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    Economic Downturn Impacts Hispanic Spending Less Than Expected

    Latinos might be considered a "turbo-charger" for economic recovery.

    By Cesar M Melgoza, Managing Partner and CEO

    Hispanics normally represent an opportunity for business growth -- that has proven true in some sectors while impacting others significantly. The "Great Recession" really took hold in 2009 after threatening in '07 and sinking in during '08. We all are hopeful that '10 begins an extended recovery.

    Noticeable but not very significant decreases in spending by Hispanic households were felt in consumables such as beef, fresh milk, pork, eggs, vegetables, fruits and poultry, where the average Hispanic household spend dropped between 0.2 percent to 0.8 percent.

    Nonetheless, spending on goods such as fuel, lawn and gardening equipment, life insurance and prescription drugs increased dramatically -- from a 6 percent to a 9 percent increase! This data comes from Geoscape's Consumer Spending Dynamix database, which draws from the U.S. Department of Commerce's Consumer Expenditure Survey as well as other public and proprietary sources and modeling.

    Overall, Hispanic spending is very strong in items related to personal care, apparel and food consumed at home. This is partly due to larger family sizes compared to the average American home and to cultural tendencies that emphasize "care and feeding" of children and family members in high regard. Over the years, savvy grocers have known that Hispanic shopping baskets are upscale and plentiful. Spending on items such as fresh fish, fruits and vegetables -- commonly known as premium products -- are popular items among Hispanics of all income and acculturation levels.

    Some geographic markets were impacted more severely than others as well. The housing boom raised and then lowered Hispanic hotbeds such as Las Vegas, Miami and Phoenix. Along with the housing market, jobs in construction and other real-estate related industries helped bring down the metropolitan areas in general. The smaller metropolitan areas were impacted more severely in the last year; places including Albuquerque and Gainesville saw average Hispanic household spending drop by more than 30 percent.

    On the other hand, places such as San Francisco and Portland saw average Hispanic household spending increases by more than 30 percent. Some of the increase in average household spending seen in high cost-of-living areas such as San Francisco could be due to the fact that lower income households migrated out of these metro areas, thereby raising the average spending per Hispanic households who can still afford to live there.

    The wealthiest states for Hispanics are still not those with the largest numbers of Hispanics -- such as Maryland, Alaska, Hawaii and Virginia; all of which have median Hispanic household incomes of $53,000-$61,000 per year. Of the larger Hispanic states, New Jersey, Illinois, California and Nevada show median incomes of $47,000-$49,000 per year. Among metropolitan areas, Washington, D.C., has the highest Hispanic median income with more than $61,000 followed by Juneau and San Francisco with $60,000 and $56,000, respectively.

    As spending tends to ebb and flow with the economy, so does income. This is one of the reasons Hispanic migration across the country has increased -- as Hispanics tend to be employed in volatile industries such as construction, manufacturing and agriculture, which tends to accelerate their transience during recessionary times.

    Hispanics are typically a better long-term bet overall for many core spending products due to the fact that Hispanics are younger -- with a median age of 27 years compared to 41 years for non-Hispanic whites -- and live longer (83 years vs. 81 years) means that the average Hispanic consumer's life span is much longer than that of non-Hispanics. The spending over a lifetime, therefore, is oftentimes much greater for Hispanic households.

    As the economy turns-around and Hispanic employment comes back to normal levels, the upsurge in spending on home and personal care products is expected to contribute heavily towards the recovery. Part of this is due to the relative young age and transience of Hispanics, requiring furniture and transportation to a greater extent than more stable non-Hispanic households.

    So, as the next decade begins, Hispanic retailers should look forward to Hispanics contributing more than their fair share to the resilience of the U.S. economy -- instead of being considered a drag to the economy as some might portend, Latinos might be considered a "turbo-charger" for the recovery.

    Cesar M Melgoza is managing partner and CEO of Geoscape. For more information, go to www.geoscape.com or call (888) 211-9353.

    Editor's Note: The opinions expressed in this article are the author's, and do not necessarily reflect the views of
    Convenience Store News.

    By Cesar M Melgoza, Managing Partner and CEO
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