Buying groceries, streaming a movie, getting a haircut, filling the gas tank. These acts of using goods and services are consumption, and in most economies they are the largest single driver of growth. Households do the consuming, and their spending decisions ripple through factories, warehouses, and payrolls.

Economists divide consumption into categories. Durable goods like cars and appliances last years. Nondurable goods like food and fuel are used up quickly. Services like insurance and medical care are intangible. The mix shifts as countries get richer. Poor households spend most of their income on food and shelter. Wealthy ones spend more on services and leisure.

Consumption depends on income, but not only income. Confidence matters. A household that fears layoffs will cut back even if the paycheck is still coming. Wealth matters too: when housing prices rise, homeowners feel richer and spend more. That wealth effect can boost an economy, and its reversal can drag one down.

Drivers of consumption

• Disposable income
• Consumer confidence
• Interest rates and credit access
• Household wealth
• Expectations about the future