Personal Consumption Expenditure refers to the consumer’s money spent on goods and services (individuals or non-profits). PCE consists of durable goods, nondurable goods, and services such as food, clothing, rent, electricity, health, education, transportation, vehicles, etc. The PCE of individuals makes for about half or two-thirds of some countries’ Gross Domestic Product. It is a significant factor in the growth of the economy. The countries with the largest economy in the world, such as the US and China, have a high rate of production and consumption. For economic growth, the consumer’s demand should be capable of being met by the manufacturer.
- PCEs, help in the fulfillment of industrial needs by facilitating the creation of employment opportunities
Employment opportunities are created, seeing as most companies in the private sectors are required to produce goods or perform a service for the consumer. In their bid to meet up with the demand of consumers, industries may need to employ more workers to help with production. Also, with the service industry, the consumer’s need has to be met with professional service providers who will give a 100% to their customers. For instance, Uber and Lyft are examples of service providers.
- PCEs provide capital for the industry because consumers are continually making purchases and requests for services.
If the final consumer does not demand the goods, the money spent on production will go to waste. This money spent on goods and services helps the industry thrive by providing it with capital that allows it to keep flourishing.
- PCEs help businesses within an industry grow;
Consumers are more interested in a particular product, thus opening an avenue for a healthy dose of competition between the companies. This provides them with the drive to beat their competitor’s sales record by increasing demand for their products and supplying these demands. For service providers, the need for more customers picking their services over their competitors makes them provide incentives for their customers, i.e., anything that will give them an edge over other companies in that industry. This helps the industry grow exponentially as it helps increase the overall average demand for goods or services within that industry.
- PCEs also boost technological advancement.
In trying to meet up the demands of the consumer, industries make a conscious effort to better themselves. Do they begin to think, how can we do this faster? How can we obtain more from this material? Following these questions, those in the industry spend money on research and development to create equipment to make their production process easier and more efficient.
- PCEs aid industries grow internationally.
Consumers’ demand for a particular product home and abroad helps businesses break into the international scene. For instance, a consumer goes vacationing and carries a product along; people start asking, where did you get this? They want to buy, but they realize that a particular product is not being sold in their country, and they begin to clamor for its sale. This, in turn, helps the company with expanding its reach globally, opening an avenue for them to profit while allowing the industry to grow.