Consumer Discretionary
Candlefocus EditorWhile their cost may be considered a luxury in a given situation, consumers also have the option of purchasing them as part of a lifestyle choice. Consumer discretionary items tend to be purchased more often when economic conditions are good and there is more money to go around. This is because consumers have more disposable income when the economy is doing better and are more likely to indulge in purchases that make them feel good or provide a sense of pleasure.
Analysts and investors use the Consumer Discretionary sector to gauge the state of the economy. When spending is up on discretionary items, it's a sign of economic growth. When spending slows, they take it as a sign of economic hardship. This is why the sector is closely watched.
The Consumer Discretionary sector is often compared with the sector known as Consumer Staples, which consists of goods and services that are considered essential for daily needs. These include items such as food, fuel and personal care products. Because these goods are necessary for survival, spending on them does not vary as much as with discretionary items. This is why Consumer Staples is considered a more reliable gauge of economic health.
In conclusion, Consumer Discretionary is a sector of the economy that includes goods and services that are considered non-essential, but consumers may choose to purchase them as part of a lifestyle choice. Analysts and investors watch the level of spending on this sector as an indicator of economic health. It is often contrasted with the Consumer Staples sector, which is comprised of goods and services that are considered essential for daily needs. Consumer Discretionary can be an important indicator of economic growth or hardship.