Consumer trends, UK : April to June 2015

• In Quarter 2 (Apr to Jun) 2015, household spending (adjusted for inflation) grew by 0.8% (£2.3 billion)

• The main contribution to growth can be seen in ‘Recreation and culture’, which includes ‘Games, toys and hobbies’. ‘Recreation and culture’ has increased by 3.2% compared with Quarter 1 (Jan to Mar) 2015. The largest negative contribution to growth can be seen in ‘Alcoholic beverages’ and ‘Electricity, gas and other fuels’

• 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 Jun) 2009. Following falls in 2010 and 2011, it has now increased to £276.6 billion, the highest volume spending since the start of the series. In each quarter since Quarter 2 (Apr to Jun) 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 3.1% higher in Quarter 2 (Apr to Jun) 2015, when compared with Quarter 2 (Apr to Jun) 2014

• The current price value of household spending, which includes inflation, shows how much UK households spent. In Quarter 2 (Apr to Jun) 2015, current price spending increased by 1.0% compared with Quarter 1 (Jan to Mar) 2015

• The household expenditure implied deflator increased by 0.1% in Quarter 2 (Apr to Jun) 2015 compared with the previous quarter (Jan to Mar) 2015

The volume measure provides an estimate of the amount of goods and services purchased by households. In Quarter 2 (Apr to Jun) 2015, it increased by 0.8%. The current price value of household spending (inflation included) shows how much UK households spent. In Quarter 2 (Apr to Jun) 2015, it increased by 1.0% compared with Quarter 1 (Jan to Mar) 2015. Figure 1 compares the levels of current price and volume spending from 2008 onwards.

Trends in household expenditure

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 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 adjust 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 (139.3 Kb Pdf) for UK HHFCE.

Figure 2 shows annual household final consumption expenditure from 1997 onwards, the period from which a full HHFCE dataset is available.

From 1997, household final consumption expenditure:

• in current prices, increased to £232.6 billion in Quarter 3 (Jul to Sep) 2008, falling to £225.0 billion in Quarter 2 (Apr to Jun) 2009, then returning to positive growth in each quarter from Quarter 3 (Jul to Sep) 2009 to reach £288.2 billion in the latest quarter

• in volume terms, increased to £267.4 billion in Quarter 4 (Oct to Dec) 2007, falling to £250.8 billion in Quarter 2 2009 (Apr to Jun) 2009. Following falls in 2010 and 2011, it has now increased to £276.6 billion, the highest volume spending since the start of the series. In each quarter since Quarter 2 (Apr to Jun) 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 2 (Apr to Jun) 2015, the value of household spending in current prices increased by 1.0% on the previous quarter (Jan to Mar 2015) and by 3.7% on the same quarter in 2014 (Apr to Jun). The volume measure of household spending increased by 0.8% on the quarter (Apr to Jun 2015). When comparing the volume measure of household spending in Quarter 2 (Apr to Jun) 2015 with the same quarter in 2014 (Apr to Jun) it increased by 3.1%, reflecting the pattern since 2009 of households spending more for a relatively lower volume of goods and services.

Figure 3 shows spending in volume terms (adjusted for inflation). Spending on ‘Recreation and culture’ has made the largest contribution to the positive growth in Quarter 2 (Apr to Jun) 2015, increasing by 3.2% on the previous quarter. Within ‘Recreation and culture’, ‘Games, toys and hobbies’ showed the largest increase of 4.9% compared with Quarter 1 (Jan to Mar) 2015.

The largest negative contribution to growth over this quarter can be seen in ‘Alcoholic beverages’. This is driven by decreased spending on ‘Wine’, which has fallen by 6.1%, continuing the trend from the previous quarter (Jan to Mar 2015). Within ‘Housing’, ‘Electricity, gas and other fuels’ has also fallen by 3.5% when compared with Q1 (Jan to Mar) 2015.

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 (Apr to Jun) 2015, the seasonally adjusted household expenditure measure of prices, the implied deflator, increased by 0.1%, indicating the increased 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 0.6% higher than in Quarter 2 (Apr to Jun) 2014.

From Blue Book 2011, the Consumer Prices Index (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.

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 2 (Apr to Jun) 2015, the revisions to total household final consumption expenditure have been made in line with the revisions policy for Blue Book 2015. "Impact of Blue Book 2015 Changes on Current Price Gross Domestic Product Estimates, 1997 to 2010" provides an explanation of the method changes introduced in Blue Book 2015.

Revisions between the previous edition of Consumer Trends (Quarter 1 (Jan to Mar) 2015) and the latest HHFCE estimates are summarised in Table 1 ‘Revisions to Household Final Consumption Expenditure’. As well as changes arising from new international standards and guidelines, the revisions reflect methodological changes in the compilation of estimates, updated data from suppliers, as well as adjustments to HHFCE as a result of Supply and Use balancing and the GDP balancing process. The article ‘Changes to National Accounts Blue Book 2015: Improvements to Household Expenditure Estimates’ provides more information on what Supply and Use balancing is, and how it affects HHFCE estimates in Blue Book 2015.

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.

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