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Market disciplines American waistlines

Market disciplines American waistlines
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First Published: Fri, Jun 27 2008. 12 09 AM IST
Updated: Fri, Jun 27 2008. 12 09 AM IST
It’s well established that Americans have been getting fatter for decades. Obesity rates skyrocketed from 1980 to 2003: more than one-third of Americans are now obese, according to the Centers for Disease Control and Prevention, more than twice the rate of a generation ago. Medical authorities debate the particular causes—inactive lifestyle, changes in diet—but some of the explanation may be economic.
Consider: during the same period, the US savings rate plummeted and consumption as a percentage of gross domestic product (GDP) rose. Now, all three trends appear to be moderating. This suggests that the market may be applying a bit of discipline to America’s waistline. If so, it would break a five-decade trend and affect industries ranging from health care to restaurants to insurers.
Obesity rates grew after the war, but really took off around 1980. The culprits? Taxes, higher wages for women and restaurant portion sizes, according to two economists at the University of Miami.
Increases in take-home pay turned eating out from a luxury to an everyday occurrence. And as women’s wages grew and more women worked outside the home, more families found themselves eating takeout or in restaurants.
Restaurant portions are bigger than those typically eaten at home. And they’ve gotten larger over time. The number of new products introduced in restaurants bragging of huge portions increased sevenfold during the two decades, according to researchers from New York University.
The reason for larger portions is simple. Sixteen ounces (0.48 litres) of soda will set you back about $1.10 (Rs47) at a 7-Eleven in New York. A Double Big Gulp contains four times as much soda (and calories), but only costs 50 cents more. Everybody seems to win—the cost of the extra soda is a few pennies, and the customer gets a bargain.
For all that soda-chugging, there may be a break in the obesity trend. The percentage of Americans who are obese has not increased significantly since 2003. A study published in late May also indicated that childhood obesity may have hit a plateau. One possible explanation: consumers are unwilling to go further into hock to eat out.
The graphs of America’s savings rate and consumption as a percentage of GDP display suspiciously similar patterns. Savings declined steadily from around 10% of annual family incomes in 1980 and have hovered at zero or slightly below in recent years. How much of this went into unsustainable consumption—or buying Double Frappuccinos is unclear. But stabilizing waistlines could be a sign that consumers are repairing their balance sheets.
This trend could mean trouble for some companies. A decline in eating out would hit restaurants. Insulin, and other drugs used by the obese, would see their high growth rates slow—as would hip and knee replacements. Others would benefit. Health insurance premiums could fall. And more people would live to retirement, helping nursing homes.
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First Published: Fri, Jun 27 2008. 12 09 AM IST