Economic well-being

Economic Well-being, Quarter 1 Jan to Mar 2015

  • In Q1 2015, gross domestic product (GDP) per head increased 0.2% compared to Q4 2014 but remains 0.6% below pre-economic downturn levels. This was a slightly slower growth rate than the 0.4% quarterly increase seen in GDP.
  • Net national disposable income (NNDI) per head, which represents the income available to UK residents, increased 1.6% compared to Q4 2014, but remains 3.8% below pre-economic downturn levels.
  • In Q1 2015, real household disposable income (RHDI) per head (excluding non-profit institutions serving households) was unchanged (0.0%) compared to Q4 2014 and increased 3.7% compared to the same quarter a year ago (Q1 2014). Overall, it remains broadly in line with the level of household income seen since 2012.
  • In the financial year ending 2014, median income (the income of the middle household if all households are ranked from the lowest income to the highest) was £24,500 – 3.4% higher than in 2012/13. This is a reversal of the downward trend seen since the finanical year ending 2008.
  • In Q1 2015, household spending per head grew 0.8% compared to the previous quarter – continuing the general upward trend that started in Q3 2011.
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Consumer trends

Consumer Trends, Q3 2013: ONS

  • In Q3 2013, household spending (adjusted for inflation) grew by 0.8% (£1.9 billion). All areas showed positive growth with the exception of ‘Housing’ and ‘Health’.
  • Household spending when compared with the same quarter a year ago has risen in every quarter since Q1 2012 and was 2.5% higher in Q3 2013. This is the highest comparable growth since Q1 2008.
  • Household spending still remains 1.5% below the peak of spending (in volume terms) in Q4 2007.
  • The current price value of household spending, which includes inflation, shows how much UK households spent. In Q3 2013 current price spending increased by 1.7% compared with Q2 2013, continuing the trend of positive growth which has continued since Q3 2009. Current price spending is now 18.2% higher than Q4 2007.
  • In current price terms, the value of UK household spending per head was £4,117, an increase of 1.5% on the quarter.

Family spending

Living Costs and Food Survey, 2012

  • UK households spent an average of £489 a week in 2012.
  • The largest expenditure categories were housing (excluding mortgages), fuel and power, transport, and recreation and culture.
  • There were four regions in which expenditure over the period 2010-2012 was higher than the UK average: London, the South East, the East and the South West.
  • Average spending has decreased between 2006 and 2012 once the figures have been adjusted to allow for changes in prices (inflation).
  • Households in London spend the most, while those in the North East spend the least.
  • Expenditure in rural areas is higher than in urban areas.

Consumer trends

Consumer trends, Q2 2013: ONS

  • In Q2 2013, household spending (adjusted for inflation) grew by 0.3% (£661m). The main positive contributor to growth was increased household spending on ‘Transport’.
  • Household spending has increased by 0.3% but still remains 2.8% below the peak of spending (in volume terms) in Q4 2007. Households purchased 4.0% more in volume terms this quarter compared with the recent low of Q2 2009.
  • The current price value of household spending, which includes inflation, shows how much UK households spent. In Q2 2013 current price spending increased by 0.9% compared with Q1, continuing the trend of positive growth which has continued since Q3 2009. Current price spending is now 15.1% higher than Q4 2007. Households current price spending was 19.1% higher in Q2 2013 than the recent low of Q2 2009.
  • The value of UK household spending per head, in current price terms, was £4,037, an increase of 0.7% on the quarter and 10.3% when compared with Q1 2008, the quarter prior to the first fall in expenditure, including inflation, since 1997.

International comparisons: the economy

Measuring National Well-being: ONS

  • In international comparisons of household income the UK has dropped  from 5th place in 2005 to 12th place in 2011. This is partly as a result of the devaluation of sterling seen in this period.
  • Since 2009 inflation has remained high compared to the US, France and Germany but has been relatively less volatile
  • Despite falling 12 places between 2005 and 2011 when looking at rankings based on unemployment, the UK labour market has been more resilient in than previous recessions
  • In terms of household spending and wealth, the UK has remained relatively strong compared with other OECD countries
  • Despite falling two places in the rankings since 2005, the UK still fares relatively better under Net National Income than Gross Domestic Product

Frances Grady of the TUC said:

“The combination of recession and austerity has taken its toll on household finances, with income levels in the UK falling behind many of its European neighbours. ‘Even before the recession, household spending in the UK was far more reliant on debt than in other advanced economies. In order to address this as a country we need to obsess less about housing bubbles and focus instead on securing decent pay rises and creating better paid jobs.”

British Lifestyles report: Mintel

  • When asked about how their spending habits have changed over the past five years, some 56% of all Brits (amounting to 23 million adults) claim to now only buy items when absolutely needed and almost four in ten (37%) say they are buying fewer treats for themselves and their families.
  • While just over a fifth (22%) of consumers agree they have been better off over the past year, more than a third (36%) say things have become more difficult.
  • A further third (36%) of Brits claim to go on fewer holidays and almost a fifth (17%) are working longer hours as a consequence of the downturn.
  • In addition, while in 2008 six in ten Brits (60%) were perfectly happy with their standard of living, this fell to 50% in 2012.
  • Today, the top three financial priorities for British consumers are 1. Keeping up with bills (82%) 2. Adding to rainy day savings (67%) 3. Saving for big ticket purchases (58%). Just 6% of adults admit they haven’t changed their spending habits in response to the economic downturn.