Household final consumption expenditure
Encyclopedia
Household final consumption expenditure (HFCE) is a transaction of the national account's use of income account representing consumer spending
. It consists of the expenditure incurred by resident household
s on individual consumption goods and services, including those sold at prices that are not economically significant. It also includes various kinds of imputed expenditure of which the imputed rent for services of owner-occupied housing (imputed rent
s) is generally the most important one. The household sector covers not only those living in traditional households, but also those people living in communal establishments, such as retirement home
s, boarding house
s and prison
s.
The above given definition of HFCE includes expenditure by resident households on the domestic territory and expenditure by resident households abroad (outbound tourists), but excludes any non-resident households' expenditure on the domestic territory (inbound tourists). From this national definition of consumption expenditure may be distinguished the household final consumption expenditure according to the domestic concept which includes household expenditure made on the domestic territory by residents and inbound tourists, but excludes residents' expenditure made abroad.
HFCE is measured at purchasers' prices which is the price the purchaser actually pays at the time of the purchase. It includes non-deductible value added tax
and other taxes on products, transport and marketing costs and tips paid over and above stated prices.
Actual final consumption of households excludes the general government's collective consumption expenditure which is expenditure on goods and services that cannot be uniquely attributed to households (e.g. expenditure on defence, safety and order, home affairs, environmental protection, national bodies such as parliament, governments etc).
s. Countries with relatively large shares of such transfers in kind are Belgium, Denmark, France, Luxembourg, the Netherlands, Finland and Sweden, where HFCE represents less than 80% of actual final consumption of households for most years.
The above observations are based on data downloadable from Eurostat's website:
Consumer spending
Consumer spending or consumer demand or consumption is also known as personal consumption expenditure. It is the largest part of aggregate demand or effective demand at the macroeconomic level...
. It consists of the expenditure incurred by resident household
Household
The household is "the basic residential unit in which economic production, consumption, inheritance, child rearing, and shelter are organized and carried out"; [the household] "may or may not be synonymous with family"....
s on individual consumption goods and services, including those sold at prices that are not economically significant. It also includes various kinds of imputed expenditure of which the imputed rent for services of owner-occupied housing (imputed rent
Imputed rent
Imputed rent is the economic theory of imputation applied to real estate: that the value of a good is more a matter what the buyer is willing to pay than the cost the seller incurs to create it. In this case, market rents are used to estimate the value to the property owner...
s) is generally the most important one. The household sector covers not only those living in traditional households, but also those people living in communal establishments, such as retirement home
Retirement home
A retirement home is a multi-residence housing facility intended for senior citizens. Typically each person or couple in the home has an apartment-style room or suite of rooms. Additional facilities are provided within the building, including facilities for meals, gathering, recreation, and some...
s, boarding house
Boarding house
A boarding house, is a house in which lodgers rent one or more rooms for one or more nights, and sometimes for extended periods of weeks, months and years. The common parts of the house are maintained, and some services, such as laundry and cleaning, may be supplied. They normally provide "bed...
s and prison
Prison
A prison is a place in which people are physically confined and, usually, deprived of a range of personal freedoms. Imprisonment or incarceration is a legal penalty that may be imposed by the state for the commission of a crime...
s.
The above given definition of HFCE includes expenditure by resident households on the domestic territory and expenditure by resident households abroad (outbound tourists), but excludes any non-resident households' expenditure on the domestic territory (inbound tourists). From this national definition of consumption expenditure may be distinguished the household final consumption expenditure according to the domestic concept which includes household expenditure made on the domestic territory by residents and inbound tourists, but excludes residents' expenditure made abroad.
HFCE is measured at purchasers' prices which is the price the purchaser actually pays at the time of the purchase. It includes non-deductible value added tax
Value added tax
A value added tax or value-added tax is a form of consumption tax. From the perspective of the buyer, it is a tax on the purchase price. From that of the seller, it is a tax only on the "value added" to a product, material or service, from an accounting point of view, by this stage of its...
and other taxes on products, transport and marketing costs and tips paid over and above stated prices.
Components
Household final consumption expenditure includes the following components:- households' purchases of products for their everyday needs (e.g. food, clothing, cars, rents, personal services)
- households' partial payments for products provided by the general government (e.g. tickets to public museums and swimming pools)
- households' payments to the general government for licences and permits (e.g. fees for issuing passports)
- imputed rentImputed rentImputed rent is the economic theory of imputation applied to real estate: that the value of a good is more a matter what the buyer is willing to pay than the cost the seller incurs to create it. In this case, market rents are used to estimate the value to the property owner...
s for services of owner-occupied housing - household's own account consumption of outputs produced by unincorporated enterprises owned by households (e.g. own-consumption of milk produced on a farm)
- income in kind earned by employees (free or reduced train tickets for railway employees)
- households' consumption of Financial Intermediation Services Indirectly Measured (FISIM)
From household final consumption expenditure to actual final consumption of households
Household final consumption expenditure (HFCE) is not an exhaustive measure of the goods and services consumed by households. The general government and non-profit institutions serving households (NPISH) often provide goods and services to households for their individual consumption free of charge or at reduced prices. Examples are health services provided by governments or reimbursed by a social security fund, education services, the part of service provided by public museums, concert halls, operas, swimming pools that is not financed by entrance fees, aid for social housing etc. By adding the general government's and NPISHs' individual consumption expenditure to household final consumption expenditure one receives the actual final consumption of households.Actual final consumption of households excludes the general government's collective consumption expenditure which is expenditure on goods and services that cannot be uniquely attributed to households (e.g. expenditure on defence, safety and order, home affairs, environmental protection, national bodies such as parliament, governments etc).
Data
In the member states of the European Union the share of household final consumption expenditure (HFCE) in actual final consumption of households usually varies between 70% and 90%. The rest is goods and services consumed free of charge (or at reduced prices) transferred by governments and non-profit institutions serving households to households. A high government share in the provision of individual consumption goods and services is often found in countries known as welfare stateWelfare state
A welfare state is a "concept of government in which the state plays a key role in the protection and promotion of the economic and social well-being of its citizens. It is based on the principles of equality of opportunity, equitable distribution of wealth, and public responsibility for those...
s. Countries with relatively large shares of such transfers in kind are Belgium, Denmark, France, Luxembourg, the Netherlands, Finland and Sweden, where HFCE represents less than 80% of actual final consumption of households for most years.
The above observations are based on data downloadable from Eurostat's website:
- http://nui.epp.eurostat.ec.europa.eu/nui/show.do?query=BOOKMARK_DS-070992_QID_-33988DAE_UID_-3F171EB0&layout=time,L,X,0;geo,L,Y,0;unit,L,Z,0;indic_na,L,Z,1;INDICATORS,L,Z,2;&zSelection=DS-070992unit,PPS_HAB;DS-070992INDICATORS,FLAG;DS-070992indic_na,P31_S14;&rankName1=unit_1_0_-1_2&rankName2=INDICATORS_1_0_-1_2&rankName3=indic-na_1_0_-1_2&rankName4=time_1_0_0_0&rankName5=geo_1_2_0_1&sortC=ASC_-1_FIRST&rStp=&cStp=&rDCh=&cDCh=&rDM=true&cDM=true&empty=false&wai=false&time_mode=NONE&lang=ENHousehold final consumption expenditure per inhabitant in the EU Member States and Japan]
- http://nui.epp.eurostat.ec.europa.eu/nui/show.do?query=BOOKMARK_DS-070989_QID_-105408C9_UID_-3F171EB0&layout=time,L,X,0;geo,L,Y,0;unit,L,Z,0;indic_na,L,Z,1;INDICATORS,L,Z,2;&zSelection=DS-070989indic_na,P41;DS-070989INDICATORS,FLAG;DS-070989unit,PPS_HAB;&rankName1=unit_1_0_-1_2&rankName2=INDICATORS_1_0_-1_2&rankName3=indic-na_1_0_-1_2&rankName4=time_1_0_0_0&rankName5=geo_1_2_0_1&sortC=ASC_-1_FIRST&rStp=&cStp=&rDCh=&cDCh=&rDM=true&cDM=true&empty=false&wai=false&time_mode=NONE&lang=ENActual individual consumption per inhabitant in European countries]
See also
- Consumer price indexConsumer price indexA consumer price index measures changes in the price level of consumer goods and services purchased by households. The CPI, in the United States is defined by the Bureau of Labor Statistics as "a measure of the average change over time in the prices paid by urban consumers for a market basket of...
(CPI) - Final consumption expenditureFinal consumption expenditureIn the national accounts expenditure on goods and services that are used for the direct satisfaction of individual needs or collective needs of members of the community is recorded in the use of income account under the transaction final consumption expenditure .The most important part of final...
- Government final consumption expenditureGovernment final consumption expenditureGovernment final consumption expenditure is a transaction of the national account's use of income account representing government expenditure on goods and services that are used for the direct satisfaction of individual needs or collective needs of members of the community .It consists of the...
- InflationInflationIn economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a...
- List of largest consumer markets
- Personal consumption expenditures price indexPersonal consumption expenditures price indexThe PCE price index is a United States-wide indicator of the average increase in prices for all domestic personal...
(PCEPI)