In Quarter 4 (Oct to Dec) 2015, household spending (adjusted for inflation) grew by 0.6% (£1.7 billion) compared with Quarter 3 (July to Sept) 2015.
The main contribution to growth can be seen in “Household goods and services”, which has increased by 3.4% compared with Quarter 3 (July to Sept) 2015. “Health”, “Miscellaneous” and “Housing” were the only areas showing small negative contributions to the overall growth in the current quarter (Oct to Dec) 2015.
Household spending in volume terms increased to £267.4 billion in Quarter 4 (Oct to Dec) 2007 before falling to £250.8 billion in Quarter 2 (Apr to June) 2009. Following falls in 2010 and 2011, it has now increased to £279.1 billion, the highest volume spending since the start of the series. In each quarter since Quarter 2 (Apr to June) 2014, volume spending has exceeded the previous high in Quarter 4 (Oct to Dec) 2007.
Household spending when compared with the same quarter a year ago has been showing positive growth each quarter since Quarter 4 (Oct to Dec) 2011. It was 2.7% higher in Quarter 4 (Oct to Dec) 2015, when compared with Quarter 4 (Oct to Dec) 2014.
Household spending in volume terms has increased by 2.8% in 2015 when compared with 2014. This is the highest annual growth in volume terms since 2007.
The current price value of household spending, which includes inflation, shows how much UK households spent. In Quarter 4 (Oct to Dec) 2015, current price spending increased by 1.9% compared with Quarter 3 (July to Sept) 2015.
The household expenditure implied deflator increased by 1.3% in Quarter 4 (Oct to Dec) 2015 compared with the previous quarter (July to Sept) 2015.Back to table of contents
The volume measure provides an estimate of the amount of goods and services purchased by households. In Quarter 4 (Oct to Dec) 2015, it increased by 0.6%. The current price value of household spending (inflation included) shows how much UK households spent. In Quarter 4 (Oct to Dec) 2015, it increased by 1.9% compared with Quarter 3 (July to Sept) 2015. Figure 1 compares the levels of current price and volume spending from 2009 onwards.
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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 gross domestic product (GDP). There are 2 measures:
- current prices – which is the value of spending in a particular quarter measured in the prices at that time
- volume terms – which adjusts 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 for UK HHFCE.
Figure 2 shows annual household final consumption expenditure from 1997 onwards.
From 1997, household final consumption expenditure:
in current prices, increased to £232.6 billion in Quarter 3 (July to Sept) 2008, falling to £225.0 billion in Quarter 2 (Apr to June) 2009, then returning to positive growth primarily in each quarter since Quarter 3 (July to Sept) 2009 to reach £293.4 billion in the latest quarter (Oct to Dec) 2015
in volume terms, increased to £267.4 billion in Quarter 4 (Oct to Dec) 2007, falling to £250.8 billion in Quarter 2 (Apr to June) 2009. Following falls in 2010 and 2011, it has now increased to £279.1 billion, the highest volume spending since the start of the series. In each quarter since Quarter 2 (Apr to June) 2014, volume spending has exceeded the previous high in Quarter 4 (Oct to Dec) 2007
The pre-2007 increases in household spending were a consequence of households predominantly facing higher prices and buying more goods and services. 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 Quarter 4 (Oct to Dec) 2015, the value of household spending in current prices increased by 1.9% on the previous quarter (July to Sept) 2015, and by 3.2% on the same quarter (Oct to Dec) in 2014. The volume measure of household spending increased by 0.6% on the quarter (Oct to Dec) 2015. When comparing the volume measure of household spending in Quarter 4 (Oct to Dec) 2015 with the same quarter (Oct to Dec) in 2014, it increased by 2.7%.Back to table of contents
Figure 3 shows spending in volume terms (adjusted for inflation). Spending on “Household goods and services” has made the largest contribution to the positive growth in Quarter 4 (Oct to Dec) 2015, increasing by 3.4% on the quarter. Within this area, “Major household appliances” showed the largest increase of 10.7% compared with Quarter 3 (July to Sept) 2015.
The largest negative contribution to growth over this quarter can be seen in “Housing”, which has fallen by 0.4% in volume terms. This is driven by decreased spending on “Gas”, which has fallen by 9.8% compared with the previous quarter (July to Sept) 2015, possibly due to milder than average Quarter 4 (Oct to Dec) 2015 temperatures.
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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 to Dec) 2015, the seasonally adjusted household expenditure measure of prices, the implied deflator, increased by 1.3% compared with Quarter 3 (July to Sept) 2015, indicating the increase in prices that households face when purchasing goods or services. The impact of the alignment of the household expenditure rental series with the CPIH deflator has subdued the level of current price data since 2012.
The household expenditure deflator (seasonally adjusted) is 0.4% higher than in Quarter 4 (Oct to Dec) 2014, which is broadly in line with recent CPI data.
From the 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-quarter a year ago, with those of the CPI from 2009 onwards.
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In current price terms, seasonally adjusted, consumer spending in Quarter 4 (Oct to Dec) 2015 has now reached £4,491 per head. This is an increase of £75 (1.7%) per head when compared with Quarter 3 (July to Sept) 2015. In volume terms, there has been an increase of 0.4% per head, indicating that consumers spent more because they bought more in addition to the effect of increasing prices.
In 2015, current price spending per head grew by £381 when compared with 2014, an increase of 2.2%. Total per head spending has now reached £17,687 in 2015, with “Housing” and “Transport” making the largest contributions of £4,282 and £2,465 respectively. The third-largest contribution to overall per head spending can be seen in “Miscellaneous” ,where spending in 2015 reached £2,257.
Comparing spending by types of goods and services (in current price terms), households have continued to spend most on “Services”. In 2015, spending on “Services” grew to its highest level since the start of the series, and is now at £9,961, contributing 56.9% of total household spending. “Services” include spending on essential items such as “Housing” and “Transport services”.
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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 4 (Oct to Dec) 2015, the revisions to total household final consumption expenditure have been made from Quarter 1 (Jan to Mar) 2015.
Revisions between the previous edition of Consumer Trends (Quarter 3 (July to Sept) 2015) 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: Revisions to household final consumption expenditure, seasonally adjusted
|Revisions to value (current prices)||Revisions to growth (current prices)||Revisions to growth (volume measure)|
|Source: Office for National Statistics|
Download this table Table 1: Revisions to household final consumption expenditure, seasonally adjusted.xls (37.4 kB)
All growth rates in consumer trends are rounded to 1 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 2. 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 (39.4 kB)
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