The volume measure provides an estimate of the amount of goods and services purchased by households. In Q4 2013 it increased by 0.4% compared with Q3 2013.
The current price value of household spending (inflation included) shows how much UK households spent. In Q4 2013 it increased by 1.2% compared with Q3 2013. Current price spending has shown positive growth since Q3 2009.
Household Final Consumption Expenditure (HHFCE) includes spending on goods and services except for: buying or extending a house, investment in valuables (paintings, antiques etc) or purchasing second-hand goods. Explanations for these exceptions and the related concepts are available in the ‘Guidance and methodology’ section.
Household expenditure is used in the National Accounts to measure the contribution of households to economic growth and accounts for about 60% of the expenditure measure of GDP. There are two measures:
Current prices - which is the value of spending in a particular quarter measured in the prices at that time;
Volume terms - which adjusts for price inflation and gives a better picture of whether households are purchasing more goods and services.
The estimate of HHFCE where net tourism expenditure is included is called the UK national estimate. When net tourism is excluded, this produces the aggregate total UK domestic expenditure. Lower level analyses in this bulletin are based on the domestic concept. This is discussed in greater detail in ‘Definitions and Conventions’ for UK HHFCE.
Analysis in this section of the Statistical Release is conducted from 1997, the period from which a full HHFCE dataset is available.
From 1997, household final consumption expenditure:
In current prices, increased to £224.3 billion in Q1 2008, falling to £216.0 billion in Q2 2009, then returning to predominantly positive growth to reach £262.4 billion in the latest quarter.
In volume terms, increased to £242.1 billion in Q4 2007, falling to £226.4 billion in Q2 2009. It has now increased to £239.3 billion, the highest volume spending since Q1 2008.
The pre-2007 increases in household spending were a consequence of households facing higher prices and buying more goods and services. However, in 2008 and 2009 households spent less because they predominantly bought less, in volume terms. Since 2009, household spending has increased, but the volume of goods and services purchased has experienced far lower growth.
In Q4 2013, the value of household spending in current prices increased by 1.2% on the previous quarter, and by 4.5% on the same quarter in 2012. The volume measure of household spending increased by 0.4% on the quarter and 2.2% on the same quarter in 2012, signifying that households are spending more for a relatively lower volume of goods and services.
In Q4 2013 the value of current price spending per head was £4,078, an increase of £41 on the previous quarter continuing the trend of positive growth started in Q3 2009. The volume measure per head increased by £7 in the same period, indicating that households spent more because they bought more, in addition to the effect of positive price increases.
In Q1 1997 the value of household spending per head in current prices was £2,177. It reached £3,659 in Q1 2008 before falling to £3,496 in Q2 2009. These changes in current price spending by households were primarily influenced by the increase and then fall in the volume of goods and services bought. Since Q3 2009, the current price expenditure per head has continued to increase to reach the Q4 2013 level of £4,078, an increase of 11.5% when compared with the first peak of expenditure in Q1 2008.
In current price terms, ‘Housing’ and ‘Transport’ have predominantly shown the largest contributions to household spending per head over recent years, this quarter taking a 25% and 14% share of the overall spend respectively.
The largest per head increase this quarter has been seen in ‘Housing’ which has increased by £27, with the largest increase shown in spending on ‘Imputed rental’ which has increased by £17. ‘Actual rentals’ have also increased by £8 this quarter. Imputed rent is the amount a home owner would have to pay to rent their own home. It is based on a rental equivalence method, using an average value for UK rented accommodation from household expenditure on actual rentals grossed up by UK owned housing stock.
In 2013, spending per head grew by £610 in current price terms, with volume also increasing by £223. These are the largest annual increases in per head spending since 2007 for both measures.
In volume terms (adjusted for inflation), spending on ‘Clothing and footwear’ has made the largest contribution to the positive growth in Q4 2013, increasing by 2.8% on the quarter. Within ‘Clothing and footwear’, ‘Garments’ showed the largest increase of 2.6% compared to Q3 2013.
The largest negative contribution to growth over this quarter can be seen in ‘Alcohol and tobacco’ which has fallen by -3.4% in volume terms. This is driven by decreased spending on ‘Wine’ which has fallen by -5.2%. Spending on 'Tobacco' has also contributed to the negative growth, falling by 2.0% in the current quarter. This is the thirteenth quarter of negative spending on 'Tobacco' in volume terms.
The household expenditure measure of prices is an important component of the GDP deflator, which is used to determine price pressures in the economy.
This quarter the seasonally adjusted household expenditure measure of prices (the deflator) increased by 0.8%. The household expenditure deflator (seasonally adjusted) is now 2.1% higher than in Q4 2012. This continues the trend of positive deflator growth since Q2 2009, indicating the increased prices that households face when purchasing goods or services.
In Q4 2013, the largest increase in percentage terms in the household deflator was seen in ‘Education’, which grew by 9.7%. However, the 2.4% growth in the deflator of ‘Housing’ contributed the most to the overall household expenditure deflator, as it is proportionally a larger contributor to household expenditure.
From Blue Book 2011, CPI has been used to deflate estimates of Household Expenditure.
As announced with the publication of the Second Estimate of GDP Q4 2013, ONS have today introduced two new methods impacting upon Household Final Consumption Expenditure (HHFCE) from Q1 2012 to Q4 2013, in line with the National Accounts Revision Policy. (27.8 Kb Pdf)
Below the effects of introducing new methods for deriving a) current price ‘Imputed Rental’ and ‘Actual rental’ data and b) chained volume measure ‘Net tourism’ are discussed.
All current price and implied deflator analyses and data in this release, including ‘Household spending per head’ and ‘Focus on prices in household expenditure’ are affected by this change. There is no chained volume measure impact.
Revisions following the introduction of a new method for deriving current price ‘Imputed rental’ and ‘Actual rental’ data are presented for the first time in this edition of Consumer Trends. This change means downwards revisions to the current price measure of HHFCE on ‘Imputed rental’ and ‘Actual rental’ and will feed into the current price ‘National’ measure of HHFCE from Q1 2012 to Q4 2013.
With no changes to the chained volume measure (CVM) of HHFCE, growth in the household expenditure implied deflator will also be reduced.
National Accounts includes the concepts of ‘Actual rental’ and ‘Imputed rental of owner occupiers’ in household expenditure estimates. ‘Actual rental’ represents the rents paid by households that rent accommodation. ‘Imputed rental’ reflects the amount a home owner would have to pay to rent their own home. It is based on a rental equivalence method - an average value for UK rented accommodation from HHFCE ‘Actual rentals’ is grossed-up by UK owned housing stock (Department of Communities and Local Government data).
The average value for rented accommodation, primarily provided by the Living Cost and Food survey (LCF), has been revised. This aligns the 2012 and 2013 quarter on corresponding quarter of the previous year growth for the household expenditure implied deflators for both measures of rental in line with the comparable change in the equivalent not seasonally adjusted Consumer Price Inflation including owner occupiers' housing costs (CPIH). There is no change in the use of housing stock data. The move to align with the CPIH is a reflection of the fact that CPIH uses Valuation Office Agency (VOA) to inform the average value for UK rented accommodation in preference to the LCF. It is planned that this alternative source will be used in the compilation of HHFCE ‘Rental’ data from Blue Book 2015.
Impact on Household Expenditure
The graphs below show current price and implied deflator data for the ‘Actual rental’ and ‘Imputed rental’ prior to the introduction of the new method and following its implementation.
The graph above highlights that current price ‘Actual rental’ data have shifted downwards in all periods from Q1 2012.
The graph above highlights that current price ‘Imputed rental’ data have shifted downwards in all periods from Q1 2012. A relatively stable series is now shown from Q4 2012 as a consequence of aligning the quarter on corresponding quarter of the previous year growth for the ‘Imputed rental’ implied deflator with the CPIH for ‘Imputed rental’ comparable growth of 1.0%.
The two graphs above demonstrate how the revisions to current price ‘Rental’ data have brought the quarter on corresponding quarter of the previous year growth for the household expenditure implied deflators for ‘Actual rental’ and ‘Imputed rental’ in line with the comparable growth in the CPIH.
In the Second Estimate of Q4 2013 GDP published on 26 February 2014, ONS introduced an improved method for measuring ‘Net tourism’ in chained volume measures. ‘Net tourism’ is defined as ‘UK tourist expenditure abroad’ less ’Foreign tourist expenditure in the UK’, with both current price series deflated by separate price indices. The new method solely addresses the way in which the price of ‘UK tourist expenditure abroad’ is compiled; all other components of ‘Net tourism’ are unaffected by this improvement.
All chained volume measure and implied deflator analyses at a ‘National’ level in this release, are affected by this change.
ONS now utilises a larger sample of 45 countries, compared to 32 in method previously employed. Inflation data are obtained for all 45 countries, which have been sourced from publicly available Eurostat, OECD and IMF databases. These inflation rates are then adjusted by the relevant exchange rate for each country, reflecting the fact that tourist goods are purchased in the currency of the country visited (data here are primarily sourced from the Bank of England). Finally, the resulting 45 series are weighted by the proportions of total UK tourist expenditure attributable to each country, which have been obtained from International Passenger Spend (IPS) data. For example, countries that are relatively popular tourist destinations (such as Spain) will be apportioned a larger weight in the aggregate price index.
Revisions following the introduction of the new method for chained volume measure ‘Net tourism’ are presented for the first time in this edition. This change means downwards revisions to the chained volume measure of ‘UK tourist expenditure abroad’. This has ultimately been the main contributor to the downward revision to chained volume measure HHFCE at a ‘National’ level seen in this edition of Consumer Trends.
Impact on Household Expenditure
The graphs below show the impact on HHFCE ‘Net tourism’ and ‘UK tourist expenditure abroad’ before the introduction of the new method and following its implementation.
The two graphs above highlight that the chained volume measures of ‘Net tourism’ and ’UK tourist expenditure abroad’ have been revised downwards for all quarters from Q4 2012. This has meant that for 2013 overseas expenditure has been reduced by £1.7 billion. There is a relatively insignificant impact on current price data.
The graph below show the impact on the HHFCE ‘National’ implied deflator before the introduction of the new methods for ‘Rental’ and ‘Tourist expenditure abroad’ and following implementation.
The graph above highlights that the headline ‘National’ HHFCE implied deflator, seasonally adjusted, has been lowered in all quarters from Q1 2012 causing a downwards shift in the series. Note: not all revisions are attributable to the introduction of the two new methods.
The new methods discussed above are being implemented in line with the National Accounts Revision Policy (27.8 Kb Pdf) . In addition, ONS is planning to introduce VOA data to the calculation of HHFCE ‘Rental’ data at Blue Book 2015. The provisional timetable for implementation of both methods is provided below:
|Quarterly National Accounts, Q4 2013||Mar-14||Introduction of new methods for rental and tourist expenditure abroad for Q1 2012 to Q4 2013|
|Second estimate of GDP, Q1 2014||May-14||Methods extended to Q1 2014|
|Quarterly National Accounts, Q1 2014||Jun-14||Usual revisions to HHFCE taken on Q1 2013 to Q1 2014|
|Blue Book 2014||Sep-14||Methods extended to Q1 2010|
|Blue Book 2015||Jun-15||Revised methods for calculating HHFCE ‘rental’ introduced back to 1997.|
|Investigation to be undertaken into extending tourism deflator back to 1997.|
In common with all components of UK Gross Domestic Product (GDP), household final consumption expenditure (HHFCE) estimates are subject to the revisions policy of the UK National Accounts. This allows revisions to estimates to be made at particular times of the year.
In Q4 2013, the revisions to total household final consumption expenditure have been made from the first quarter of 2012. See ‘Focus on revisions’ for detailed discussion of revisions in this release.
Revisions between the previous edition of Consumer Trends (Q3 2013) and the latest HHFCE estimates are summarised in Table 2 ‘Revisions to Household Final Consumption Expenditure’. They reflect updated data from suppliers, as well as adjustments to HHFCE as a result of the GDP balancing process.
|Revisions to value (current prices)||Revisions to growth (current prices)||Revisions to growth (volume measure)|
All growth rates in Consumer Trends are rounded to one decimal place. This may cause disparity between revisions displayed in the main Consumer Trends tables and the revisions table above.
Consumer Trends guidance offers full details regarding this publication.
Date of this publication: 28 March 2014.
Next Edition: The next edition of Consumer Trends, Q1 2014, will be published on 27 June 2014. Estimates will be consistent with Blue Book 2013.
Release policy: Household Final Consumption Expenditure estimates produced in Consumer Trends are produced according to the National Accounts timetable. The preliminary estimate of GDP for the first quarter of 2014 will be published on 29 April 2014, followed by the second estimate of GDP on 22 May 2014. The next full set of Quarterly National Accounts will be published on 27 June 2014.
Basic Quality Information for Consumer Trends Statistical Bulletin
Summary Quality reports. A Summary Quality Report (147.1 Kb Pdf) for this Statistical Bulletin can be found on the National Statistics website.
Key quality issues. Household expenditure volume series are chainlinked annually. Estimates in this Consumer Trends are now based on 2010 price structures i.e. the chained volume measure estimate in 2010 equals the current price value of expenditure in 2010.
Growth in each year up to and including 2010 is calculated at average prices of the previous year. Growth from 2010 onwards is calculated at average prices of 2010. Volume series are only additive for the most recent periods, i.e. annual data for 2010 onwards and quarterly data for quarter one 2011 onwards.
Common pitfalls in interpreting series: Very few statistical revisions arise as a result of ‘errors’ in the popular sense of the word. All estimates, by definition, are subject to statistical ‘error’ but in this context the word refers to the uncertainty inherent in any process or calculation that uses sampling, estimation or modelling. Most revisions reflect either the adoption of new statistical techniques or the incorporation of new information which allows the statistical error of previous estimates to be reduced. Only rarely are there avoidable ‘errors’ such as human or system failures and such mistakes are made quite clear when they do occur.
Coherence. Household Final Consumption Expenditure estimates published in Consumer Trends are a component of the GDP expenditure approach. However, the preliminary estimate for GDP is produced based on the GDP output approach. Historic experience shows that the output approach provides the best timely approach to measuring GDP growth. GDP growth according to the expenditure and income approaches is therefore brought into line with that recorded by output.
Further information. Further Quarterly National Accounts, Quarterly Sector Accounts and Financial Accounts tables are available in the United Kingdom Economic Accounts.
Details of the policy governing the release of new data are available from the press office.
The ONS compliance plan can be found on the ONS website.
Code of practice. National Statistics are produced to high professional standards set out in the UK Statistics Authority's Code of Practice for Official Statistics. They undergo regular quality assurance reviews to ensure that they meet customer needs. They are produced free from any political interference.
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