The volume measure provides an estimate of the amount of goods and services purchased by households. In Q3 2012 it increased by 0.4 per cent, meaning it was 4.8 per cent below the peak of pre recession spending in Q4 2007.
The current price value of household spending (inflation included) shows how much UK households spent. In Q3 2012 it increased by 0.8 per cent on the quarter, meaning it was 10.5 per cent higher than Q4 2007.
In Q3 2012, the value of UK household spending per head, in current price terms, was £3,840, an increase of 0.6 per cent on the quarter, £241 higher than in Q4 2007.
Household Final Consumption Expenditure (HHFCE) includes spending on goods and services except buying or extending a house, investment in valuables (paintings, antiques) or purchasing second-hand goods. Explanations for these exceptions and the related concepts are available in the Consumer Trends guidance and methodology section.
Household expenditure is used in the National Accounts to measure the contribution of households to economic growth and accounts for about 60 per cent of GDP. There are two 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.
Analysis in this section of the Statistical Release is conducted from 1997 because this is the period from which revisions were applied in Blue Book 2012.
Starting in 1997 household final consumption expenditure:
Increased in current prices to £220.5 billion (in Q1 2008), before falling to £212.2 billion in Q2 2009, then returning to predominantly positive growth to reach £243.3 billion in the present quarter.
Increased to £228.5 billion in volume terms in Q4 2007, before falling to £213.3 billion in Q2 2009. It then increased slightly between Q3 2009 and Q4 2010, but since then has fallen back and is still lower than Q4 2010.
Pre-2007, increases in household spending were a consequence of households facing higher prices and buying more goods and services. However, in 2008 and 2009 households spent less because they bought less. Since 2009, household spending has increased, but the volume of goods and services purchased has been broadly flat.
In Q3 2012, the value of household spending in current prices increased by 0.8 per cent on the quarter, and by 4.0 per cent on the same quarter in 2011. The volume measure of household spending increased by 0.4 per cent on the quarter, and 1.3 per cent on the same quarter in 2011.
The increases in current price estimates and relative weakness (small increases or falls) in the volume estimates (inflation adjusted) signify households are spending more for a lower volume of goods and services than in the past.
Trends in household spending per head have followed a similar pattern to overall household expenditure. In Q3 2012 the value of current price spending per head was £3,840, an increase of £23 on the previous quarter. This continued the increases of the past year, between Q3 2011 and Q3 2012 household spending per head increased by £119.
In Q1 1997 the value of household spending per head in current prices was £2,155. It reached £3,599 in Q4 2007 before falling to £3,435 in Q2 2009. Since that date the current price expenditure per head has continued to increase to reach the Q3 2012 level of £3,840.
The volume measure (inflation adjusted) of household spending per head increased to £3,431 in Q3 2012, up £7 from Q2 2012.
In the latest quarter, the largest share of household spending per head has been on ‘Housing’ (which includes spending on electricity, gas and rental charges). This accounts for almost 25 per cent of current price spending. In the latest quarter, spending on ‘Housing’ decreased to £942 per head, a fall of £5 on the previous quarter. The main driver of this fall was reduced spending on ‘Gas’, which fell by £18. This fall is emphasised by higher than average spending in Q2 2012, when The Met Office recorded the coldest April and June for over 20 years.
Spending on ‘Transport’ is the next largest component of overall spending this quarter, with current expenditure rising to £565, a rise of £3 on the quarter. ‘Transport’ expenditure includes the purchase of vehicles, the fuel to power vehicles, and other modes of transport. This reflects an increase in purchases of 'Motor cars', which has increased by £10 to £164.
With additional spending on Olympic and Paralympic tickets this quarter, spending per head on 'Recreational and sporting services' has increased by £9 to a record level of £37.
In volume terms (adjusted for inflation), spending on ‘Recreation and Culture’ made the largest contribution to the positive growth in Q3 2012, increasing by 3.3 per cent on the quarter. ‘Recreational and Sporting Services’ (which has this quarter included sales of Olympic and Paralympic tickets), has made the main contribution to growth, increasing by 31.7 per cent this quarter. This is an increase of 34.3 per cent when compared to Q3 2011.
‘Transport’ also contributed to the overall increase in volume spending, with an increase of 1.3 per cent. Within ‘Transport’, 'Motor cars' were the main positive contribution to growth with an increase of 6.9 per cent when compared to the previous quarter, and 23.1 per cent when compared to Q3 2011. Even with the positive growth in the latest 2 quarters the volume of purchases in Q3 2012 is still weaker in comparison to before the contraction in GDP in 2008.
The largest negative contribution in the current quarter can be seen in ‘Housing’ which has fallen by 2.1 per cent this quarter. In particular, there has been a large decrease in sales of ‘Gas’ which has fallen by 20.1 per cent in volume terms. This large decrease is partially due to a higher than average Q2 2012, when The Met Office recorded unseasonably low temperatures for the time of year, meaning households spent more on heating than normal.
The household expenditure measure of prices is an important component of the GDP deflator which is used to determine price pressures in the economy.
This quarter the seasonally adjusted household expenditure measure of prices (the deflator) increased by 0.4 per cent. The household expenditure deflator (seasonally adjusted) is now 2.8 per cent higher than in Q3 2011. This continues the trend of positive deflator growth since 2009 Q2, indicating the increased prices that households face when purchasing goods or services.
Although the household expenditure measure of price inflation is positive (indicating increasing prices) the growth in the first three quarters of 2012 is weaker than in 2010 and 2011. This indicates that the rate of increase in prices has slowed.
In Q3 2012, the largest increases in percentage terms in the household deflator were seen in ‘Housing’ and ‘Restaurants and Hotels’ which grew by 1.7 per cent and 1.3 per cent respectively.
It should be noted that the CPI and RPI are the two official main measures of inflation. From Blue Book 2011, CPI has been used to deflate estimates of Household Expenditure.
Households bought tickets, but the wider Olympic and Paralympic effects are more difficult to identify in consumer demand.
During Q3 2012, London played host to the 2012 Olympic and Paralympic games. In line with National Accounts methods expenditure on ticket sales has been included in the latest quarter’s estimate, so that all expenditure is captured at the point the service was provided, rather than when the tickets were purchased. For household expenditure the ticket sales are included in the category 'Recreational and sporting services' which captures household spending on services provided by sports stadia, racecourses, golf courses and other sporting and recreation venues.
This section uses current price data to analyse the changes in spending related to the Olympics.
Spending on Olympic and Paralympic tickets accounted for almost £500 million of household spending in 'Recreational and sporting services'. The increase in spending between Q2 2012 and Q3 2012 was exceptional in terms of growth for this category at £591 million (34 per cent on the quarter) and took the total amount spent by households to £2.3 billion.
Household spending grew consistently for ten years from £849 million in Q1 1997 to £1,692 million in Q1 2007. Household spending on 'Recreational and sporting services' was then flat for the four years between 2007 and 2011 (a period spanning the recession), with total spending remaining close to £1,500 million.
In addition to changes in spending on recreational and sporting services it might be expected that other categories of household spending were affected; for example, changes in spending on eating at home, eating out, travel to Olympic and Paralympic venues and accommodation. If there were changes in households spending behaviour these might appear in spending on food, alcohol, transport, restaurants and hotels.
Household spending on food for “eating at home” increased by 1.4 per cent while the volume measure of food showed that households bought 0.9 per cent more food, so the increase in spending was a combination of price changes and an increase in the amount of goods purchased.
In terms of “eating out” in restaurants spending increased by 1.6 per cent and when adjusted for inflation increased by 0.3 per cent. But neither of these changes were particularly strong in the context of previous growth rates. This suggests that any positive or negative impact from the Olympic and Paralympic Games was counter-balanced by other changes in households spending for this category.
Spending on accommodation services increased by 1.2 per cent quarter on quarter but fell by 0.2 per cent when adjusted for inflation. Again, because these estimates are not unusual for the quarter this suggests that any positive or negative impact from the Olympic and Paralympic Games was counter-balanced by other changes in spending on this category.
In comparison, the Index of Services publication showed a 2.0 per cent increase in output adjusted for inflation in the Distribution, hotels and restaurants industry between Q3 and Q2 2012. This stronger growth could be related to the business to business spend or the impact of the distribution industry.
In Q3 2012 the major changes in spending on 'Transport' by households were driven by the purchase of motor vehicles. These estimates are based on information from the Society of Motor Manufacturers and Traders.
Apart from the ticket sales the possible direction of any Olympic and Paralympic Games effect on household spending is difficult to isolate. This is because both UK and foreign tourists could be substituting their usual expenditure for Olympic and Paralympic Games related expenditure in the same category. For example, households spending on accommodation related to Olympic and Paralympic events may have been a substitute for another holiday, and therefore not created any additional hotel spending.
Between Q1 1997 and Q1 2008 UK household spending abroad (imports of tourism) increased from £3.5 billion to £9.1 billion (current prices seasonally adjusted). Following this, spending fell rapidly until Q2 2009. Spending by UK households abroad was then relatively stable up until Q3 2011, after which it has grown in consecutive quarters to its current level.
In Q3 2012 UK households spent £7.4 billion abroad, its highest level since Q1 2009. This increase in spending fits with the estimates produced in the ONS publication, Overseas Travel and Tourism which showed that:
During the period July to September, UK residents made 1 per cent more visits abroad than in the corresponding period in 2011, and spent 7 per cent more on these visits.
The Met Office also reported that summer 2012 (June, July and August) was the wettest in 100 years, which could have influenced UK households decision to holiday abroad.
Foreign households spending in the UK (exports of tourism) was relatively flat between Q1 1997 and Q4 2003. Since then, the amount of money spent by foreign tourists when holidaying in the UK has increased from £3.7 billion to £6.0 billion in Q3 2012. Again the Overseas Travel and Tourism publication supports this:
During the period July to September 2012, overseas residents made 4 per cent fewer visits to the UK than in the corresponding period in 2011. However, they spent 6 per cent more on these visits.
Spending by foreign tourists holidaying in the UK has continued to grow since Q3 2010 in current prices seasonally adjusted terms. Whilst the latest quarter is continuing the trend, the fact that the increase in spending is not exceptional suggests that foreign tourists coming to the UK to attend Olympic and Paralympic events were replacing rather than adding to the normal numbers who holiday in the UK.
The level of UK tourist spending abroad and foreign tourist spending in the UK is captured by the International Passenger survey (IPS). The foreign tourist expenditure is subsequently removed from the HHFCE estimate at National level (exports of goods and services). Exports of goods and services are therefore normally expressed as a negative value. Information on UK residents’ spending abroad is also collected by the IPS. This is then included in the HHFCE estimate at National level (imports of goods and services).
When analysing patterns of imports and exports of tourism, there are a number of influencing factors, for example changing popularity of holiday destinations and currency exchange rates.
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 Q3 2012, the revisions to total household final consumption expenditure have been made from the first quarter of 2011.
Revisions between the previous edition of Consumer Trends (Q2 2012) 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.
|Revisions to value (current prices)||Revisions to growth (current prices)||Revisions to growth (volume measure)|
Consumer Trends guidance offers full details regarding this publication.
Date of this publication: 21 December, 2012.
Next Edition: The next edition of Consumer Trends, Q4 2012, will be published on 27 March 2013. Estimates will be consistent with Blue Book 2012.
ONS would like to invite users of the household expenditure and income estimates to a user seminar.
The seminar will cover the Consumer Trends and Economic Position of Households publications, and the detailed estimates contained within, which feed into the estimate of the size of the UK economy (GDP).
This event will offer the opportunity for suppliers and users of the data to discuss their priorities.
Household Final Consumption Expenditure estimates produced in Consumer Trends are produced according to the National Accounts timetable. The preliminary estimate of GDP for the fourth quarter of 2012 will be published on 25 January 2013, followed by the second estimate of GDP on 27 February 2013. The next full set of quarterly national accounts will be published on 27 March 2013.
Basic Quality Information for Consumer Trends Statistical Bulletin
Summary Quality reports
A Summary Quality Report (134.3 Kb Pdf) for this Statistical Bulletin can be found on the National Statistics website.
Key quality issues
Household expenditure volume series are chainlinked annually. Estimates in this Consumer Trends are now based on 2009 price structures, i.e the chained volume measure estimate in 2009 equals the current price value of expenditure in 2009.
Growth in each year up to and including 2009 is calculated at average prices of the previous year. Growth from 2009 onwards is calculated at average prices of 2009. Volume series are only additive for the most recent periods; annual data for 2009 onwards and quarterly data for quarter one 2010 onwards.
Common pitfalls in interpreting series: 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 quite clear when they do occur.
Household Final Consumption Expenditure estimates published in Consumer Trends are a component of the 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 Quarterly National Accounts, Quarterly Sector Accounts and Financial Accounts tables are available in the United Kingdom Economic Accounts.
Details of the policy governing the release of new data are available from the press office.
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