User guide to consumer trends

Household final consumption expenditure (HHFCE) within the context of the UK National Accounts is defined as personal expenditure on goods and services, including imputed rent of owner-occupied dwellings, the administrative costs of non-life insurance and life insurance, and superannuation schemes. Business expenditure and expenses, interest and other transfer payments and capital expenditure on dwellings are all excluded from household final consumption.

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. These and other points that affect the general definition of HHFCE are discussed in greater detail in definitions and conventions for UK HHFCE.

The expenditure information contained within the consumer trends release is used by a range of public and private bodies as well as individuals. An example is the use of implied deflators. These are an important measure of price pressures for goods and services within the UK economy and are therefore useful to government policymakers and the Bank of England.

The total, national household final consumption expenditure (HHFCE) estimate contained in consumer trends accounts for approximately 60% of the gross domestic product (GDP) expenditure measure produced as part of the UK output, income and expenditure and quarterly national accounts statistical bulletins.

HHFCE estimates from the consumer trends release are also used in our other statistical outputs and releases, including the household saving ratio, the Effects of taxes and benefits on UK household income and Annual Abstract of Statistics. HHFCE estimates are used by the private sector to analyse demand for different goods and services, for example, we have provided further detail on the changes in household expenditure on fuel to consultancy firms.

We welcome feedback and suggestions on this release through the email address consumer.trends@ons.gov.uk.

The quarterly and annual estimates of household final consumption expenditure (HHFCE) at current and previous year prices are built up commodity by commodity from a variety of independent sources. Each component series within HHFCE is individually seasonally adjusted in current price and volume terms.

The main sources of data used to compile HHFCE estimates are the Retail Sales Inquiry (RSI) and the Living Costs and Food Survey (LCF). Further detail, including the strengths and weaknesses of source data, are considered in HHFCE sources (PDF, 171KB).

In the consumer trends release, household final consumption expenditure (HHFCE) estimates are categorised according to international classification of individual consumption by purpose (COICOP) standards. More information on COICOP classification can be found in Classification of household consumption headings (PDF, 134KB) and from the UN Statistics Division.

The categories with COICOP codes are as follows:

• 01 Food and non-alcoholic beverages

• 02 Alcoholic beverages, tobacco and narcotics

• 03 Clothing and footwear

• 04 Housing, water, electricity, gas and other fuels

• 05 Furnishings, household equipment and routine household maintenance

• 06 Health

• 07 Transport

• 08 Communication

• 09 Recreation and culture

• 10 Education

• 11 Restaurants and hotels

• 12 Miscellaneous goods and services

Tables are also presented for durable goods, semi-durable goods, non-durable goods and services using COICOP divisions.

Each table has six variants, denoted by a suffix:

• CN for current prices, not seasonally adjusted

• CS for current prices, seasonally adjusted

• KN for chained volumes, not seasonally adjusted

• KS for chained volumes, seasonally adjusted

• DN for implied deflators, not seasonally adjusted

• DS for implied deflators, seasonally adjusted

Implied deflators are an indirect measure of inflation and are presented in the consumer trends briefing.

The consumer trends release provides volume measures of household final consumption expenditure (HHFCE) estimates. These chained volume measures (CVMs) allow users to identify changes in expenditure on a good (or service) resulting from a change in the quantity purchased, rather than a change in the price of that good (or service).

Since the Quarter 2 (Apr to June) 2003 edition of consumer trends, volume measure estimates (.KN and .KS tables) have been produced by a process called annual chain-linking. This method is used to ensure changes in the structure of the economy are reflected in statistics of growth as early as possible.

Annual chain-linking uses a reference year in which current price series and the corresponding volume measures are equal in pounds sterling (or take the value 100 in index number form). The current reference year is 2018. Although the use of chain-linking produces more accurate growth rates, there is a loss of additivity (components no longer sum to totals) for annual estimates before 2018 and Quarter 1 (Jan to Mar) 2019 for quarters.

More information on annual chain-linking can be found in Definitions and conventions for UK HHFCE.

An analysis of revisions to the main household expenditure series – growth rates of total expenditure at current prices and in chained volume terms – appears at the end of the consumer trends statistical bulletin.

Benchmarks

The compilation of annual national accounts is mainly based on regular surveys and administrative data sources. However, in some cases it is necessary to use less frequent data sources or bespoke academic or market research to fill data gaps in areas that are difficult to measure. Wherever possible we try to update these "benchmark" data sources at least once every five years.

Several household expenditure methods using "benchmarks" have been updated and have resulted in significant data revisions. Classification Of Individual Consumption according to Purpose (COICOPs) affected include (but are not limited to): Major durables for outdoor recreation (COICOP 09.2.1), Social protection (12.4), Water transport (07.3.4), Motor cars (07.1.1) and Hospital services (06.3).

Furthermore, enhancements to both domestic remote gambling and imports of remote gambling have been made, which form part of Games of chance (COICOP 09.4.3) and UK tourist expenditure abroad respectively.

Insurance and pensions

Two new data sources have been introduced in production of our Blue Book 2022-consistent Insurance and pensions household expenditure estimates.

Solvency (SII) is a framework that the Prudential Regulatory Authority (PRA), part of the Bank of England, uses to regulate UK insurance companies. To improve estimates for insurance, the Office for National Statistics (ONS) is introducing this SII administrative data source. For household expenditure, as well as revisions to Life insurance (COICOP 12.5.1), this is an improvement on Living Costs and Food (LCF) Survey estimates for Non-life insurance (COICOPs 12.5.2 to 12.5.4).

Because of the enhanced granularity of the SII data, we can now also provide no-zero data for expenditure on Other insurance (COICOP 12.5.5).

Additionally, SII data have been used as a primary source to update other household expenditure "benchmarks" as described previously for expenditure on services that are funded directly by insurance companies. These include services for dwelling maintenance and repair (COICOP 04.3.2), Outpatient services (COICOP 06.2), Hospital services (COICOP 06.3) and Maintenance and repair of personal transport equipment (COICOP 07.2.3).

The Financial Survey of Pension Schemes (FSPS) is a quarterly survey run by the ONS that collects data on income and expenditure, transactions, assets and liabilities of UK-funded occupational pension schemes. It replaces the MQ5 Pension Funds Survey (PFS), which previously informed the household expenditure estimate of pension funds as part of the Financial services other than FISIM [financial intermediation services indirectly measured](COICOP 12.6.2) series.

Trade

Continuous improvements to trade statistics are ongoing in the national accounts. For Blue Book 2022, estimates of international travel have been aligned with revised International Passenger Survey data from 2009 onwards as outlined in the Travel trends: 2019 article. This has led to revisions of UK domestic household expenditure on Air transport (COICOP 07.3.3) and Accommodation services (COICOP 11.2), as well as estimates of net tourism expenditure that, when combined with UK domestic expenditure, forms the UK national estimate of household final consumption expenditure (HHFCE).

The household final consumption expenditure (HHFCE) estimates in the consumer trends release are consistent with those appearing at Tables E1 to E4 of the quarterly national accounts statistical bulletin for the same period.

This section outlines some of the main outputs and responsibilities of the Office for National Statistics (ONS) HH Delivery and Development Branches in producing household final consumption expenditure (HHFCE) estimates.

It also summarises what work is underway within the ONS to further develop and improve the outputs to address existing limitations and also prepare for future changes (including the implementation of European statistical requirements). This will help users understand the limitations of the currently published estimates but also highlight developments that will improve the estimates. As progress is made with the improvements listed here, we will provide updates and share information on the extent of planned revisions.

Main outputs and responsibilities for household final consumption expenditure

Primary objectives of HH Delivery and Development teams in producing household expenditure estimates

HHFCE is part of national accounts. As such, the team’s responsibilities include:

• processing of HHFCE estimates to be included in the quarterly gross domestic product (GDP) releases

• providing supply and use balanced HHFCE estimates for the annual Blue Book; a description of the supply and use process can be found in the input–output supply and use tables

• reviewing methodology in household expenditure for national accounts to ensure a robust set of estimates

• publishing consumer trends and HHFCE estimates, presenting a comprehensive set of estimates of household final consumption quarterly, in line with the national accounts schedule

• producing estimates that conform to the European System of Accounts 2010 (ESA 2010) classification of individual consumption by purpose (COICOP)

• producing and delivering HHFCE data to Eurostat – this delivery is required to comply with European legislation