Consumer trends, UK: October to December 2019

• In Quarter 4 (Oct to Dec) 2019, household spending (adjusted for inflation) growth was 0.0% compared with Quarter 3 (July to Sept) 2019.

• The largest negative contribution to growth was from net tourism, which fell by negative 13.2% compared with Quarter 3 2019.

• The largest positive contribution to growth was from housing, water, gas, electricity and other fuels, which increased by positive 0.6% compared with Quarter 3 2019.

• Household spending grew by positive 0.9% in Quarter 4 2019 compared with Quarter 4 2018.

• Current price spending decreased by negative 0.1% in Quarter 4 2019 compared with Quarter 3 2019.

As the UK leaves the EU, it is important that our statistics continue to be of high quality and are internationally comparable. During the transition period, those UK statistics that align with EU practice and rules will continue to do so in the same way as before 31 January 2020.

After the transition period, we will continue to produce our national accounts statistics in line with the UK Statistics Authority’s Code of Practice for Statistics and in accordance with internationally agreed statistical guidance and standards.

The Withdrawal Agreement outlines a need for UK Gross National Income (a fundamental component of the national accounts, which includes gross domestic product (GDP)) statistics to remain in line with those of other EU countries until the EU budgets are finalised for the years in which we were a member. To ensure comparability during this cycle, the national accounts will continue to be produced according to European System of Accounts (ESA) 2010 definitions and standards.

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 measures and seasonally adjusted.

The data are consistent with Blue Book 2019.

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 QMI.

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 two measures: current prices, which are also known as nominal, cash or value series and are expressed in terms of the prices of the time period being estimated, and chained volume measure, which 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) 2019, the chained volume measure of household spending was flat against the positive 0.3% growth suggested by early predictors in the Bank of England Monetary Policy Report for January 2020 (page 21). The current price value of household spending decreased by negative 0.1% compared with Quarter 3 (July to Sept) 2019. Figure 1 shows the levels of current price and volume spending from Quarter 1 (Jan to Mar) 1997 onwards.

In Quarter 4 2019, the value of household spending in current prices increased by positive 1.8% on the same quarter in 2018. Over the same period, the volume measure of household spending increased by positive 0.9%.

The main contribution to national growth was from net tourism, which contributed negative 0.16%. The UK national aggregate of household consumption in the accounts includes spending overseas by UK residents and excludes spending in the UK by non-residents. However, the data collected to estimate the UK domestic aggregate do the reverse, as they include expenditure in the UK by non-residents and exclude expenditure outside the UK by UK residents. To get to the national concept, net tourism is added to the domestic aggregate and it is calculated as the difference between the UK tourist expenditure abroad and the foreign tourist expenditure in the UK. In Quarter 4 2019, foreign tourist expenditure (seasonally adjusted) increased by positive 6.5% compared with Quarter 3 2019 as a result of increases in both the number of visitors to the UK and the amount they spent there.

Domestic growth in consumer spending in Quarter 4 (Oct to Dec) 2019 was positive 0.1%. Figure 2 shows the main contribution to this growth was from housing, water, gas, electricity and other fuels, which contributed positive 0.15%. The largest negative contribution was from restaurants and hotels, which contributed negative 0.04% to overall growth.

The positive 0.15% contribution from housing, water, gas, electricity and other fuels was because of its positive 0.6% quarter-on-quarter growth. Within that category, the growth was mainly caused by 7.7% quarter-on-quarter growth in mains gas and liquified petroleum gas (LPG). This coincides with the lowest Quarter 4 average temperature since 2012, according to the Department for Business, Energy and Industrial Strategy’s Energy trends: UK weather publication.

Figure 3 shows the breakdown of contributions to the positive 0.6% quarter-on-quarter growth in housing, water, gas, electricity and other fuels.

At the most detailed level we record, Table 1 shows the areas that displayed the highest growth in the latest quarter and their contributions to domestic growth. Both areas are included in the largest positive contributor category: housing, water, gas, electricity and other fuels.

Table 2 shows the areas that displayed the largest decline in Quarter 4 2019. While at the three-digit level, restaurants and hotels showed the largest negative contribution to the overall growth, looking at the lowest possible level, life insurance was the main negative contribution. The negative contribution in restaurants and cafés is consistent with the Bank of England Agents’ summary of business conditions for Quarter 4 2019, which reported: “In consumer services, contacts said that the weaker economic outlook weighed on spending at restaurants, especially in the mid-range price bracket.”

In 2019, current price spending per head grew by £393 when compared with 2018, an increase of positive 1.9%. Total spending per head reached £20,797 in 2019, with housing, water, gas, electricity and other fuels making the largest contribution, at £5,309. The second and third largest contributions to overall spending per head were transport and miscellaneous where spending in 2019 reached £2,789 and £2,624 respectively. In volume terms, spending per head showed an increase of positive 0.6% (£122).

In common with all components of UK gross domestic product (GDP), household final consumption expenditure (HHFCE) estimates are subject to the revisions policy for the UK National Accounts. This allows revisions to estimates to be made at particular times of the year.

In the Quarter 4 (Oct to Dec) 2019 release, estimates of HHFCE have been revised from Quarter 1 (Jan to Mar) 2019.

Table 3 shows revisions to HHFCE since the previous edition of consumer trends, from Quarter 3 (July to Sept) 2019. They reflect updated data from suppliers, mainly caused by positive revisions for recreation and culture and clothing and negative revisions for transport.

Consumer trends guidance offers fuller details regarding this publication.

More quality and methodology information on strengths, limitations, appropriate uses, and how the data were created is available in the Consumer trends QMI. This also includes details on changes to estimates and methodology in Blue Book 2018.

We have published a quality assurance of administrative data report. This details the findings of our investigation into the quality of the data sources that are used in household final consumption expenditure (HHFCE) estimates.

Full information on the Classification of Individual Consumption According to Purpose (COICOP) classification system can be found on the UN Statistics Division website.

Quality of the estimates

Household expenditure volume series are chain-linked annually. Estimates in this 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 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 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 (HHFCE) estimates published in this bulletin 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.