1. Main points

  • Unless otherwise stated all figures are chained volume measure, seasonally adjusted.
  • In Quarter 3 (July to Sept) 2017, household spending (adjusted for inflation) grew by 0.5% compared with Quarter 2 (Apr to June) 2017.
  • The main contribution to growth can be seen in housing, which has increased by 0.8% compared with Quarter 2 2017.
  • Household spending grew 1.0% in Quarter 3 2017, when compared with Quarter 3 2016.
  • In Quarter 3 2017, current price spending increased by 0.8% compared with Quarter 2 2017.
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2. Things you need to know about this release

The quarterly Consumer trends are typically published around 90 days after the end of the quarter.

The data are consistent with Blue Book 2017. The article Changes to national accounts: actual rentals and imputed rentals published on 16 February 2017 gives detail on the major changes affecting household expenditure in Blue Book 2017.

Household final consumption expenditure (HHFCE) includes spending on goods and services except for: buying or extending a house, investment in valuables (for example, paintings and antiques) 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 gross domestic product (GDP). There are two measures:

  • current prices - also known as nominal, cash or value series are expressed in terms of the prices of the time period being estimated
  • chained volume measure - this measure removes the effects of inflation

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 for UK HHFC.

Time series data for consumer trends is also available.

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3. Household spending (adjusted for inflation) grew by 0.5% in Quarter 3 2017

In Quarter 3 (July to Sept) 2017, the chained volume measure of household spending increased by 0.5%. The current price value of household spending increased by 0.8% compared with Quarter 2 (Apr to June) 2017. Figure 1 shows the levels of current price and volume spending from Quarter 1 (Jan to Mar) 1997 onwards.

In Quarter 3 2017, the value of household spending in current prices increased by 3.2% on the same quarter in 2016. When comparing the volume measure of household spending in Quarter 3 2017 with the same quarter in 2016, it increased by 1.0%.

Since the economic downturn in 2008 to 2009 (reaching its lowest point in Quarter 2 2009), household final consumption expenditure (HHFCE) has grown by 14.7% in volume terms. In current prices, it has grown by 34.8% (£82,981 million). This shows that whilst household spending has increased during this period, the volume of goods and services purchased by households has increased at a far lesser rate, indicating the effect of price inflation.

During 2016, quarterly growth remained on trend; however, household consumption remains relatively subdued with quarter-on-year growth slowing for the fifth consecutive quarter to be at its lowest rate since Quarter 1 2012 (0.9%).

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4. What are the main contributors to this growth?

As illustrated in Figure 2, the main contributors to the 0.5% growth in consumer spending in Quarter 3 (July to Sep) 2017 were housing and transport, which both contributed 0.2%, partially offset by restaurants and hotels, which contributed negative 0.05%.

The 0.2% contribution from housing was due to its growth of 0.8% quarter-on-quarter. Within that category, the growth was driven mainly by mains gas and liquefied petroleum gas (LPG), which grew by 6.9% quarter-on-quarter, contributing 0.1% to total domestic expenditure growth.

The second largest contribution from transport was due to growth of 1.2% quarter-on-quarter, caused by motor cars, which grew by 2.9%, contributing 0.1% to total domestic expenditure growth.

Figure 3 shows the contribution of the components of housing to the overall growth in those categories.

At the most detailed level we record, Table 1 shows the areas that displayed the highest growth.

The growth in motor cars coincides with changes in the timing of car purchases in response to increases in Vehicle Excise Duty on high-polluting vehicles (which came into force in April 2017). These changes led to consumers bringing forward planned new car purchases, leading to a decline in Quarter 2 2017 and since then we have seen a modest recovery to expenditure on motor cars into Quarter 3 2017.

At this level, Table 2 shows the area that displayed the largest decline in Quarter 3 2017.

Figure 4 shows the contribution to growth for miscellaneous goods and services. Although this area includes life insurance which, as noted in Table 2 shows the largest decline, this is offset by increases to personal care and financial services.

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5. Household final consumption expenditure revisions, Quarter 3 2017

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 Quarter 3 (July to Sept) 2017, the revisions to total household final consumption expenditure have been made from Quarter 1 (Jan to Mar) 2016.

Revisions between the previous edition of Consumer trends (Quarter 2 (Apr to June) 2017) and the latest HHFCE estimates are summarised in Table 1: Household final consumption expenditure: revisions. The revisions reflect updated data from suppliers, as well as adjustments to HHFCE as a result of the GDP balancing process.

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7. Upcoming and recent publications

We published an article detailing the change being made to the estimation of actual and imputed rentals (Classification of individual consumption by purpose (COICOPs) 04.1 and 04.2) in Blue Book 2017.

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8. Quality and methodology

Consumer trends guidance offers fuller details regarding this publication.

We have published a Quality and methodology information report for this statistical bulletin and details on changes to estimates and methodology in Blue Book 2017.

The Consumer trends Quality and Methodology Information report contains important information of:

  • the strengths and limitations of the data and how it compares with related data
  • uses and users of the data
  • how the output was created
  • the quality of the output including the accuracy of the data.

Full information on the Classification of individual consumption by purpose (COICOP) classification system can be found on the United Nations Statistics website.

Quality of the estimates

Household expenditure volume series are chain-linked annually. Estimates in this Consumer trends bulletin are now based on 2015 price structures; that is, the chained volume measure estimate in 2015 equals the current price value of expenditure in 2015.

Growth in each year up to and including 2015 is calculated at average prices of the previous year. Growth from 2015 onwards is calculated at average prices of 2015. Volume series are only additive for the most recent periods; that is, annual data for 2015 onwards and quarterly data for Quarter 1 (Jan to Mar) 2016 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 that 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 clear when they do occur.

Coherence

Household final consumption expenditure estimates published in Consumer trends are a component of the gross domestic product (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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Contact details for this Statistical bulletin

Gareth Powell
consumer.trends@ons.gsi.gov.uk
Telephone: +44 (0)1633 455969