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) rose by 0.4 per cent between Q3 and Q4 2011. This is the first positive growth since Q2 2010, when spending rose by 0.7 per cent on the previous quarter. In Q4 2011 the level of household spending in volume terms is still 1.0 per cent lower than a year ago.
In current price terms (seasonally adjusted) Q4 2011 showed growth of 1.2 per cent. This is the tenth consecutive quarter of positive growth maintaining the upward trend in overall household spending. The value of household expenditure is 3.0 per cent higher in Q4 2011 than it was in Q4 2010.
With the current price measure increasing by 1.2 per cent and 0.4 per cent growth in the volume measure, the household expenditure implied deflator grew by 0.7 per cent in Q4 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 in Q4 2011, categories of household expenditure were equally split into positive and negative growth.
Of the six categories of positive growth, Miscellaneous Goods and Services made the largest contribution, growing by £762 million between Q3 and Q4 2011. This category (which includes spending on financial services and insurance) accounted for 0.36 per cent of the overall growth. Within this category, the largest increase in spending was seen in Insurance and Other Services, showing quarter on quarter growth of 6.1 per cent and 12.1 per cent respectively.
These increases in expenditure were partially offset by a fall of £525 million in household spending on ‘Housing’ (which includes expenditure on fuels and rental charges). This fall equated to a reduction of 0.25 per cent of the overall contraction. Within ‘Housing’, the largest fall was in, 'Electricity Gas and Water' which fell by 5.2 per cent quarter on quarter.
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. This continues the trend of positive inflator growth, which has continued since 2009 Q3. The growth in Q4 2011 is an indicator of continuing rising prices. The household expenditure implied deflator (seasonally adjusted) is now 4.0 per cent higher than in Q4 2010.
The largest increases in percentage terms in the household implied deflator were seen in ‘Education’, which increased by 4.3 per cent and ‘Alcohol and Tobacco’, which increased by 3.2 per cent.
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.
In 2011, household expenditure in volume terms (seasonally adjusted) fell by 1.2 per cent compared to 2010. However, the value of household spending increased by 2.8 per cent in 2011, showing that even though households bought fewer goods and services they spent more in current prices.
The volume of goods and services purchased in 2011 was at a similar level to 2009, whereas the value of spending by households was 8.4 per cent higher than 2009 (or £71.9 billion more). This increase in current price household expenditure equates to an increase of £938 per head over the two year period.
The low growth rates in volume expenditure and higher growth rates in the value of household expenditure reflect the price pressures faced by households. The household expenditure measure of price pressures showed a 4.2 per cent increase in 2011. The official measure of inflation, the CPI also showed strong average growth levels at 4.5 per cent in 2011.
The most recent ONS estimates for household expenditure show how households have changed their spending patterns for different goods and services .Two of the most interesting areas are the changes in expenditure for ‘Food and Non-Alcoholic Beverages’ and 'Recreation and Culture'. Between Q1 2008 and Q4 2011 quarterly household spending per head (current prices) increased from £3,594 to £3,740 per quarter, an increase of 4.0 per cent. Over the same period, the volume measure for spending per head fell by 7.7 per cent.
An example of one of the main contributors to this pattern has been spending on ‘Food and Non Alcoholic Beverages’. Quarterly household spending per head on ‘Food and Non Alcoholic Beverages’ increased from £319 in Q1 2008 to £343 in Q4 2011. Over the same period the volume measure for spending per head fell by 11.8 per cent.
Not all household expenditure reflects this pattern of increased prices and reduced spending by volume. Household spending on goods and services categorised as ‘Recreation and Culture’ has shown a very different path between Q1 2008 and Q4 2011.
Quarterly household spending per head fell from £415 to £398 between Q1 2008 and Q4 2011, a fall of 4.0 per cent. However, over the same period the volume measure of spending per head increased by 1.5 per cent. These estimates show how households have obtained better value for money in this category of expenditure in comparison to others.
One of the main drivers of the fall in current price terms for ‘Recreation and Culture’ was spending on audio-visual, photographic and information processing equipment. Households current price spending fell from £88 to £77 per head per quarter between Q1 2008 and Q4 2011. At the same time the volume measure of houseold expenditure increased over the same period reflecting weak or negative price pressures.
Food, an essential purchase showed an interesting expenditure path throughout 2011. In Q4 2011 both the volume and value of household expenditure on food and non-alcoholic beverages fell. The 0.9 per cent fall in both volume expenditure and value of spending reflects the weaker price pressures on this good (0.1 per cent increase in Q4 2011).
The reduction in value of spending and amount of ‘Food and Non Alcoholic Beverages’ purchased in Q4 2011 contrasts with the trend since Q1 2008, which showed increased spending and reduced volume purchases. Between Q1 2008 and Q4 2011, the value of current price expenditure on ‘Food and Non Alcoholic Beverages’ increased to £21.5 billion, a rise of 10.3 per cent. Over the same period, the volume measure of households spending on ‘Food and Non Alcoholic Beverages’ fell by 9.3 per cent.
Looking at 2011 as a whole, household spending on ‘Food and Non Alcoholic Beverages’ showed an increase of 2.6 per cent. However, in volume terms, the level of spending on food and non alcoholic drinks fell by 2.6 per cent.
In 2011 the volume of food and drink purchased by households fell to its lowest level since 2002.
When households substitute more expensive brands for less costly products this is reflected in the household expenditure current price estimates, which show the price of goods bought multiplied by the amount of goods purchased. The volume measure estimates take account of inflation by deflating the current price estimates by the Consumer Price Index (CPI). The volume measure estimates therefore reflect the amount of goods and services purchased.
The majority of ‘Recreation and Culture’ contains types of expenditure that may be considered as non-essential or discretionary. In Q4 2011 the volume of goods and services purchased by households increased by 1.8 per cent compared to the previous quarter. The value of spending on recreation and culture increased by 0.3 per cent in the same period. The household expenditure implied deflator showed a fall of 1.5 per cent in Q4 2011, suggesting that households could get better value for money.
In Q4 2011, households spending on ‘Recreation and Culture’ in current price terms was £25.0 billion, compared to Q1 2008 this was a fall of 1.3 per cent. However, the volume measure of households expenditure on ‘Recreation and Culture’ increased by 4.3 per cent between Q1 2008 and Q4 2011 (an increase of £1.1 billion over the four year period).
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 2011, the revisions to total household final consumption expenditure have been made from the first quarter of 2011.
Revisions between the previous edition of Consumer Trends (Q3 2011) and the latest HHFCE 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)|
Guidance to this publication can be found at:
Date of this publication: 28th March 2012.
Next publication of Consumer Trends will be Q1 2012 published on 28th June 2012. This will be consistent with Blue Book 2012.
HHFCE Work Plan. A HHFCE work plan will be issued prior to the publication of Q1 2012 Consumer Trends on 28th June 2012. This will be located within the Guidance and Methodology Section.
For more information on per head calculations in National Accounts estimates, see the UK Economic Accounts. United Kingdom Economic Accounts - Q4 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 first quarter of 2012 will be published on 25th April 2012, followed by the second estimate of GDP on 24th May 2012. The next full set of quarterly national accounts will be published on 28th June 2012.
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:
Quality and Methodology Information for Consumer Trends (134.3 Kb Pdf)
Key quality issues
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.
Further Quarterly National Accounts, Quarterly Sector Accounts and Financial Accounts tables are available in the United Kingdom Economic Accounts at:
Quarterly National Accounts - Q4 2011
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