In Q4 2014 (Oct–Dec 2014), household spending (adjusted for inflation) grew by 0.6% (£1.6 billion)
The main contribution to growth can be seen in ‘Miscellaneous goods and services’ which has increased by 3.1% compared with Q3 2014 (Jul-Sep 2014). The largest negative contribution to growth can be seen in ‘Transport’ which has fallen by 1.1% compared with Q3 2014 (Jul-Sep 2014)
Household spending in volume terms, increased to £259.0 billion in Q4 2007 (Oct-Dec 2007), falling to £244.1 billion in Q2 2009 (Apr-Jun 2009). It has now increased to £263.9 billion, the highest volume spending since the start of the series. Volume spending for the latest three quarters (Apr-Jun 2014, Jul-Sep 2014 and Oct-Dec 2014) has exceeded the previous high in Q4 2007 (Oct-Dec 2007)
Household spending when compared with the same quarter a year ago has been showing positive growth each quarter since Q4 2011 (Oct-Dec 2011). It was 3.0% higher in Q4 2014 (Oct-Dec 2014), when compared with Q4 2013 (Oct-Dec 2013), the highest increase since Q4 2007 (Oct-Dec 2007)
The current price value of household spending, which includes inflation, shows how much UK households spent. In Q4 2014 (Oct-Dec 2014), current price spending increased by 1.0% compared with Q3 2014 (Jul-Sep 2014)
The household expenditure implied deflator grew by 0.4% in Q4 2014 (Oct–Dec 2014) compared with the previous quarter (Jul-Sep 2014)
The volume measure provides an estimate of the amount of goods and services purchased by households. In Q4 2014 (Oct-Dec 2014), it increased by 0.6%. The current price value of household spending (inflation included) shows how much UK households spent. In Q4 2014 (Oct-Dec 2014), it increased by 1.0% compared with Q3 2014 (Jul-Sep 2014). Figure 1 compares the levels of current price and volume spending from 2008 onwards.
Back to table of contents
Household Final Consumption Expenditure (HHFCE) includes spending on goods and services except for: buying or extending a house, investment in valuables (paintings, antiques etc) or purchasing second-hand goods. Explanations for these exceptions and the related concepts are available in Consumer Trends guidance and methodology.
Household expenditure is used in the National Accounts to measure the contribution of households to economic growth and accounts for about 60% of the expenditure measure of GDP. There are two measures:
- current prices - which is the value of spending in a particular quarter measured in the prices at that time
- volume terms - which adjust for price inflation and gives a better picture of whether households are purchasing more goods and services.
The estimate of HHFCE where net tourism expenditure is included is called the UK national estimate. When net tourism is excluded, this produces the aggregate total UK domestic expenditure. Lower level analyses in this bulletin are based on the domestic concept. This is discussed in greater detail in Definitions and Conventions (139.3 Kb Pdf) for UK HHFCE.
Figure 2 shows annual household final consumption expenditure from 1997 onwards, the period from which a full HHFCE dataset is available.
From 1997, household final consumption expenditure:
in current prices, increased to £232.7 billion in Q3 2008 (Jul-Sep 2008), falling to £224.4 billion in Q2 2009 (Apr-Jun 2009), then returning to positive growth in each quarter from Q3 2009 (Jul-Sep 2009) to reach £280.7 billion in the latest quarter
in volume terms, increased to £259.0 billion in Q4 2007 (Oct – Dec 2007), falling to £244.1 billion in Q2 2009 (Apr-Jun 2009). It has now increased to £263.9 billion, the highest volume spending since the start of the series. Volume spending in each of the last three quarters (Apr-Jun 2014, Jul-Sep 2014, Oct-Dec 2014) has exceeded the previous high in Q4 2007 (Oct-Dec 2007)
The pre-2007 increases in household spending were a consequence of households facing higher prices and buying more goods and services. However, in 2008 and 2009 households spent less because they predominantly bought less, in volume terms. Since 2009, household spending has increased, but the volume of goods and services purchased has experienced far lower growth.
In Q4 2014 (Oct-Dec 2014), the value of household spending in current prices increased by 1.0% on the previous quarter (Jul-Sep 2014), and by 4.3% on the same quarter in 2013. The volume measure of household spending increased by 0.6% on the quarter (Oct-Dec 2014) and 3.0% on the same quarter in 2013 (Oct-Dec 2013), signifying that households are spending more for a relatively lower volume of goods and services.Back to table of contents
Figure 3 shows spending in volume terms (adjusted for inflation). Spending on ‘Miscellaneous goods and services’ has made the largest contribution to the positive growth in Q4 2014 (Oct-Dec 2014), increasing by 3.1% on the quarter. Within ‘Miscellaneous goods and services’ ‘Life insurance’ showed the largest increase of 37.3% compared with Q3 2014 (Jul-Sep 2014), (‘Life insurance’ in Household Expenditure is net of claims). This increase in spending can also be seen in the output measure of GDP.
The largest negative contribution to growth over this quarter can be seen in ‘Transport’ which has fallen by 1.1% in volume terms. This is driven by decreased spending on ‘Water transport’, which has fallen by 13.9%, and ‘Vehicle parts and accessories’ which has fallen by 12.1%.
Back to table of contents
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 (Oct-Dec 2014) the seasonally adjusted household expenditure measure of prices (the deflator) increased by 0.4%. This continues the trend of positive deflator growth since Q2 2012 (Apr-Jun 2012), indicating the increased prices that households face when purchasing goods or services. The household expenditure deflator (seasonally adjusted) is 1.3% higher than in Q4 2013 (Oct-Dec 2013).
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.
Back to table of contents
In current price terms, seasonally adjusted, consumer spending in Q4 2014 (Oct-Dec 2014) has now reached £4,337 per head. This is an increase of £37 per head when compared to Q3 2014 (Jul-Sep 2014). In volume terms, there has been an increase of £18 per head, indicating that consumers spent more because they bought more in addition to the affect of positive price increase.
In 2014 current price spending per head grew by £583 when compared with 2013, an increase of 3.5%. Although ‘Housing’ and ‘Transport’ contribute the most to overall spending, the largest increase between 2013 and 2014 can be seen in ‘Financial services’, where spending rose from £231 to £351, an increase of £120.
When analysing spending by types of goods and services (in current price terms), households have continued to spend most on 'Services'. In 2014, spending on 'Services' grew to its highest level since the start of the series, and is now at £9,536, contributing 56% of total household spending. ‘Services’ include spending on essential items such as ‘Housing’ and ‘Transport services’.
When comparing growth rates in types of goods and services (in current price terms) over a longer period, all product types show a marked decline in 2009. Since then all categories have shown overall growth, with the exception of non-durable goods which, after an initial upturn in 2010, remained broadly flat until 2014. During 2014, spending per head on non-durable goods has fallen by 1.6% when compared to 2013, mainly due to a fall in expenditure on ‘Housing’ and ‘Transport fuels’. In the latest year (2014) within ‘Housing’ a drop in volume spending in ‘Electricity and gas’ has seen per head expenditure fall. Contrastingly, the fall in per head expenditure in ‘Transport fuels’ is as a result of falling prices, with volume spending remaining broadly unchanged.
Back to table of contents
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 2014 (Oct-Dec 2014), the revisions to total household final consumption expenditure have been made from Q1 2014 (Jan-Mar 2014).
Revisions between the previous edition of Consumer Trends, Q3 2014, (Jul-Sep 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.
Table 1: Household final consumption expenditure revisions, Q4 2014
|Revisions to value (current prices) £ million||Revisions to growth (current prices) %||Revisions to growth (volume measure) %|
|Source: Office for National Statistics|
Download this table Table 1: Household final consumption expenditure revisions, Q4 2014.xls (36.4 kB)
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.Back to table of contents
HHFCE terms and definitions are outlined in Table 3. Consumer Trends guidance offers fuller details regarding this publication.
Table 2: Table of household final consumption expenditure terms and definitions
|COICOP||Classification Of Individual Consumption by Purpose. COICOP is an internationally agreed system of classification for reporting consumption expenditure within National Accounts and is used by other household budget surveys across the European Union.|
|CPI||Consumer Price Index. Measures the price paid by consumers for a fixed group of goods and services.|
|GDP||Gross Domestic Product. The measure of all services and goods produced in a country over a specific period.|
|HHFCE||Household Final Consumption Expenditure. Spending by households on products or services to satisfy their immediate needs or wants. This includes expenditure on the administrative costs of insurances but excludes capital expenditure on dwellings and valuables.|
|SA||Seasonally adjusted. Seasonal adjustment removes the variations associated with the time of the year, i.e. seasonal effects; this allows consecutive quarters to be compared, providing a reliable estimate of short-term change.|
|CP||Current price. Current price series (also known as nominal, cash or value series) are expressed in terms of the prices of the time period being estimated. In short, they describe the actual price charged or paid for the goods or services at time of production or consumption.|
|CVM||Chained volume measure. This measure allows users to identify changes in expenditure on a good (or service) resulting from a change in the volume, rather than a change in the price of that good (or service).|
|IDEF||Implied deflator. An indirect measure of inflation. Calculated as current price data divided by chained volume measure data, multiplied by 100.|
|Domestic estimate||HHFCE aggregate total excluding net tourism|
|National estimate||Estimate of HHFCE including net tourism expenditure.|
|TOUREX||Estimates for foreign tourist expenditure in the UK.|
|TOURIM||Estimates for UK tourist expenditure abroad.|
|Source: Office for National Statistics|
Download this table Table 2: Table of household final consumption expenditure terms and definitions.xls (67.6 kB)
Contact details for this Statistical bulletin
Telephone: +44 (0)1633 45 5612