1. Main points

  • In Quarter 4 (Oct to Dec) 2016, household spending (adjusted for inflation) grew by 0.7% (£2.0 billion) compared with Quarter 3 (July to Sept) 2016.
  • The main contribution to growth can be seen in “Housing”, this has increased by 1.3% compared with Quarter 3 2016.
  • Household spending in volume terms increased to £277.1 billion in Quarter 4 2007 before falling to £260.1 billion in Quarter 2 2009; following falls in 2010 and 2011, it increased to £294.8 billion in Quarter 4 2016, the highest volume spending since the start of the series, in each quarter since Quarter 3 2014, volume spending has exceeded the previous high in Quarter 4 2007.
  • Household spending when compared with the same quarter a year ago has been showing positive growth each quarter since Quarter 4 2011; it was 2.9% higher in Quarter 4 2016, when compared with Quarter 4 2015.
  • The current price value of household spending, which includes inflation, shows how much UK households spent; in Quarter 4 2016, current price spending increased by 1.4% compared with Quarter 3 2016.
  • The household expenditure implied deflator increased by 0.7% in Quarter 4 2016 compared with the previous quarter.
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2. Summary of household expenditure in Quarter 4 (Oct to Dec) 2016

The volume measure provides an estimate of the amount of goods and services purchased by households. In Quarter 4 (Oct to Dec) 2016, it increased by 0.7%. The current price value of household spending (inflation included) shows how much UK households spent. In Quarter 4 2016, it increased by 1.4% compared with Quarter 3 (July to Sept) 2016. Figure 1 compares the levels of current price and volume spending from Quarter 4 2010 onwards.

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4. Household spending by product

Analysis on spending by product relates to the domestic measure. In Quarter 4 (Oct to Dec) 2016, domestic spending in volume terms grew by 0.8% when compared with Quarter 3 (July to Sept) 2016. Figure 3 shows spending in volume terms (adjusted for inflation). Spending on “Housing” has made the largest contribution to the positive growth in Quarter 4 2016, increasing by 1.3% on the previous quarter, (0.3% of overall growth). Within this area, “Mains gas and LPG” showed the largest increase of 22.7% compared with Quarter 3 2016.

Figure 4 shows spending in volume terms (domestic measure, adjusted for inflation) between 2015 and 2016. During 2016, expenditure grew by 2.6 % when compared with 2015. This is the strongest annual growth since 2007 when expenditure grew by 2.8%. The main contributions to positive growth can be seen in “Recreation and culture”, “Miscellaneous” and “Transport”, contributing 0.6%, 0.4% and 0.3% respectively. With the exception of “Alcohol, tobacco and narcotics” all other areas have shown positive growth when compared with 2015.

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5. Focus on prices in household expenditure

The household expenditure measure of prices is an important component of the gross domestic product (GDP) deflator which is used to determine price pressures in the economy. Figure 5 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 implied deflator, increased by 0.7% compared with Quarter 3 (July to Sept) 2016, indicating the increase in prices that households face when purchasing goods or services.

The household expenditure deflator (seasonally adjusted) is 1.6% higher than in Quarter 4 (Oct to Dec) 2015.

From the Blue Book 2011, the consumer price index (CPI) has been used to deflate estimates of household expenditure. Figure 6 compares the household expenditure implied deflator growths in percentage terms, quarter-on-quarter a year ago, with those of the CPI from Quarter 4 2010 onwards.

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6. Household spending per head

In current price terms, seasonally adjusted, consumer spending in Quarter 4 (Oct to Dec) 2016 has now reached £4,655 per head. This is an increase of £54 (positive 1.2%) per head when compared with Quarter 3 (July to Sept) 2016. In volume terms, there has been an increase of 0.5% per head, indicating that consumers spent more because they bought more in addition to the effect of increasing prices.

In 2016, current price spending per head grew by £578 when compared with 2015, an increase of 3.3%. Total per head spending has now reached £18,326 in 2016, with “Housing” and “Transport” making the largest contributions of £4,604 and £2,490 respectively. The third-largest contribution to overall per head spending can be seen in “Miscellaneous”, where spending in 2016 reached £2,343.

Comparing spending by types of goods and services (in current price terms), households have continued to spend most on “Services”. In 2016, spending on “Services” grew to its highest level since the start of the series, and is now at £10,416, contributing 57.6% of total household spending. “Services” include spending on essential items such as “Housing” and “Transport services”.

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7. Household final consumption expenditure revisions Quarter 4 (Oct to Dec) 2016

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) 2016, 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 3 (July to Sept) 2016) 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.

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.

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8. User engagement seminar

We would like to invite users of the Household Income, Expenditure and NPISH estimates to a user engagement seminar.

Date – Wednesday the 26th April 2017
Time – 1pm – 5pm
Venue – 110 Rochester Row - HFMA, London, SW1P 1JP

This seminar will provide an opportunity to engage directly with key stakeholders, users and expert individuals to raise their awareness of the new data sources and methods used to produce the Household Income, Expenditure and NPISH estimates.

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9. Quality and methodology

The Consumer trends Quality and methodology information document contains important information on:

  • 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

HHFCE terms and definitions are outlined in Table 2. Consumer trends guidance offers fuller details regarding this publication.

Main quality issues

Household expenditure volume series are chainlinked annually. Estimates in this Consumer trends 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 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 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.

Further information

Further quarterly national accounts, quarterly sector accounts and financial accounts tables are available in the UK Economic Accounts.

Details of the policy governing the release of new data are available by visiting the UK Statistics Authority website.

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Contact details for this Statistical bulletin

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