Household final consumption expenditure

Last updated

Household final consumption expenditure (POES) is a transaction of the national account's use of income account representing consumer spending. It consists of the expenditure incurred by resident households 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 rents) 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 homes, boarding houses and prisons.

Contents

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. [1]

Components

Household final consumption expenditure includes the following components:

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 states. 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:

See also

Notes

  1. ↑ F. Lequiller, D. Blades: Understanding National Accounts, Paris: OECD 2006, p. 126

Related Research Articles

Gross domestic product Market value of goods and services produced within a country

Gross domestic product (GDP) is a monetary measure of the market value of all the final goods and services produced in a specific time period by countries. GDP (nominal) per capita does not, however, reflect differences in the cost of living and the inflation rates of the countries; therefore, using a basis of GDP per capita at purchasing power parity (PPP) may be more useful when comparing living standards between nations, while nominal GDP is more useful comparing national economies on the international market. Total GDP can also be broken down into the contribution of each industry or sector of the economy. The ratio of GDP to the total population of the region is the per capita GDP and the same is called Mean Standard of Living.

A variety of measures of national income and output are used in economics to estimate total economic activity in a country or region, including gross domestic product (GDP), gross national product (GNP), net national income (NNI), and adjusted national income. All are specially concerned with counting the total amount of goods and services produced within the economy and by various sectors. The boundary is usually defined by geography or citizenship, and it is also defined as the total income of the nation and also restrict the goods and services that are counted. For instance, some measures count only goods & services that are exchanged for money, excluding bartered goods, while other measures may attempt to include bartered goods by imputing monetary values to them.

Economy of Andorra

The economy of Andorra is a developed and free market economy driven by finance, retail, and tourism. The country's gross domestic product (GDP) was US$3.66 billion in 2007. Attractive for shoppers from France and Spain as a free port, Andorra also has developed active summer and winter tourist resorts. With some 270 hotels and 400 restaurants, as well as many shops, the tourist trade employs a growing portion of the domestic labour force. An estimated 13 million tourists visit annually.

Disposable income is total personal income minus current income taxes. In national accounts definitions, personal income minus personal current taxes equals disposable personal income. Subtracting personal outlays yields personal savings, hence the income left after paying away all the taxes is referred to as disposable income.

Consumer price index Statistic to indicate the change in typical household expenditure

A consumer price index (CPI) is a price index, the price of a weighted average market basket of consumer goods and services purchased by households. Changes in measured CPI track changes in prices over time.

Public finance Study of the role of government within the economy

Public finance is the study of the role of the government in the economy. It is the branch of economics that assesses the government revenue and government expenditure of the public authorities and the adjustment of one or the other to achieve desirable effects and avoid undesirable ones. The purview of public finance is considered to be threefold, consisting of governmental effects on:

  1. The efficient allocation of available resources;
  2. The distribution of income among citizens; and
  3. The stability of the economy.

In business, total value added is calculated by tabulating the unit value added per each unit of product sold. Thus, total value added is equivalent to revenue minus intermediate consumption. Value added is a higher portion of revenue for integrated companies and a lower portion of revenue for less integrated companies ; total value added is very closely approximated by compensation of employees, which represents a return to labor, plus earnings before taxes, representative of a return to capital.


The PCE price index (PCEPI), also referred to as the PCE deflator, PCE price deflator, or the Implicit Price Deflator for Personal Consumption Expenditures by the BEA, and as the Chain-type Price Index for Personal Consumption Expenditures (CTPIPCE) by the Federal Open Market Committee (FOMC), is a United States-wide indicator of the average increase in prices for all domestic personal consumption. It is benchmarked to a base of 2012 = 100. Using a variety of data including U.S. Consumer Price Index and Producer Price Index prices, it is derived from the largest component of the GDP in the BEA's National Income and Product Accounts, personal consumption expenditures.

Government spending Government consumptions, investments, and transfer payments

Government spending or expenditure includes all government consumption, investment, and transfer payments. In national income accounting, the acquisition by governments of goods and services for current use, to directly satisfy the individual or collective needs of the community, is classed as government final consumption expenditure. Government acquisition of goods and services intended to create future benefits, such as infrastructure investment or research spending, is classed as government investment. These two types of government spending, on final consumption and on gross capital formation, together constitute one of the major components of gross domestic product.

Gross fixed capital formation

Gross fixed capital formation (GFCF) is a macroeconomic concept used in official national accounts such as the United Nations System of National Accounts (UNSNA), National Income and Product Accounts (NIPA) and the European System of Accounts (ESA). The concept dates back to the National Bureau of Economic Research (NBER) studies of Simon Kuznets of capital formation in the 1930s, and standard measures for it were adopted in the 1950s. Statistically it measures the value of acquisitions of new or existing fixed assets by the business sector, governments and "pure" households less disposals of fixed assets. GFCF is a component of the expenditure on gross domestic product (GDP), and thus shows something about how much of the new value added in the economy is invested rather than consumed.

Intermediate consumption is an economic concept used in national accounts, such as the United Nations System of National Accounts (UNSNA), the US National Income and Product Accounts (NIPA) and the European System of Accounts (ESA).

Operating surplus is an accounting concept used in national accounts statistics and in corporate and government accounts. It is the balancing item of the Generation of Income Account in the UNSNA. It may be used in macro-economics as a proxy for total pre-tax profit income, although entrepreneurial income may provide a better measure of business profits. According to the 2008 SNA, it is the measure of the surplus accruing from production before deducting property income, e.g., land rent and interest.

The Indian government has, since war, subsidised many industries and products, from fuel to gas.

Import Good brought into a jurisdiction

An import is the receiving country in an export from the sending country. Importation and exportation are the defining financial transs of international trade.

Government final consumption expenditure (GFCE) is an aggregate transaction amount on a country's national income accounts 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.

In 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 (FCE).

United Kingdom National Accounts – The Blue Book

The annual United Kingdom National Accounts records and describes economic activity in the United Kingdom and as such is used by government, banks, academics and industries to formulate the economic and social policies and monitor the economic progress of the United Kingdom. It also allows international comparisons to be made. The Blue Book is published by the UK Office for National Statistics alongside the United Kingdom Balance of Payments – The Pink Book.

References

This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.