The board last month issued a report, “The Impact of Demographic Trends on Consumer Spending,” examining the size and age distribution of the future population and projecting how spending patterns will respond to the changes.
The report offers a perspective on how population growth trends will impact spending by 2025.
“Over the next decade, health spending will grow 15% due to demographic trends alone, compared with 8% for total consumption spending,” said Gad Levanon, The Conference Board’s chief economist for North America and one of the report’s authors. “More so than any other category, health care spending is concentrated among the oldest households. Long-term care, in particular, is likely to experience even more dramatic growth of 20% to 25% due to demographic trends alone.”
As the U.S. population ages, life expectancy for the elderly is increasing. So while the U.S. population is projected to increase by 8% from 2015 to 2025, the number of residents between the ages of 70 and 84 will spike by 50%, according to the report.
As people age, they also retire. The number of retirees is currently increasing by about 1.2 million a year, roughly three times as much as a decade ago. Retirement dramatically changes both time allocation and consumption patterns, The Conference Board noted.
The report highlights other consumption patterns over the next decade, including:
• The tendency of retired people to spend more time within their homes on various activities and hobbies. As a result, spending in categories such as household maintenance, gardening, reading and pets is likely to grow well above the rate of total consumption. In addition, demand for products targeted to older shoppers within other broad consumption categories, such as personal care products and travel, are also likely to grow rapidly.
• Older households tend to spend less on men’s clothing, meals away from home, rented homes and used cars, among other categories, and will experience slower-than-average consumption growth.
• With population growth among those age 5 to 24 expected to remain flat, education spending will essentially remain unchanged from 2015 to 2025, and spending on school supplies and youth clothing will suffer.
The report includes an analysis of how population trends will affect states and metro areas over the decade. Domestic migration has been recovering after a several-year stretch of low mobility that began during the Great Recession. In general, the shift from the Northeast and Midwest to the South and West is likely to continue, the report said. One ramification of this trend is that such states as New York and Illinois and the District of Columbia metropolitan area are likely to lose a disproportionate number of their older and most affluent residents.
The report also identified a major shift in immigration trends in the United States, with fewer immigrants coming from Latin America and more from other parts of the world, including Asia. This will have important geographical implications, as Latinos and Asians tend to choose different sets of locations within the United States.
Consumption in retirement destinations is likely to grow especially fast in the years ahead, according to the report, with many of these areas expected to experience consumption gains of 30% or more due to population growth alone. In these locations, including Florida, Texas, Arizona and Nevada, spending on health care is likely to be especially high.