The U.S. economy relies on robust consumer spending. But it's starting to look like Americans have had enough of some products.
Have you heard of “Peak Car”? That’s the idea that there’s a point at which total car ownership and miles driven will start declining. Given the questions about whether or not millennials want cars, as well as data showing that Americans have been driving less for a wide variety of reasons, some analysts believe that we’ve already hit Peak Car in the U.S.
And cars may not be the only thing that’s peaked. Here’s a look at a several seemingly disparate areas where U.S. consumers may be topping out.
The case for this one is controversial. Auto sales have been on the rebound since the Great Recession, sometimes growing by more than one million sales from year to year. After a hot summer for sales, 2014 is on pace for perhaps 16.5 to 17 million new vehicle purchases in the U.S. Then again, after months of heavy promotions and discounting, some experts believe the market is bound to slump toward the end of 2014, and few think that the tally will match the all-time high of 17.4 million sales in 2000.
Globally, some analysts predict that car ownership and usage will peak sometime in the next decade, while the Economist has theorized that Peak Car “still seems quite a long way off” because demand for cars in developing countries is expected to be strong for decades, and also because self-driving features will become mainstream. That means driving will be safer and insurance will cost less, drawing more people onto the roads.
For years, there’s been talk about reaching a saturation point for casinos, in which gambling expands so widely that too many casinos are chasing the business of the same pool of customers willing to roll the dice and pull the arms of slot machines. The effects of such a situation are on display in Atlantic City, N.J., where one-quarter of the casinos opened at the beginning of 2014 are now closed. Two more casinos in Mississippi closed this year, and analysts are questioning whether markets such as the Baltimore area—which now hosts two casinos, and which has been blamed as a contributor to the falloff in gambling in Atlantic City—are big enough to keep local gaming interests afloat.
New casinos are still planned for Massachusetts and Pennsylvania, yet based on the number of casino closings and data indicating that overall slot revenues in North America are on pace to be down nearly 30% this year, it looks like there are already too many casinos in the marketplace battling to survive. “In many jurisdictions, gaming supply has increased while demand for the product has not, resulting in a state of market disequilibrium,” a post at the asset-based lending site ABL Advisor explained. “There is no simpler way for me to make this point.”
Between 1986 and 2005, more than 4,500 new golf courses were opened in the U.S., including as many as 400 in a single year. Over the next six years, however, there was a net reduction of 500 courses, with 155 courses closing in 2012. Golf participation and golf sales are likewise plummeting for a variety of reasons: Ppeople are too busy, the sport just might be too hard, too expensive, or too uncool. And projections call for roughly 150 course closings and no more than 20 course openings in the years ahead. In other words, golf most likely peaked in the U.S. in 2005.
Peak Fast Food
The American appetite for pizza appears to have reached an all-time high around 2012, when one survey found that 40% of consumers noshed on pizza at least once a week. The food and beverage consultant firm Technomic noted in early 2014 that pizza consumption has “decreased just slightly over the past two years, likely peaking post-recession due to pizza’s ability to satisfy cravings and meet needs for value.” Foot traffic at Pizza Hut and other quick-serve pizza chains has been on the decline. For that matter, Businessweek recently made the case that the U.S. may also be reaching “Peak Burger.” The growth of franchises for fast food giants such as Burger King and McDonald’s has slowed significantly in recent years, with net openings close to zero.
Data from a new report from the NPD Group indicates that visits to low-cost quick-service restaurants, where the average customer bill is about $5, has been flat over the past year, and for the most part, income inequality and stagnant wages among the middle classes are to blame. “Low-income consumers, who are heavier users of quick service restaurants, were most adversely affected by the Great Recession and have less discretionary income to spend on dining out,” the study explains.
Coca-Cola, PepsiCo, and the Dr. Pepper Snapple Group may have together just pledged to reduce calories by 20% in sugary beverages, but the effort appears unlikely to bring American soda consumption back to the heights of a decade or so ago. Per-capita consumption of soda fell 16% between 1998 and 2011, and in 2013, total volume sales of soda was measured at 8.9 billion cases, the lowest total since 1995. Part of the long-term decline has been attributed to Americans wanting to cut calories and have more nutritious diets, but diet soda sales have been tanking lately too.
In 1991, the average American purchased 40 garments of clothing annually, according to data cited by the Wall Street Journal. Clothing consumption took off from there, reaching an average of 69 articles bought in 2005, which appears to have been the peak. In 2013, American consumers had gotten their clothing purchases down to an average of 63.7 garments per year.
Peak Diapers (for Babies)
The U.S. birth rate declined 8% during the recession-era years 2007 to 2010, and just kept on falling thereafter, reaching a record low (thus far) in 2013. Considering that U.S. births peaked in 2007, it shouldn’t be a surprise that diaper sales in the U.S. have retreated since then as well.
What’s especially interesting is that as baby diaper sales have declined, industry giants like Procter & Gamble have stepped up efforts to sell adult diapers and other incontinence products to make up for the decline at the other end of the market.
Peak Median Income
Lots of these peaks are just challenges for specific industries. But here’s one that might worry any consumer-based business: People can’t spend more if they aren’t earning more.
In 1999, median household income in the U.S. was $56,895 in today’s dollars (after adjusting for inflation), according to census data cited by New York magazine. That was the highest it’s ever been. Lately, the middle-of-the-road household income in America has been $51,939. Given increased automation of the workforce and the rise of income inequality across the board, it may very well be that the median household will never be able to party like it’s 1999.