Apparel Spending as a Share of Disposable Income: Lowest in U.S. History

 |  About: VanEck Vectors Retail ETF (RTH)
by: Mark J. Perry

Americans spent almost $326 billion on clothing and footwear in 2009 (data here), which as a share of disposable personal income (data here), was the lowest ever in U.S. history, at only 2.98%. Spending on clothing as a share of income has fallen in 20 out of the last 22 years, from 4.78% in 1988 to less than 3% in 2009. Compared to 1950 when spending on clothing was 9% of income, spending last year was less than one-third that amount, and compared to spending on clothing of 6% of income in 1970, spending last year was half of that share.

In other words, clothing is now cheaper than at any time in history, when measured as a share of disposable income. And there's a better selection of clothing now, at higher quality, and with options available today like no-iron fabrics and washable silk that have become increasingly available in recent years.

And when it comes to footwear, I don't think anybody would argue that the selection and quality today are far ahead of past decades - just think of the athletic footwear options today vs. Chuck Taylor Converse All-Stars, which were at one time "state-of-the-art" and were only available in two colors (black and white) until 1966.

The chart below explains the falling cost of clothing and footwear as a share of disposable income, by displaying the CPI for Clothing (data here) and the CPI for All Items (data here). Since 1992, prices in general have risen by 57%, while prices for clothing have fallen by 8.5%. With significantly falling prices in real terms, clothing has become more and more affordable almost every year, requiring smaller shares of our income, which has freed up disposable income that can now be spent on other consumer goods (think electronics, travel, entertainment, etc.).

Bottom Line: As a direct result of increased global competition, advances in technology, and increased worker productivity, clothing is cheaper today both in inflation-adjusted prices and as a share of disposable income. We have more clothing today per person than any previous generation (think of the number and size of closets in a typical 1930s, 1940s or 1950s era home), and the clothing and footwear are cheaper and better than ever, contributing to a gradually rising standard of living for the average American.