Consumer trends, UK: October to December 2018

• In Quarter 4 (Oct to Dec) 2018, household spending (adjusted for inflation) grew by 0.3% compared with Quarter 3 (July to Sept) 2018.

• The main contributor to growth was housing, which increased by 0.6% compared with Quarter 3 2018.

• Household spending grew by 1.7% in Quarter 4 2018, when compared with Quarter 4 2017.

• Current price spending increased by 0.9% in Quarter 4 2018 compared with Quarter 3 2018.

The quarterly Consumer trends data are typically published around 90 days after the end of the quarter.

Unless otherwise stated all figures are chained volume measure, seasonally adjusted.

The data are consistent with Blue Book 2018.

Household final consumption expenditure (HHFCE) includes spending on goods and services except for: buying or extending a house, investment in valuables (for example, paintings and antiques) 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 gross domestic product (GDP). There are two measures:

• current prices – also known as nominal, cash or value series are expressed in terms of the prices of the time period being estimated

• chained volume measure – this measure removes the effects of inflation

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 for UK HHFCE (Word, 58KB).

Time series data for Consumer trends are also available.

In Quarter 4 (Oct to Dec) 2018, the chained volume measure of household spending increased by 0.3%. The current price value of household spending increased by 0.9% compared with Quarter 3 (July to Sept) 2018. Figure 1 shows the levels of current price and volume spending from Quarter 1 (Jan to Mar) 1997 onwards.

In Quarter 4 2018, the value of household spending in current prices increased by 4.2% on the same quarter in 2017. When comparing the volume measure of household spending in Quarter 4 2018 with the same quarter in 2017, it increased by 1.7%.

The annual year-on-year volume growth has fallen to 1.8%, its lowest rate since 2012 (Table 1). The quarterly growth remained stable in the first two quarters of 2018 at 0.5%, decreasing to 0.4% in Quarter 3 and 0.3% in Quarter 4. This trend is consistent with the Bank of England’s Inflation Report: February 2019 statement:

“Consumption continued to grow modestly, supported by a recovery in real income growth. However, some indicators of consumer spending weakened towards the end of the year.”

Domestic growth in consumer spending in Quarter 4 (Oct to Dec) 2018 was 0.4%. Figure 2 shows the main contributions to this growth were housing and furnishings, household equipment and routine household maintenance, which contributed 0.16% and 0.14% respectively. This was partially offset by miscellaneous goods and services, which contributed negative 0.14%.

The 0.16% contribution from housing was due to its growth of 0.6% quarter-on-quarter. Within that category, the growth was driven mainly by imputed rentals, which grew by 0.5% quarter-on-quarter, contributing 0.08% to total domestic expenditure growth.

At the most detailed level we record, Table 2 shows the areas that displayed the highest growth in the latest quarter.

Table 3 shows the area that displayed the largest decline in Quarter 4 2018.

In current price terms, seasonally adjusted, consumer spending in Quarter 4 (Oct to Dec) 2018 has now reached £5,099 per head. This is an increase of £37 (positive 0.7%) per head when compared with Quarter 3 (July to Sept) 2018. In volume terms, there has been an increase of £7 (positive 0.1%) per head.

In 2018, current price spending per head grew by £670 when compared with 2017, an increase of 3.4%. Total spending per head has now reached £20,172 in 2018, with housing and transport making the largest contributions of £5,298 and £2,654 respectively. The third-largest contribution to overall spending per head can be seen in miscellaneous, where spending in 2018 reached £2,594.

Comparing spending by types of goods and services (in current price terms), households have continued to spend most on services as shown in Figure 4. In 2018, spending on services remained on an upward trend since 2009, and is now at £11,579, contributing 57.9% of total household spending. Services includes spending on essential items such as housing and transport services.

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) 2018, the revisions to total household final consumption expenditure have been made from Quarter 1 (Jan to Mar) 2018.

Revisions between the previous edition of Consumer trends (Quarter 3 (July to Sept) 2018) and the latest HHFCE estimates are summarised in Table 4. 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.

Family spending – This comes from the Living Costs and Food (LCF) Survey, which surveys households on their income and expenditure on consumer goods and services. We primarily use data from the LCF survey to compile household final consumption expenditure (HHFCE) data on food.

Annual Business Survey – This survey includes the turnover of businesses in the retail sector. We primarily use these data to compile HHFCE data on clothing and footwear.

Retail Sales – This comes from the Retail Sales Inquiry, which surveys businesses in the retail sector on their sales. We primarily use data from retail sales to assign a quarterly path to the annual figures received from the Annual Business Survey.

Quarterly National Accounts – Our data feed into gross domestic product (GDP), for which it makes up roughly 60% of the expenditure measure. More details about this quarter’s GDP and its components are available in the latest release. The quarterly national accounts release also contains analysis on the data included within this publication and its implications for the wider economy.

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

Consumer trends guidance offers fuller details regarding this publication.

We have published a Quality and Methodology Information report for this statistical bulletin and details on changes to estimates and methodology in Blue Book 2018.

The Consumer trends Quality and Methodology Information report 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.

Full information on the Classification of Individual Consumption by Purpose (COICOP) classification system can be found on the United Nations Statistics Division website.

Quality of the estimates

Household expenditure volume series are chain-linked annually. Estimates in this Consumer trends bulletin are now based on 2016 price structures; that is, the chained volume measure estimate in 2016 equals the current price value of expenditure in 2016.

Growth in each year up to and including 2016 is calculated at average prices of the previous year. Growth from 2016 onwards is calculated at average prices of 2016. Volume series are only additive for the most recent periods; that is, annual data for 2016 onwards and quarterly data for Quarter 1 (Jan to Mar) 2017 onwards.

Very few statistical revisions arise because 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 that 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. The GDP estimates contain data from three different approaches (output, expenditure and income approach). In the UK, the estimates of the three approaches are balanced to produce the best estimate of GDP.