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Statistical bulletin: Consumer Trends, Q4 2014 This product is designated as National Statistics

Released: 31 March 2015 Download PDF

Main Points

  • In Q4 2014 (Oct–Dec 2014), household spending (adjusted for inflation) grew by 0.6% (£1.6 billion).
  • The main contribution to growth can be seen in ‘Miscellaneous goods and services’ which has increased by 3.1% compared with Q3 2014 (Jul-Sep 2014). The largest negative contribution to growth can be seen in ‘Transport’ which has fallen by 1.1% compared with Q3 2014 (Jul-Sep 2014).
  • Household spending in volume terms, increased to £259.0 billion in Q4 2007 (Oct-Dec 2007), falling to £244.1 billion in Q2 2009 (Apr-Jun 2009). It has now increased to £263.9 billion, the highest volume spending since the start of the series. Volume spending for the latest three quarters (Apr-Jun 2014, Jul-Sep 2014 and Oct-Dec 2014) has exceeded the previous high in Q4 2007 (Oct-Dec 2007).
  • Household spending when compared with the same quarter a year ago has been showing positive growth each quarter since Q4 2011 (Oct-Dec 2011). It was 3.0% higher in Q4 2014 (Oct-Dec 2014), when compared with Q4 2013 (Oct-Dec 2013), the highest increase since Q4 2007 (Oct-Dec 2007).
  • The current price value of household spending, which includes inflation, shows how much UK households spent. In Q4 2014 (Oct-Dec 2014), current price spending increased by 1.0% compared with Q3 2014 (Jul-Sep 2014).
  • The household expenditure implied deflator grew by 0.4% in Q4 2014 (Oct–Dec 2014) compared with the previous quarter (Jul-Sep 2014).

Summary of Household Expenditure in Q4 2014

The volume measure provides an estimate of the amount of goods and services purchased by households. In Q4 2014 (Oct-Dec 2014), it increased by 0.6%. The current price value of household spending (inflation included) shows how much UK households spent. In Q4 2014 (Oct-Dec 2014), it increased by 1.0% compared with Q3 2014 (Jul-Sep 2014). Figure 1 compares the levels of current price and volume spending from 2008 onwards.

Figure 1: Quarterly Household Final Consumption Expenditure Total (£ billion), Seasonally Adjusted

Figure 1: Quarterly Household Final Consumption Expenditure Total (£ billion), Seasonally Adjusted
Source: Office for National Statistics

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Household Spending by Product

Figure 3 shows spending in volume terms (adjusted for inflation).  Spending on ‘Miscellaneous goods and services’ has made the largest contribution to the positive growth in Q4 2014 (Oct-Dec 2014), increasing by 3.1% on the quarter. Within ‘Miscellaneous goods and services’  ‘Life insurance’ showed the largest increase of 37.3% compared with Q3 2014 (Jul-Sep 2014), (‘Life insurance’ in Household Expenditure is net of claims).  This increase in spending can also be seen in the output measure of GDP.
 
The largest negative contribution to growth over this quarter can be seen in ‘Transport’ which has fallen by 1.1% in volume terms. This is driven by decreased spending on ‘Water transport’, which has fallen by 13.9%, and ‘Vehicle parts and accessories’ which has fallen by 12.1%.

Figure 3: COICOP Contribution to Overall Growth, Domestic Measure, Chained Volume Measure, Seasonally Adjusted

Figure 3:  COICOP Contribution to Overall Growth, Domestic Measure, Chained Volume Measure, Seasonally Adjusted
Source: Office for National Statistics

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Focus on Prices in Household Expenditure

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-Dec 2014) the seasonally adjusted household expenditure measure of prices (the deflator) increased by 0.4%. This continues the trend of positive deflator growth since Q2 2012 (Apr-Jun 2012), indicating the increased prices that households face when purchasing goods or services. The household expenditure deflator (seasonally adjusted) is 1.3% higher than in Q4 2013 (Oct-Dec 2013).

Figure 4: Household Expenditure Implied Deflator, Seasonally Adjusted, Percentage Change

Figure 4: Household Expenditure Implied Deflator, Seasonally Adjusted, Percentage Change
Source: Office for National Statistics

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From 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 the same quarter a year ago, with those of the CPI from 2008 onwards.

Figure 5: Household Expenditure Implied Deflator v CPI, Not Seasonally Adjusted, Year-on-Year, Percentage Change

Figure 5: Household Expenditure Implied Deflator v CPI, Not Seasonally Adjusted, Year-on-Year, Percentage Change
Source: Office for National Statistics

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Household Spending per Head

In current price terms, seasonally adjusted, consumer spending in Q4 2014 (Oct-Dec 2014) has now reached £4,337 per head. This is an increase of £37 per head when compared to Q3 2014 (Jul-Sep 2014). In volume terms, there has been an increase of £18 per head, indicating that consumers spent more because they bought more in addition to the affect of positive price increase.

In 2014 current price spending per head grew by £583 when compared with 2013, an increase of 3.5%. Although ‘Housing’ and ‘Transport’ contribute the most to overall spending, the largest increase between 2013 and 2014 can be seen in ‘Financial services’, where spending rose from £231 to £351, an increase of £120.

When analysing spending by types of goods and services (in current price terms), households have continued to spend most on 'Services'. In 2014, spending on 'Services' grew to its highest level since the start of the series, and is now at £9,536, contributing 56% of total household spending. ‘Services’ include spending on essential items such as ‘Housing’ and ‘Transport services’.

When comparing growth rates in types of goods and services (in current price terms) over a longer period, all product types show a marked decline in 2009. Since then all categories have shown overall growth, with the exception of non-durable goods which, after an initial upturn in 2010, remained broadly flat until 2014.  During 2014, spending per head on non-durable goods has fallen by 1.6% when compared to 2013, mainly due to a fall in expenditure on ‘Housing’ and ‘Transport fuels’. In the latest year (2014) within ‘Housing’ a drop in volume spending in ‘Electricity and gas’ has seen per head expenditure fall.  Contrastingly, the fall in per head expenditure in ‘Transport fuels’ is as a result of falling prices, with volume spending remaining broadly unchanged.

Figure 6: Household Expenditure Spending per Head, Annual, Percentage Growth

Figure 6: Household Expenditure Spending per Head, Annual, Percentage Growth
Source: Office for National Statistics

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Household Final Consumption Expenditure Revisions Q4 2014 (Oct-Dec 2014)

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 Q4 2014 (Oct-Dec 2014), the revisions to total household final consumption expenditure have been made from Q1 2014 (Jan-Mar 2014).

Revisions between the previous edition of Consumer Trends, Q3 2014, (Jul-Sep 2014) 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: Household Final Consumption Expenditure Revisions, Q4 2014

  £ million % %
Revisions to value (current prices) Revisions to growth (current prices) Revisions to growth (volume measure)
2014 Q1 618 0.2 0.2
2014 Q2 1,003 0.1 _
2014 Q3 402 -0.2 0.1

Table source: Office for National Statistics

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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 above.

Guidance and Methodology

HHFCE terms and definitions are outlined in Table 3.  Consumer Trends guidance offers fuller details regarding this publication.

Table 2: Table of Household Final Consumption Expenditure Terms and Definitions

Term Description
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.

Table source: Office for National Statistics

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Background notes

  1. Date of this publication: 31 March 2015

  2. Next Edition:  The next edition of Consumer Trends, Q1 2015, will be published on 30 June 2015.  Estimates will be consistent with Blue Book 2014.

  3. Release policy.  Household Final Consumption Expenditure estimates produced in Consumer Trends are produced according to the National Accounts timetable. The preliminary estimate of GDP for the first quarter of 2015 (Jan - Mar 2015) will be published on 28 April 2015, followed by the second estimate of GDP on 28 May 2015. The next full set of Quarterly National Accounts will be published on 30 June 2015.

  4. Basic Quality Information for Consumer Trends Statistical Bulletin

    Summary Quality reports: A Summary Quality Report 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 2011 price structures i.e. the chained volume measure estimate in 2011 equals the current price value of expenditure in 2011.

    Growth in each year up to and including 2011 is calculated at average prices of the previous year. Growth from 2011 onwards is calculated at average prices of 2011. Volume series are only additive for the most recent periods, i.e. annual data for 2011 onwards and quarterly data for quarter one 2012 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 quite clear when they do occur.

    Coherence: 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.

  5. Further information: 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.

  6. The ONS compliance plan can be found on the ONS website.

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  8. Code of practice: National Statistics are produced to high professional standards set out in the UK Statistics Authority's Code of Practice for Official Statistics. They undergo regular quality assurance reviews to ensure that they meet customer needs. They are produced free from any political interference.

  9. Details of the policy governing the release of new data are available by visiting www.statisticsauthority.gov.uk/assessment/code-of-practice/index.html or from the Media Relations Office email: media.relations@ons.gsi.gov.uk

    These National Statistics are produced to high professional standards and released according to the arrangements approved by the UK Statistics Authority.

Statistical contacts

Name Phone Department Email
David Matthewson +44 (0)1633 455612 Household Accounts Delivery consumer.trends@ons.gsi.gov.uk
Get all the tables for this publication in the data section of this publication .
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