An analysis of household consumption

The latest data on household consumption in 2010 H1 are well above the previous forecast, and this deviation can be explained only partially by the more favourable labour market situation. The aim of this box is to compare the individual statistics on household consumption and identify the differences between them.

Like the other GDP components, household consumption (the highest-weight expenditure component of GDP) is subject to revisions after the first estimate is released (see Chart 1). The magnitude of the revisions in 2006–2010 varies over time. In some periods it even exceeds 2 percentage points. Future GDP data revisions thus constitute one of the general uncertainties of the forecast.

Chart 1 (Box) Magnitudeofrevisionsofhouseholdconsumption
The magnitude of the past revisions varies, sometimes exceeding 2 percentage points
(constant prices; seasonally adjusted; annual percentage changes)

When estimating household final consumption expenditure in previous years, the CZSO mainly used outputs from the Household Budget Survey at both quarterly and annual frequency. These statistics provide data for the national accounts in the required COICOP1 breakdown and document the consumption behaviour of a sample of about 3,000 households. However, the real household consumption expenditure data from the household budget statistics show a different household consumption profile than the data reported under the national accounts methodology (see Chart 2). According to the Household Budget Survey, there was no real fall in household consumption expenditure during 2009 and a marked annual decline was recorded only in 2010 Q2. This decline was caused chiefly by a decrease in spending in the retail sector including transport.

Chart 2 (Box) Household consumption expenditure according to the Household Budget Survey
According to the Household Budget Survey, consumer spending started to fall only this year, doing so in the retail sector including transport
(constant prices; annual percentage changes; contributions in percentage points)

As these statistics started to differ in trend from the supply side represented by the retail sales statistics, the CZSO updated its methodology starting with the estimate of consumption in the national accounts for 2009 Q4 and used the retail sales statistics to a larger extent when estimating individual household consumption. The CZSO explained this methodological change by stating that the set of households surveyed was less representative, especially at quarterly frequency. Chart 3 shows that from this period onwards the quarterly time series for household consumption is almost identical to the time series for retail sales including the automotive segment, which this year has seen noticeable growth driven by increased vehicle sales. By contrast, retail sales excluding the automotive segment have this year continued falling year on year, indicating more subdued demand compared to household consumption from the national accounts.

Chart 3 (Box) Retail sales and household consumption
In recent quarters, consumption has been developing in line with sales in the retail sector including the automotive segment, driven by car sales
(constant prices; quarterly percentage changes)

Household consumption according to the national accounts broken down by durability shows that the structure of household consumption reported by the CZSO in the last three quarters is roughly in line with retail sales including the automotive segment. The sharp increase in the automotive segment in the national accounts data is probably reflected in durable goods, which made a significant positive contribution at constant prices in 2010 Q2, thereby helping household consumption to extricate itself from year-on-year decline. The contribution of non-durable goods in the first two quarters of this year was also significant, but their retail sales are still showing a noticeable decline.

Chart 4 (Box) Household consumption according to the national accounts broken down by durability
According to the national accounts, expenditure on durable goods and services is growing in particular
(constant prices; annual percentage changes; contributions in percentage points)


1 The international standard Classification of Individual Consumption by Purpose, which is used in the national accounts system.