This article explains the impact of developments affecting Household Final Consumption Expenditure (HHFCE) estimates (1997 to 2011) released in the Blue Book 2012 data set.
Article Authors: Peter Gittins and Simon Luke, Office for National Statistics.
Contributions from: Gary Brown, Rich Wild and Daniel Wisniewski, Office for National Statistics.
This article explains the impact of developments affecting Household Final Consumption Expenditure (HHFCE) estimates (1997 to 2011) released in the Blue Book 2012 data set. These developments have been broadly limited to balancing HHFCE estimates against other sectors’ estimates (Supply and Use balancing) and improvements to estimates of expenditure on insurance services following a review.
The article also highlights a number of potential future HHFCE developments.
Revisions to the annual totals (national concept) for HHFCE, are less than 1 per cent of the annual totals published in quarter 4 2011 Consumer Trends.
The size of revisions between 1997 and 2011 mean that the differences between Blue Book 2012 and previously published (quarter 4 2011) annual current price growth rates are no more than 0.6 per cent in any year (see figure 1).
The revisions to annual data up to 2010 (see table 1) are driven by the Supply and Use balancing process, and the improvements in methods and source data for insurance services.
|Revision from supply and use balancing||Revision fom Insurance method change||Total revision|
From 2009 onwards, it is not possible to isolate the impact of the insurance services improvements, since they were introduced alongside other revised data as part of the Supply and Use balancing process.
In 2010 and particularly 2011, new and revised source data (including Annual Business Survey benchmark data) has informed the latest HHFCE estimates. Published data for 2011 has been revised up by just under 0.5 per cent compared to the quarter 4 2011 value. The 2011 data is not Supply and Use balanced but growth into 2011 is benchmarked to the new 2010 balanced level.
The Supply and Use balancing process (see annex A) has not significantly changed aggregate level annual current price HHFCE between 1997 (the first year open for revision) and 2008. Revisions from Supply and Use balancing in these years are less than 0.1 per cent of total HHFCE.
The more open Supply and Use balancing process for 2009 and 2010 has taken into account new and revised data sources (for example: HMRC income data 2009/10 and 2010/11; and, new Annual Business Survey data for 2010). This, together with the change to insurance services estimates, led to an upward revision to 2009 published data of less than 0.3 per cent and a downward revision to 2010 data of less than 0.1 per cent.
At 4-digit COICOP (Classification Of Individual COnsumption by Purpose) level, the balancing process has had a more significant effect. This is due to a reassessment of the 1997 to 2008 CPA (Classification of Products by Activity) level balances reached in the Blue Book 2011 Supply and Use balancing exercise.
In Blue Book 2011, Supply and Use products were reclassified from CPA 2002 to CPA 2008. This changed the matching of the estimates produced in Supply and Use balancing to COICOP products, reallocating total balanced HHFCE across the CPA 2008 products and HHFCE COICOPs. The CPA product balances from Blue Book 2011 have been subject to some quality improvement during the Blue Book 2012 balancing exercise with a consequent impact on the 4-digit HHFCE COICOP breakdown from 1997 onwards.
The article National Accounts articles - Improvements to Blue Book 2012: Measurement of Insurance Services provides a description of the methods and sources improvements that have been made to the measurement of insurance services and an indication of the impact that these improvements have within the UK National Accounts.
The impact these improvements have had on total HHFCE (national concept) is shown earlier in table 1. Revisions are most significant in 1997 and 1998 (the 1997 upward revision is just under 0.9 per cent of total HHFCE), and in 2001 to 2004 (the 2003 downward revision is just over 0.8 per cent of total HHFCE). Otherwise, annual revisions are equivalent to less than 0.3 per cent of total HHFCE.
It is important to realise that insurance data (COICOP 12.5) and pensions data (part of COICOP 12.6) are balanced together in Supply and Use balancing. They have been subject to balancing changes as well as revision due to the new insurance methods and sources. Therefore, the net revision in these COICOPs is not the value of revision due to insurance methodology change shown in table 1.
The revisions to aggregate HHFCE quarterly current price values are largely driven by the annual changes. In particular, the changes from Supply and Use balancing have moved annual expenditure between COICOPS and hence allocated a quarterly path with different attributes (both seasonally adjusted and non-seasonally adjusted).
The annual revisions due to the insurance methods and sources developments have affected quarterly paths (seasonally adjusted and non-seasonally adjusted) even though the original quarterly growth profile has been used to help inform the quarterly path of the new levels.
A comparison of Blue Book 2012 and previously published quarterly seasonally adjusted growth for total HHFCE (national concept) is shown in figure 2. The differences are somewhat more significant in the earlier and later periods. The earlier periods are affected by a change in seasonal adjustment as well as the Insurance and Supply and Use revisions. The later periods are affected by the open period Supply and Use balancing, and by new and revised data and benchmarks.
After initially using default settings during set-up of the new HHFCE compilation system in 2011, the seasonal adjustment of COICOP 09.1.4 (recording media) has been reviewed and a seasonal break has been detected in quarter 1 1997. Consequently improvements have been made to the seasonal adjustment model, which have significantly changed the seasonal pattern of the data in the period 1997 to 2000. These changes are significant at the total HHFCE (national concept) level.
In Blue Book 2012, the reference year for chain volume measures has been updated from 2008 to 2009.
Substantial changes to deflation methodology (i.e. the way we move from current prices to chain volume measures) were integrated into the HHFCE estimates in Blue Book 2011. Since this methodology has not been changed for the Bluebook 2012 data set (and the deflators used are not revised), changes to quarterly and annual growth in chain volume measures are driven by the current price developments outlined earlier in this article.
Annual changes in current price terms can impact on the chain volume measure for total HHFCE directly (as with the changes to estimates of insurance services), and indirectly. The annual current price Supply and Use balancing changes will, in some cases, have changed the weights for combining lower level products to the total HHFCE chain volume measure.
Chain volume measures are seasonally adjusted separately to the current price data. However, the chain volume measure series for COICOP 09.1.4 (recording media) has also been affected by the review of seasonal adjustment outlined earlier under the section on “developments affecting quarterly current price data in Blue Book 2012”.
A large development project to improve the estimates of expenditure on imputed rentals and repairs and maintenance for housing (COICOP 04) is planned, in order to comply with the European System of Accounts (ESA) 2010 regulation. This work requires a review of existing sources and methods and collaboration with ONS Prices colleagues who are reviewing their measures of actual and owner occupied housing rental price changes.
In addition to this ESA 2010 development work, the HHFCE team will aim to incorporate into future Blue Books a number of other developments. These developments include:
Improved estimates of households’ energy consumption (COICOP 04.5), in particular the estimate of gas consumption (COICOP 04.5.2).
A new source and method for producing estimates of expenditure on broadband services.
Additionally, a full scale review of the seasonal adjustment used in HHFCE is planned for later this year. Any consequent improvements to the seasonal adjusted HHFCE data will be introduced in the Blue Book 2013 dataset. This follows the work on Coicop 09.1.4 (recording media) outlined earlier in the section on 'developments affecting quarterly current price data in Blue Book 2012'.
This article has set out the improvements introduced into the HHFCE dataset as part of Blue Book 2012 production.
It has shown that revisions to current price annual estimates for total HHFCE (national concept) are most significant in 1997 and 1998 and between 2001 and 2003. These revisions are driven by the improvements in methods and source data for estimating expenditure on insurance services.
The importance of the Supply and Use balancing process was described to put in context the changes and challenges in this Blue Book at a detailed COICOP level. However, the impact of Supply and Use balancing on aggregate annual current price HHFCE has been minimal.
Revisions to chain volume measures were not covered in detail since they are largely driven by developments affecting the annual and quarterly current price data.
The article also set out some important HHFCE developments scheduled for Blue Book 2013 and Blue Book 2014.
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This article does not cover the historic (pre 1997) total HHFCE national concept data released in the Quarterly National Accounts, Q1 2012. This current price and chain volume measure data (seasonally adjusted) is available annually from 1948 and quarterly from 1955.
Details of the policy governing the release of new data are available by visiting www.statisticsauthority.gov.uk/assessment/code-of-practice/index.html or from the Media Relations Office email: email@example.com
Supply and Use tables provide the framework for ensuring supply and demand estimates in the National Accounts system are consistent. They are compiled annually at current prices and use data from the Production, Expenditure and Income approaches to GDP (Gross Domestic Product), taking account of the relative strengths of each. The aim of Supply and Use balancing is to produce a coherent and balanced estimate of GDP in current prices.
The Supply tables explain how products are supplied in the domestic economy. The Use tables explain how products are consumed in the form of intermediate and final expenditure by sector. They are compiled based on two identities which together state that total supply in the economy is equal to total demand in the economy. As a component of the expenditure approach, HHFCE estimates, along with other expenditure components, are 'balanced' so they equal the production and other supply side estimates.
Supply and Use tables are produced for each industry and for each product within the economy. The 2012 Blue Book data publishes the National Accounts consistent with the UK Standard Industrial Classification of Economic activities 2007 (SIC 2007) and the Classification of Products by Activity 2008 (CPA 2008).