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) has remained unchanged between Q2 and Q3 2011 following 3 quarters of negative growth. This means that the volume of household expenditure in Q3 2011 is 1.0 per cent below the level of household spending in Q3 2010.
In current price terms (seasonally adjusted) Q3 2011 showed growth of 0.8 per cent. This continues an upward trend in overall household spending, with household expenditure increasing in the last nine quarters. The value of household expenditure is 3.4 per cent higher in Q3 2011 than it was in Q3 2010.
With the current price measure increasing by 0.8 per cent and zero growth in the volume measure, the household expenditure implied deflator grew by 0.7 per cent in Q3 2011, an indication of the higher prices experienced by households.
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 there were six positive growth categories, one making no contribution to growth, and five categories making a negative contribution to household expenditure volume growth.
The volume measure of ‘Housing’ expenditure (which includes expenditure on actual and implied rentals, gas and electricity) grew by £389m. This accounted for almost 0.18 per cent of the overall growth. Within ‘Housing’ expenditure, the largest increase was recorded in ‘Electricity, gas and other fuels’, which showed quarter on quarter growth of 4.9 per cent.
The increase in ‘Housing’ expenditure was offset, by a volume fall of £319m in households’ consumption of ‘Miscellaneous goods and services’ (which includes spending on insurance and financial services). This fall equated to a reduction of 0.15 per cent of the overall growth. Within ‘Miscellaneous goods and services’, the largest fall was in ‘financial services’, which fell by 6.0 per cent quarter on quarter, the largest percentage fall in this area for over 10 years.
The household expenditure measure of prices is an important component of the GDP deflator. This quarter the implied deflator (seasonally adjusted) increased by 0.7 per cent. The growth in Q3 2011 was lower than in the previous three quarters, but still indicates rising prices. The household expenditure implied deflator (seasonally adjusted) is now 4.4 per cent higher than in Q3 2010.
The largest increases in percentage terms in the household implied deflator were seen in: ‘Household goods and services’ (which includes furniture and furnishings, household appliances and tools), which increased by 2.1 per cent and ‘Food and non alcoholic drinks’, which increased by 1.9 per cent.
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 implied deflator can be explained by the different coverage and methodology used in each approach.
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 Q3 2011, the revisions to total household final consumption expenditure have been made from the first quarter of 2010.
Revisions between the previous edition of Consumer Trends (Q2 2011) and the latest household final consumption expenditure estimates are summarised in Table 1 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)|
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Date of this publication: 22nd December 2011
Household Final Consumption Expenditure estimates produced in Consumer Trends are produced according to the National Accounts timetable. The preliminary estimate of GDP for the fourth quarter of 2011 will be published on 24 Jan 2012, followed by the second estimate of GDP on 24 Feb 2012. The next full set of quarterly national accounts will be published on 28th March 2012.
Basic Quality Information for Consumer Trends Statistical Bulletin
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Household expenditure volume series are chainlinked annually. 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.
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.
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