1. Main points

  • Unless otherwise stated all figures are chained volume measure, seasonally adjusted.
  • In Quarter 1 (Jan to Mar) 2017, household spending (adjusted for inflation) grew by 0.4% compared with Quarter 4 (Oct to Dec) 2016.
  • The main contribution to growth can be seen in “Miscellaneous goods and services”, which has increased by 2.1% compared with Quarter 4 2016.
  • Household spending grew 2.6% in Quarter 1 2017, when compared with Quarter 1 2016.
  • In Quarter 1 2017, current price spending increased by 0.9% compared with Quarter 4 2016.
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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 is consistent with Blue Book 2016, published on 30 June 2016. We also published an article on the changes and improvements to household final consumption expenditure (HHFCE) estimates in Blue Book 2016.

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 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 HHFCE.

When we refer to Quarter 1 – this means January to March
When we refer to Quarter 2 – this means April to June
When we refer to Quarter 3 – this means July to September
When we refer to Quarter 4 – this means October to December

Time series data for consumer trends can be accessed through the link at the top of the page in a green box. It is entitled “View all data used in this statistical bulletin”.

Please also note that, as part of our usual quality assurance processes for this release, we investigated the path of 07.2.2 Fuels and lubricants for personal transport equipment. Historically, in this area, the current price estimate was seasonal (and therefore seasonally adjusted) while the chained-volume measure (CVM) was not very seasonal. However, it appears that over recent years the chained-volume series has started to show stronger seasonal patterns, with falls in Quarter 1 becoming regular. Our time series experts recommended that we change the seasonal adjustment, particularly in recent years. In the latest quarter this has reduced the fall in the CVM seasonal adjustment (SA) series by around £444 million, compared with not making this change, which also has an impact on the seasonally adjusted implied deflator.

In this publication only the current quarter is open for revision, so only Quarter 1 2017 will be affected. Implementing this change to the whole series will take some time due to the revisions policy. When we release Quarter 2 2017 we will make changes to the whole span of data (as part of the annual Blue Book cycle), but we have already finalised our dataset for the supply-use balanced years (that is, up to Quarter 4 2015) and cannot now take this change on. This means that when we publish next quarter, the change in seasonality will only be taken back as far as Quarter 1 2016. The next time we will be able to make changes before that datapoint will be in the Quarter 1 2018 publication, which is the period coincidental with Blue Book 2018; at this point the change will feed through to all relevant years.

For further information or clarification, please contact us directly.

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3. Household spending (adjusted for inflation) grew by 0.4% in Quarter 1 2017

In Quarter 1 (Jan to Mar) 2017, the chained volume measure of household spending increased by 0.4%. The current price value of household spending increased by 0.9% compared with Quarter 4 (Oct to Dec) 2016. Figure 1 shows the levels of current price and volume spending from Quarter 1 1997 onwards.

In Quarter 1 2017, the value of household spending in current prices increased by 4.6% on the same quarter, in 2016. When comparing the volume measure of household spending in Quarter 1 2017 with the same quarter in 2016, it increased by 2.6%.

Since the economic downturn in 2008 to 2009 (reaching its lowest point in Quarter 2 (Apr to June) 2009), household final consumption expenditure (HHFCE) has grown by 13.8% in volume terms. In current prices, it has grown by 31.4% (£73,788 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 the relative slow down in Quarter 1 2017 is in line with other data sources and other aspects of GDP.

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4. What are the main contributors to this growth?

As illustrated in Figure 2, the main contributors to the 0.4% growth in consumer spending in Quarter 1 (Jan to Mar) 2017 were Miscellaneous goods and services and Transport, which contributed 0.3% and 0.2% respectively, partially offset by Housing, which contributed negative 0.2%.

The 0.3% contribution from Miscellaneous goods and services was due to its growth of 2.1% quarter on quarter. Within that category, the growth was driven mainly by Life insurance, which grew by 17.6% quarter on quarter, contributing 0.1% to total domestic expenditure growth.

The second largest contribution from Transport was due to growth of 1.4% quarter on quarter, caused by Motor cars, which grew by 4.0%, contributing 0.2% to total domestic expenditure growth.

Figure 3 shows the contribution of the components of Miscellaneous goods and services to the overall growth in those categories.

At the most detailed level we record, the following areas displayed the highest growth:

The growth in Motor cars immediately precedes the introduction of the new vehicle excise duty (VED) rates that came into force on 1 April 2017. Under the new system all new cars, except for those with zero emissions, are subject to an annual flat rate charge, and this is thought to have improved sales in this period.

At this level, the following areas displayed the largest decline in Quarter 1 2017:

This coincides with a spate of moderately warmer temperatures and use of energy-efficient products during Quarter 1 2017. This meant that households spent less on fuel to heat their homes.

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5. Focus on tobacco (COICOP 02.2)

Since 1997, successive governments have taken action to curb smoking and the negative effect it has on people’s health. Such actions include the removal of advertising, the introduction of plain packaging and increases in taxation on tobacco products themselves.

Between Quarter 1 (Jan to Mar) 1997 and Quarter 1 2017, household spending on tobacco products fell by 53.0% in volume terms, yet it has grown by 56.9% in current prices. This indicates that while households are spending increasingly more money on tobacco products, they are getting less for their money. Figure 4 displays the paths of current price and chained-volume-measure spending on tobacco products over time.

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6. Household final consumption expenditure revisions

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.

This quarter, in line with GDP, the open period for revision is Quarter 1 (Jan to Mar) 2017.

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8. Upcoming and recent publications

We recently published an article detailing the change being made to the estimation of Actual and Imputed Rentals (COICOPs 04.1 and 04.2) in Blue Book 2017.

We will be publishing a further article detailing all the changes to estimates in Blue Book 2017.

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9. 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 2016.

Full information on the COICOP classification system can be found on the United Nations Statistics website.

Quality of the estimates

Household expenditure volume series are chainlinked annually. Estimates in this consumer trends bulletin are now based on 2013 price structures; that is, the chained volume measure estimate in 2013 equals the current price value of expenditure in 2013.

Growth in each year up to and including 2013 is calculated at average prices of the previous year. Growth from 2013 onwards is calculated at average prices of 2013. Volume series are only additive for the most recent periods; that is, annual data for 2013 onwards and quarterly data for Quarter 1 (Jan to Mar) 2014 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

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