Statistical bulletin: Consumer Trends, Q1 2012

Household Final Consumption Expenditure (HHFCE) contracts by 0.1 per cent in volume in Q1 2012

• The volume of expenditure on goods and services (seasonally adjusted) fell by 0.1 per cent in Q1 2012, following growth of 0.5 per cent in Q4 2011.
• ‘Miscellaneous goods & services’ (which includes financial services and insurance) showed the largest contribution to volume contraction.
• ‘Food & non alcoholic beverages’ showed the largest positive contribution to growth in volume terms this quarter.
• In current prices, seasonally adjusted household expenditure increased by 0.5 per cent.
• The household expenditure implied deflator (a measure of price pressures faced by households) increased by 0.6 per cent.

Summary of Household Expenditure, Q1 2012

Figure 1. Household Final Consumption Expenditure Total (Quarter on Quarter Growth)

Source: Office for National Statistics

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Household expenditure makes up about 60 per cent of UK GDP, and as a result has an important part to play in the path of economic growth.

The volume of expenditure on goods and services (seasonally adjusted) fell by 0.1 per cent in Q1 2012 compared with Q4 2011, when the volume of expenditure rose by 0.5 per cent. When compared to the same quarter a year ago, volume expenditure fell by 0.9 per cent. Quarter on corresponding quarter of previous year growth in volume terms has now been negative for 4 consecutive quarters, while actual spending at current prices (seasonally adjusted) has continued to grow.

Between Q4 2011 and Q1 2012 household spending per head fell by 0.3 per cent in volume terms. Current price expenditure per head has risen by 0.3 per cent to £3,759, again showing the trend for spending more but getting less.

With the current price measure increasing by 0.5 per cent between Q4 2011 and Q1 2012 and the volume measure shrinking by 0.1 per cent, the household expenditure implied deflator has grown by 0.6 per cent,  an indication of the higher prices experienced by households.

Figure 2. COICOP Contribution to Overall Growth

Source: Office for National Statistics

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Figure 2 shows the chained volume measure contribution to overall growth for each expenditure category by Classification of Individual Consumption by Purpose (COICOP).  It shows that in Q1 2012, categories of household expenditure were equally split into positive and negative growth.

Of the six categories of negative growth, ‘Miscellaneous Goods & Services’ made the largest contribution, with a fall of £713 million between Q4 2011 and Q1 2012. Within this category, the largest decreases were seen in ‘Financial Services’ and ‘Social Protection’ (which includes expenditure on private and residential care homes for example). Together these categories account for almost 80 per cent of the overall fall.

The largest positive contribution was seen in ‘Food & Non Alcoholic Beverages’ which increased by £275 million. Within this area, ‘Meat’ and ‘Vegetables’ showed the largest increases in volume terms, showing quarter on quarter increases of 4.5 per cent and 5.6 per cent respectively.

Focus on prices in household expenditure

The household expenditure measure of prices is an important component of the GDP deflator. This quarter the implied deflator (seasonally adjusted) increased by 0.6 per cent. This continues the trend of positive deflator growth (positive growth since 2009 Q3). The household expenditure implied deflator (seasonally adjusted) is now 2.9 per cent higher than in Q1 2011. Whilst both quarter on quarter and quarter on corresponding quarter of previous year growth rates are positive (indicating increasing prices) the size of growth is at its lowest level for some time, indicating a slowing in the rate that prices are rising.

In Q1 2012, the largest increases in percentage terms in the household implied deflator were seen in ‘Housing’ and ‘Clothing & Footwear’ which grew by 1.6 per cent and 1.4 per cent respectively.

It should be noted that the CPI and RPI are the two official main measures of inflation. From Blue Book 2011, CPI has been used to deflate estimates of Household Expenditure.

Figure 3. Household Expenditure Implied Deflator Seasonally Adjusted Per Cent Change

Source: Office for National Statistics

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Figure 4. Price Measures Not Seasonally Adjusted Year on Year Per Cent Change

Source: Office for National Statistics

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Since 2008 UK households spend less abroad but foreign visitors spend more

Figure 5. Tourism Imports and Exports 1997 to Q1 2012

Source: Office for National Statistics

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HHFCE contains estimates for foreign tourists spending while in the UK. The level of spending is captured by the International Passenger survey (IPS) and removed from the HHFCE estimate at National level (exports of goods and services). Exports of goods and services are therefore expressed as a negative value. Information on UK residents’ spending abroad is also collected by the IPS. This is then added to the HHFCE estimate at National level (imports of goods and services). Tourism expenditure data therefore feeds into GDP through the HHFCE estimate.

Between Q1 1997 and Q1 2008 UK household spending abroad (imports of tourism) increased from £3.5 billion to £9.1 billion (current prices seasonally adjusted).  Following this, spending fell rapidly until Q2 2009. Since then spending by UK households abroad has been relatively stable with spending in Q1 2012 of £6.9 billion.

Foreign households spending (exports of tourism)  has been relatively flat between Q1 1997 and Q4 2003. Since then, the amount of money spent by foreign tourists when holidaying in the UK has increased from -£3.7 billion to -£5.5 billion in Q1 2012.

Figure 6. Tourism Imports and Exports 2008 to Q1 2012

Source: Office for National Statistics

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Since Q2 2008, the amount of money being spent by UK households abroad has been falling both in current price and volume terms (seasonally adjusted).  Current price tourism imports in Q3 2011 fell to their lowest level since Q2 2004. 

Purchases made by UK residents abroad fell by 24.1 per cent between Q1 2008 and Q1 2012 (current price seasonally adjusted).

Spending by foreign tourists holidaying in the UK (which is expressed as a negative value as it is an export of goods and services) has grown in current price and volume terms since Q2 2008.  Current price spending has increased by 10.3 per cent whilst the volume of purchases has increased by 2.5 per cent.

When analysing patterns of imports and exports of tourism, there are a number of influencing factors, for example changing popularity of holiday destinations and currency exchange rates.

Household Final Consumption Expenditure revisions, Q1 2012

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 Q1 2012, the revisions to total household final consumption expenditure have been made in line with the revisions policy for Blue Book 2012. An explanation of the methods changes introduced in Blue Book 2012 is available in Content of UK National Accounts: the Blue Book 2012.

Revisions to household final consumption expenditure estimates are summarised in Table 1.  They reflect updated data from suppliers, as well as adjustments to HHFCE as a result of Supply and Use balancing and the GDP balancing process. For more information on what Supply and Use balancing is, and how it affected HHFCE estimates in Blue Book 2012, an article Blue Book 2012: Improvements to Household Expenditure Estimates is available.

Table 1: Revisions to Household Final Consumption Expenditure, Seasonally Adjusted

Table source: Office for National Statistics

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.

Guidance and Methodology

Consumer Trends guidance on the ONS website offers full guidance and methodology details regarding this publication.

Background notes

1. Date of this publication: 28 June 2012

2. What's New

   The HHFCE Work Programme has been published as part of this release and is within the Guidance and Methodology Section of the ONS website.

3. 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 second quarter of 2012 will be published on 25 July 2012, followed by the second estimate of GDP on 24 August 2012. The next full set of quarterly national accounts will be published on 27 September 2012.

4. Basic Quality Information for Consumer Trends Statistical Bulletin

   Summary Quality reports

   A Summary Quality Report (134.3 Kb Pdf) for this Statistical Bulletin can be found on the ONS website.

   Household expenditure volume series are chainlinked annually. Estimates in this Consumer Trends are now based on 2009 price structures, that is, the chained volume measure estimate in 2009 equals the current price value of expenditure in 2009.

   Growth in each year up to and including 2009 is calculated at average prices of the previous year. Growth from 2009 onwards is calculated at average prices of 2009. Volume series are only additive for the most recent periods; annual data for 2009 onwards and quarterly data for quarter one 2010 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.

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