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.
In Q2 2011 the volume of goods and services purchased by households (chained volume measure) fell by 0.8 per cent (seasonally adjusted). This is the largest fall since Q1 2009, and follows a fall of 0.6 per cent in Q1 2011.
In current price terms, expenditure growth slowed to 0.1 per cent (seasonally adjusted).This is the smallest increase in growth since Q2 2009, and follows a 1.2 per cent increase in Q1 2011.
With the current price measure increasing by 0.1 per cent and the volume measure falling by 0.8 per cent, the household expenditure implied deflator grew by 0.8 per cent in Q2 2011. Together, the three estimates show that current price growth was little changed on the quarter but the volume of goods and services has fallen driven by higher prices.
When compared to the same quarter of the previous year, the volume of household expenditure (amount of goods and services bought) is weaker by 1.7 per cent in volume terms. Current price expenditure increased by 2.7 per cent, again reflecting the price pressures faced by households.
The Classification of Individual Consumption by Purpose (COICOP) contribution to overall growth graph shows that the main contributors to the fall in expenditure by volume were ‘transport’ and ‘food and non alcoholic drink’. ‘Transport’ fell by £819m and ‘food and non alcoholic drink’ fell by £617m, accounting for 0.4 per cent and 0.3 per cent of the overall fall respectively.
Within transport, the largest fall was in ‘operations of motor vehicles’, which fell by 2.8 per cent quarter on quarter (£386m). This includes ‘motor vehicle maintenance, repair, fuels and other services’. The estimate for the ‘purchases of motor vehicles’ fell by 3.8 per cent (£301m).
‘Food and non alcoholic drink’ volume expenditure fell by 3.2 per cent. The most noticeable falls were in expenditure on fruit, which has fallen by 10.8 per cent (£157mil), and vegetables which fell by 6.1 per cent (£163m).
Offsetting these volume expenditure falls, ‘miscellaneous goods and services’ showed the largest positive growth of 2.2 per cent (£585m) quarter on quarter, with the largest increase in ‘financial services’, which increased by 4.6 per cent (£442m).
This statistical bulletin includes historical revisions to Household Final Consumption Expenditure back to 1997 and is consistent with estimates published today in the Quarterly National Accounts statistical bulletin. Further details are given in the Background Notes, in the What's New section.
In line with Blue Book 2011, volume estimates within this publication have been calculated using 2008 as the base year. In addition, the main measure used to deflate HHFCE has been changed from RPI to CPI for the first time. More information on this second change is contained within the article ‘Blue Book 2011: Improvements to household expenditure estimates’.
The household expenditure measure of prices, the implied deflator is used in the calculation of GDP. In Q2 2011, it rose by 0.8 per cent (seasonally adjusted), showing that price pressures have eased in relation to the 1.8 per cent increase recorded in Q1 2011. The main drivers of the increase in the household expenditure deflator in Q2 2011 were ‘alcohol and tobacco’ and ‘transport’. The overall quarter on quarter household expenditure implied deflator has been positive since 2009 Q1.
The Household Expenditure deflator is now more closely aligned with CPI, the main measure used to deflate HHFCE current price estimates.
It should be noted that the CPI and RPI are the two official main measures of inflation. Differences between the RPI, CPI and Household Expenditure deflator can be explained by the different coverage and methodology used in each approach.
In Q1 2008 household expenditure on motor cars reached a current price peak of £9.7 billion. Between Q1 2008 and Q1 2009 sales in current prices (volume multiplied by price) and in volume terms fell sharply.
In Q2 2009 the Government introduced the Government Vehicle Scrappage Scheme. The scheme, which offered discounts to domestic purchasers, ran until early 2010. Over the period for which the scheme was implemented the volume of motor cars sales increased.
Seasonally adjusted volume expenditure on motor cars has fallen for the last 6 consecutive quarters. Current price expenditure (seasonally adjusted) has also fallen over this period bringing the actual value of sales to its lowest level since Q2 2009.
Household Final Consumption Expenditure Revisions Q2 2011
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 Q2 2011, the revisions to total household final consumption expenditure have been made in line with the revisions policy for Blue Book 2011. An explanation of the methods changes introduced in Blue Book 2011 (46.8 Kb Pdf) is available.
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 affects HHFCE estimates an article is available at:
|Revisions to value (current prices)||Revisions to growth (current prices)||Revisions to growth (volume measure)|
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This Consumer Trends Statistical Bulletin incorporates changes outlined in the article published on 29 September, Methods Changes in the 2011 Blue Book (46.8 Kb Pdf) , Glenn Everett.
These changes have resulted in revisions to previously published estimates, particularly at the detailed level. Specifically, revisions are due to changes in classification from SIC 2003 to SIC 2007 and from CPA 2002 to CPA 2008, the change in the base and reference year from 2006 to 2008, the impact of a review of the categorisation and application of necessary data adjustments, the availability of new annual estimates for 2009, updated sample survey designs from 2011 Q1 to reflect the change to SIC 2007, and a change in seasonal adjustment methodology . Further analysis of the impact of the changes for Household Expenditure estimates in Consumer Trends is contained in the article published on 5 October, Blue Book 2011: Improvements to Household Expenditure Estimates
On 29 September 2011, the ONS announced changes to its forthcoming release schedule. This announcement can be found at: National Accounts publication timetable
Household Final Consumption Expenditure estimates produced in Consumer Trends are produced according to the National Accounts timetable. The preliminary estimate of GDP for the third quarter of 2011 will be published on 1 November 2011, followed by the second estimate of GDP on 24 November 2011. The next full set of quarterly national accounts will be published on 22 December 2011.
Treatment of Olympic ticket sales
An article titled ‘ Treatment of the Sale of Olympic Tickets in the National Accounts (19.1 Kb Pdf) ’ is available on the National Accounts website.
Basic Quality Information for Consumer Trends Statistical Bulletin
Summary Quality reports
A Summary Quality Report for this Statistical Bulletin can be found on the National Statistics website at:
Key quality issues
Household expenditure volume series are chainlinked annually. In addition to the data revisions, volume estimates have been re-referenced to reflect more recent price structures using the Consumer Prices Index (CPI) for the first time. Estimates in this Consumer Trends are now based on 2008 price structures, i.e the chained volume measure estimate in 2008 equals the current price value of expenditure in 2008. This is the first publication using the reference year 2008.
Growth in each year up to and including 2008 is calculated at average prices of the previous year. Growth from 2008 onwards is calculated at average prices of 2008. Volume series are only additive for the most recent periods; annual data for 2008 onwards and quarterly data for quarter one 2009 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.
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 Quarterly National Accounts, Quarterly Sector Accounts and Financial Accounts tables are available in the United Kingdom Economic Accounts.
Article analysing Impact of changes in National Accounts and Economic Commentary for Q2 2011 (81.1 Kb Pdf) . Contains detailed breakdowns of the components of GDP as well as key sector accounts aggregates.
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