industry consumption published by the PCE and tied to the GDP.)

Zeroing in on the prime 35 to 44 consumer age group, Table A shows they spent on average $663 on furniture products in 2017 – the highest of the age segments. Over half of these older Millennials and younger Gen Xers are now homeowners (54 percent). Many older Millennials are just now settling down, making more money, purchasing homes and buying furniture.

 

But don’t discount the many younger Millennials (ages 25-34) who are also contributing to higher furniture expenditures. At an annual average expenditure of $538, ages 25 to 34 are spending more on average annually than ages 45 to 54 ($517). These younger Millennial purchases are especially important because many reflect single-person households as opposed to dual-income married couples in the 35 to 44 age group.

Younger Baby Boomers are still leaving their mark on the furniture industry with the 55 to 64 age group posting the second highest annual furniture expenditure at $543.

Regardless of age, as with most durable goods purchases, following the money tells a broader story of the purchasing power of higher income households and the squeeze on the middle class. High income earners spent three- to-four-times the level of middle class households in 2017 (Table B). The jump among higher income households – those earning above $100,000 – is quite dramatic. Households with incomes $150,000 to $199,999 spend on average $1,132 a year compared to $770 for those earning between $100,000 and $149,999 – a 61.7 percent increase. High incomes over $200,000 are averaging $1,591.

Marriage and children play a huge role in a consumer’s furniture buying needs. Typically marriage leads to buying a house and furnishings. When kids come along, households have furniture buying needs for years to come as families grow. As Table C shows, young married families starting out where the oldest child is under 6 had the highest average furniture expenditure at $886. These families, often dual-income earners, place a high priority on home furnishings. Most often this is their first home purchase. The next older cohort, married households with children between 6 and 17 years of age spend 12 percent less at $780 annually. At this life-stage additional family commitments begin to compete for household dollars – such as expenditures for school activities and sports, dental braces, teenage automobile costs, and private schools among higher income earners.

While married couples with the oldest child under 6 spent the most per consumer unit/household, this segment only accounts for 7.2 percent of the total furniture expenditures (Table D). If Millennials seriously start to embrace the traditional American Dream – get married, have children, and buy a house – it will be a huge boom for the furniture industry. Married couples without children appear to control the largest portion of furniture purchases at 32.3 percent while single consumer units without children spend 25.7 percent. Married couples with the oldest child over 18 only reflect 8.6 percent of furniture purchases as parents plan for the next life-stage – children in college.

Table E shows the annual average furniture expenditures by different occupation type. By far, managers and professionals, with their higher incomes, had the highest average annual expenditure at $740, 41 percent more than the second highest spender, construction workers and mechanics. Construction workers and mechanics spent an annual average of $523 in 2017, slightly more than self-employed workers at $516.

Not only do managers and professionals spend the most on furniture annually, this group also comprises a substantial portion of the U.S. workforce controlling 35.5 percent of total furniture expenditures. Retired Baby Boomers are second, with 16.9 percent of sales. The occupation category that controls the third largest segment of the industry - technical, sales and clerical workers – contains some of the lowest spenders per household at $476 annually; however, their sheer numbers put their industry presence at 13.8 percent of total dollars. Service workers, also among the lowest in expenditures at $407 still represent 10.5 percent of industry sales (Table F).

Where people live also influences how much they spend on furniture each year. Larger cities seem to command the higher salaries, but also higher costs of living. Households in America’s mega markets with over 5 million in population, do not, in fact, spend the most on furniture. As shown in Table G, bigger cities, but not the largest urban areas, with populations between 2.5 million and 5 million – had the highest annual furniture expenditures at $669 in 2017.

Although the larger, densely populated areas spend more per household, the greatest share of total furniture purchases, 21.7 percent, are from households living in mid-sized urban areas with a population of 250,000 to 999,999 (Table H).

With the majority of larger U.S. urban areas in the Northeast, it is not surprising the region has the highest annual furniture expenditure at $587 (Table I). And even though the South has the lowest expenditures per households at $470, because of the region’s size, the South accounts for 35 percent of total furniture spending – well above the other three regions (Table J)

The Consumer Expenditure Survey selected representative markets to drill down to household characteristics and total household furnishings and equipment expenditures. Figure 1 gives a breakdown of MSAs with the highest amount spent on household furnishings and equipment. St. Louis topping the list with an expenditure of $3,465 might come as a surprise, but is in line with the urban size analysis in Table G. and the high homeownership rate of 75 percent makes sense.

Household furniture purchases are driven by a combination of life stages, with the two highest spenders at opposite ends. The first is young married couples ages 35 to 44 starting out buying homes and having children. The second on the opposite end is seniors retiring, taking stock of their financial good fortunes, making new lifestyle choices, and buying furniture. The problem is these Baby Boomers are aging out of the 55 to 64 age group rapidly, and the younger Millennials have been slow to embrace the traditional married-homeowner-children path. But if the economy can stay healthy, everyone is looking to the Millennials to make up for lost ground.