Consumer trends, UK: July to Spetember 2014

Household final consumption expenditure (HHFCE) for the UK, as a measure of economic growth. Includes all spending on goods and services by members of UK households.

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This is an accredited national statistic.

Contact:
Email David Matthewson

Release date:
23 December 2014

Next release:
31 March 2015

1. Key points

  • In Q3 2014, household spending (adjusted for inflation) grew by 0.9% (£2.5 billion)

  • The main contribution to growth can be seen in ‘Transport’ which has increased by 2.9% compared with Q2 2014. The largest negative contribution to growth can be seen in ‘Miscellaneous goods and services’ which has fallen by 0.5% compared with Q2 2014

  • Household spending in volume terms, increased to £259.0 billion in Q4 2007, falling to £244.1 billion in Q2 2009. It has now increased to £261.6 billion, the highest volume spending since the start of the series. Volume spending for the latest two quarters has exceeded the previous high in Q4 2007

  • Household spending when compared with the same quarter a year ago has been rising each quarter since Q3 2011, it was 2.5% higher in Q3 2014, when compared with Q3 2013

  • The current price value of household spending, which includes inflation, shows how much UK households spent. In Q3 2014 current price spending increased by 1.6% compared with Q2 2014, continuing the trend of positive quarterly growth since Q3 2009

  • The household expenditure implied deflator grew by 0.7% in Q3 2014. Within household spending categories the ‘Miscellaneous goods and services’ implied deflator showed the largest increase in percentage terms, growing by 2.2% in Q3 2014

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2. Summary of household expenditure in Q3 2014

The volume measure provides an estimate of the amount of goods and services purchased by households. In Q3 2014 it increased by 0.9%. The current price value of household spending (inflation included) shows how much UK households spent. In Q3 2014 it increased by 1.6% compared with Q2 2014. Current price spending has shown positive quarterly growth since Q3 2009. Figure 1 compares the levels of current price and volume spending from 2008 onwards.

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4. Household spending by product, seasonally adjusted

Figure 3 shows spending in volume terms (adjusted for inflation) spending on ‘Transport’ has made the largest contribution to the positive growth in Q3 2014, increasing by 2.9% on the quarter. Within ‘Transport’, ‘Motor cars’ showed the largest increase of 7.6% compared with Q2 2014.

The largest negative contribution to growth over this quarter can be seen in ‘Miscellaneous goods and services’ which has fallen by 0.5% in volume terms. This is driven by decreased spending on ‘Life insurance’, which has fallen by 7.0%, and ‘Transport insurance’ which has fallen by 9.3%.

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5. Focus on prices in household expenditure

The household expenditure measure of prices is an important component of the GDP deflator which is used to determine price pressures in the economy. Figure 4 shows the household expenditure implied deflator both year on year and quarter on quarter percentage change.

This quarter the seasonally adjusted household expenditure measure of prices (the deflator) increased by 0.7%. This continues the trend of positive deflator growth since Q2 2012, indicating the increased prices that households face when purchasing goods or services. The household expenditure deflator (seasonally adjusted) is 1.7% higher than in Q3 2013.

‘Housing’ as the largest category of household expenditure has the most impact on the overall implied deflator. This quarter, the ‘Housing’ implied deflator increased by 0.5% when compared with Q2 2014, this has contributed to the overall implied deflator growth. The majority of other expenditure categories have contributed positively to growth in the implied deflator, the largest of which in percentage terms is ‘Miscellaneous goods and services’ which grew by 2.2% when compared with Q2 2014, a reflection of strong positive growth in ‘Financial intermediation services indirectly measured (FISIM)’ and ‘Life insurance’.

From Blue Book 2011, CPI has been used to deflate estimates of Household Expenditure. Figure 5 compares the household expenditure implied deflator growths in percentage terms, quarter on the same quarter a year ago, with those of the CPI from 2008 onwards.

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6. Household final consumption expenditure revisions, Q3 2014

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 2014, the revisions to total household final consumption expenditure have been made from the first quarter of 2013.

Revisions between the previous edition of Consumer Trends (Q2 2014) 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.

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7. Guidance and methodology

HHFCE terms and definitions are outlined in Table 3. Consumer Trends guidance offers fuller details regarding this publication.

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8 .Background notes

  1. Date of this publication: 23 December 2014

  2. Next Edition: The next edition of Consumer Trends, Q4 2014, will be published on 31 March 2015. Estimates will be consistent with Blue Book 2014.

  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 fourth quarter of 2014 will be published on 27 January 2015, followed by the second estimate of GDP on 26 February 2015. The next full set of Quarterly National Accounts will be published on 31 March 2015.

  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 National Statistics website.

    Key quality issues: Household expenditure volume series are chainlinked annually. Estimates in this Consumer Trends are now based on 2011 price structures i.e. the chained volume measure estimate in 2011 equals the current price value of expenditure in 2011.

    Growth in each year up to and including 2011 is calculated at average prices of the previous year. Growth from 2011 onwards is calculated at average prices of 2011. Volume series are only additive for the most recent periods, i.e. annual data for 2011 onwards and quarterly data for quarter one 2012 onwards. 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.

  5. 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.

  6. The ONS compliance plan can be found on the ONS website.

  7. Following ONS: Follow ONS on Twitter and Facebook.

  8. 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.

  9. Details of the policy governing the release of new data are available by visiting www.statisticsauthority.gov.uk/assessment/code-of-practice/index.html or from the Media Relations Office email: media.relations@ons.gov.uk

    These National Statistics are produced to high professional standards and released according to the arrangements approved by the UK Statistics Authority.

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9 . Methodology

Contact details for this Statistical bulletin

David Matthewson
consumer.trends@ons.gov.uk
Telephone: +44 (0)1633 45 5612