Hispanic Buying Power
The immense buying power of the nation’s Hispanic consumers continues to energize the nation’s consumer market, and Selig Center projections reveal that Hispanics will control $951 billion in spending power in 2008. The 2006 American Community Survey showed that one out of every seven who lives in the U.S. is of Hispanic origin, and the U.S. Hispanic population continues to grow much faster than the non-Hispanic population. By 2013, one person out of every six in the U.S. will be Hispanic.
Over the 24-year period, 1990-2013, the nation’s Hispanic buying power will grow dynamically. In sheer dollar power, Hispanics’ economic clout will rise from $212 billion in 1990, to $490 billion in 2000, to $951 billion in 2008, and to almost $1.4 trillion in 2013. The 2008 value will exceed the 1990 value by 349 percent--a percentage gain that surpasses both the 141 percent increase in non-Hispanic buying power and the 151 percent increase in the buying power of all consumers. U.S. Hispanic buying power will grow faster than African American buying power (187 percent), Native American buying power (213 percent), and Asian buying power (337 percent).
In 2008, Hispanics account for 8.9 percent of all U.S. buying power, up from only 5 percent in 1990. Due to this brisk growth, Hispanic buying power essentially pulled even with African American buying power in 2006, and surpassed it in 2007. The estimates show that gap between the two groups’ total buying power expanded in 2008 and will widen further in future years.
Of the myriad forces supporting this substantial and continued growth, the most important is favorable demographics.
Because of both higher rates of natural increase and strong immigration, the Hispanic population is growing much faster than the total population, a trend that is expected to continue. Between 1990 and 2008, the Hispanic population increased by 107 percent compared to 14 percent for the non-Hispanic population and the 22 percent gain for the total population.
The relatively young Hispanic population, with proportionally more of them either entering the workforce for the first time or moving up in their careers, also argues for additional gains in buying power.
Hispanics’ spending patterns already help to determine the success or failure of many youth-oriented products and services. According to the 2006 American Community Survey, 33.8 percent of the Hispanic population is under age 18 compared to 21.3 percent of the non-Hispanic white population. Also, in 2006, only 5.3 percent of Hispanics were over 65, compared to 15.2 percent of non-Hispanic whites.
The increasing number of Hispanic business owners is another potent force powering this consumer market. Census Bureau data released in 2006 showed that the number of Hispanic firms grew by 31 percent between 1997 and 2002, which is more than three times faster than the 10 percent increase in the number of all U.S. firms. This jump in entrepreneurial activity, coupled with a rising level of educational attainment, illustrates Hispanics’ upward mobility.
The 2006 American Community Survey indicates that 60 percent of Hispanics over age 25 had a high school diploma, compared to only 56 percent in 1999 and to 53 percent in 1993. The proportion with a bachelor’s degree or more increased from 9 percent in 1993 to percent 11 percent in 1999 to 12 percent in 2006. The Census Bureau cautions, however, that levels of educational attainment for Hispanics are lower than those for non-Hispanic whites, blacks, and Asians largely because of the vast number of less educated foreign-born Hispanics.
Hispanic refers to a person of Mexican, Puerto Rican, Cuban or other Spanish/Hispanic/Latino culture or origin, and is considered an ethnic category rather than a racial group. Persons of Hispanic origin therefore may be of any race, and since their culture varies with the country of origin, the Spanish language often is the uniting factor. Three out of every five Hispanics living in the U.S. are born here, and among the foreign born the vast majority are Mexican (64 percent), which suggests that a great many Hispanics share similar backgrounds and cultural experiences. Nonetheless, spending patterns differ significantly based on country of origin, and the composition of the nation’s Hispanic population is changing.
Hispanics will comprise 15.3 percent of the country’s population in 2008, and will have $951 billion in disposable income. The ten states with the largest Hispanic markets, in order, are California ($249 billion), Texas ($171 billion), Florida ($101 billion), New York ($75 billion), Illinois ($41 billion), New Jersey ($36 billion), Arizona ($31 billion), Colorado ($21 billion), New Mexico ($18 billion), and Georgia ($15 billion).
Hispanics and their buying power are much more geographically concentrated than non-Hispanics. California alone accounts for 26 percent of Hispanic buying power. The five states and the ten states with the largest Hispanic markets account for 67 percent and 80 percent of Hispanic buying power, respectively. In contrast, the five states with the largest non-Hispanic markets account for only 39 percent of total buying power and the ten largest non-Hispanic markets account for only 56 percent of total buying power.
The top ten states, as ranked by the rate of growth of Hispanic buying power over 1990-2008, are Arkansas (1,536 percent), North Carolina (1,314 percent), Tennessee (1,053 percent), Georgia (1,037 percent), Nevada (965 percent), Alabama (890 percent), South Carolina (797 percent), Minnesota (768 percent), South Dakota (768 percent), and North Dakota (755 percent). In market size, Georgia, Nevada, and North Carolina also rank tenth, eleventh, and fourteenth, respectively, so, these states are three of the most attractive Hispanic markets in the nation.
Between 1990 and 2008, the share of buying power controlled by Hispanic consumers will rise from 5 percent to 8.9 percent, and the group’s share will rise in every state. In 2008, the ten states with the largest Hispanic market shares will be New Mexico (30.2 percent), Texas (20.1 percent), California (18.1 percent), Arizona (15.8 percent), Florida (15.4 percent), Nevada (14.8 percent), Colorado (11.3 percent), New York (9.4 percent), New Jersey (9.3 percent), and Illinois (8.7 percent). Nevada’s 8.5 percent shift in Hispanic market share, from 6.2 percent in 1990 to 14.8 percent in 2008 is the nation’s largest. Texas will see its Hispanic market share climb from 12.4 percent to 20.1 percent, a gain of 7.6 percent, which is a remarkable for a state with such a large, established market. Hispanics’ share of Florida’s market will rise by 6.7 percent, from 8.7 percent to 15.4 percent. Arizona’s Hispanics will claim 15.8 percent of the state’s buying power, up 6 percentage points from their 9.8 percent share in 1990. New Mexico’s Hispanic population will claim 30.2 percent of that state’s buying power, a 5.8 percent advance over their 24.4 percent share in 1990. Similarly, Hispanics’ share of California’s market will rise by 5.8 percent (from 12.3 percent in 1990 to 18.1 percent in 2008).
Because of differences in per capita income, wealth, demographics, and culture, the spending habits of Hispanics as a group are not the same as those of the average U.S. consumer. The most recent Consumer Expenditure Survey indicates that Hispanic consumers spent in total only about 88 percent as much as the average non-Hispanic consumer.
Hispanic households spent more on groceries, telephone services, clothing, footwear, and gas and motor oil. Also, Hispanics spent a higher proportion of their money on housing and vehicle purchases. They spent about the same proportion of their total outlays as non-Hispanics on restaurants, housekeeping supplies, furniture, appliances, household textiles, public transportation, and personal care products and services.
Compared to non-Hispanics, Hispanics spent substantially smaller proportions of total outlays (and substantially less money) on health care, entertainment, education, and personal insurance and pensions.
The same survey found that Hispanic households are substantially larger than non-Hispanic households (3.2 persons per household versus 2.4 persons for non-Hispanics), and have nearly twice as many children under 18. On average, there are 1.6 vehicles per Hispanic household compared to 2 vehicles per non-Hispanic household. According to the 2006 American Community Survey, 13 percent of Hispanic households do not own or lease at least one vehicle compared to 8.3 percent of non-Hispanic households.
The 2006 American Community Survey indicates that 49.3 percent of Hispanics are homeowners compared to 69.4 percent of non-Hispanics.
Once the current housing recession ends, this substantial gap in homeownership rates represents an opportunity for market expansion. The median value of Hispanic-owned homes is $208,100, which is 13 percent higher than the $183,700 median value reported for the non-Hispanic population, however.