Households consumption in 2023 National accounts - 2020 Base

Consumption of households

Final consumption consists of using goods and services to satisfy individual or collective human needs. There are two ways of presenting final consumption depending on whether the focus is on the units that incur the expenditure or those that benefit from them.

Final consumption expenditure

The purpose of the notion of final consumption expenditure (P3) is to identify the units that bear consumption expenditure, and that control and finance their amounts. Final consumption expenditure includes expenditure actually made by resident institutional units to acquire goods and services destined for final consumption. Only households, general government and non-profit institutions serving households (NPISH) bear final consumption expenditure. These expenditure can be made on the economic territory or in the rest of the world.

The final consumption expenditure of households includes a few special cases corresponding to situations in which households themselves produce the goods and services that they consume. For example, the housing services produced by homeowners who occupy their own dwelling are recorded as the homeowners' expenditure, the amount of which is equal to their production. Additionally, it is the households - rather than their employers - who make the final consumption expenditure corresponding to the goods and services received in the form of payment in kind.

The final consumption expenditure of households does not include expenditure that are partially or fully covered by social transfers in kind. For example, in the final consumption expenditure of households, only the share of health expenditure that is not reimbursed is counted; the reimbursed share is counted in the final consumption expenditure of general government.

The final consumption expenditure of general government comprises two parts. It includes firstly collective expenditure (P32), corresponding to sovereign functions: justice, defence, police, etc. It also includes all the government spending which ultimately benefits households: these individual consumption expenditure (P31) correspond essentially to education and healthcare expenditure, but also spending on culture and housing benefit, etc.

By convention, the final consumption expenditure of NPISH is only individual.

Actual final consumption

The purpose of the notion of actual final consumption (P4) is to identify the units that actually acquire or receive the consumer goods and services and benefit from their use. For households, it broadens the scope of final consumption expenditure. It includes all the goods and services acquired by resident households to directly satisfy their needs, whether or not these acquisitions have involved any spending on their part.

Therefore, as well as the goods and services acquired by means of their own final consumption expenditure, actual household final consumption comprises the goods and services which, having been the object of an individual consumption expenditure by general government and NPISH, give rise to social transfers in kind from these institutions towards households.

For the economy as a whole, final consumption expenditure and actual final consumption are equal to each other.

The notion of actual household final consumption allows international comparisons between countries that finance health and education expenditure in different ways.

Moment of recording and evaluation of final consumption

Final consumption expenditure is recorded at the moment when ownership of the good is transferred or when the service provision is finished. It is counted at the purchase price actually paid by the buyer, including taxes on the products (VAT and others).

Territorial correction

Resident households consume abroad (i.e. French tourists abroad) and, conversely, non-resident households (i.e. foreign tourists in France) consume on the economic territory. Because of the estimation methods used in the national accounts, consumption expenditure broken down by product generally do not include the expenditure of residents abroad but do include those of non-residents on the economic territory. To obtain the total final consumption expenditure of resident households, a territorial correction is made to the sum of expenditureby product. This correction is equal to the consumption expenditure abroad of resident households minus the final consumption expenditure on the economic territory of non-resident households. This correction is structurally negative, since the tourism balance used as the basis for this correction is structurally strongly positive for France. This correction is only known globally: it is not broken down by product.

Household consumption detailed by product, by purpose and by durability

The final consumption of households series are produced in three different classifications. Each one is suitable for a specific use.

1. The product classification:

The product classification is the most detailed and includes around 400 elementary items. It classifies expenditure according to the manufacturing process and the material (textile, wood, chemical...) of the object consumed. It distinguishes goods from services, and market sector from non-market sector.

It is composed of the most aggregated groupings used in the national accounts: levels A10, A17, A38 and A88. This classification should be used when referring to production, for market studies, or when making comparisons with turnover figures. It is based on NAF rév.2 or the French product classification (CPF).

2. The purpose classification:

The purpose classification is a classification of expenditure according to satisfied consumption needs. Food and non-alcoholic beverages; alcoholic beverages, tobacco and narcotics; clothing and footwear; housing, water, electricity, gas and other fuels; furnishings, household equipment and routine household maintenance; health; transport; information and communication; recreation, sport and culture; education services; restaurants and accommodation services; insurance and financial services; personal care, social protection and miscellaneous goods and services form the thirteen main items. The fourteenth item in the purpose classification represents the individual consumption expenditure of non-profit institutions serving households (S15), the fifteenth item represents the individual consumption expenditure of general government (S13) and the sixteenth is the territorial correction.

Through a few conventions, this classification groups together complementary products, goods and services, i.e. those that are simultaneously required to satisfy the same need. For example, the "transport" purpose groups together vehicle purchases, vehicle maintenance and repair costs, fuel consumption, rail and road transport expenditure, and lastly air transport.

Such a presentation lends itself well to the study of household behaviour. This is why it is used in consumption models and in the calculation of consumption elasticity with regard to income and to prices. This presentation should be used in particular for analysing medium- and long-term consumption. Furthermore, the purpose classification is the international COICOP classification which therefore allows comparisons between countries. It is used in the publications of the United Nations (UN), the Organisation for Economic Cooperation and Development (OECD) and Eurostat, the European Community statistical office. This is also the nomenclature used for Consumer Price Index (CPI).

Following a worldwide consultation, the COICOP classification was revised and a new version of the COICOP was released in 2018. This new COICOP version has been incorporated for the production of functional nomenclature estimates in the 2020 benchmark of national accounts.

It should be noted that the functional nomenclature also makes it possible to isolate pre-engaged expenditure from other expenditure. Pre-engaged expenditure is consumption of households realized within the framework of a contract which is difficult to renegotiate in a short-term (housing expenditure, telecommunication services, expenses of canteen, insurances, etc.). Pre-engaged expenditure is a useful economic variable for calculating arbitrage income, obtained after deducting pre-engaged expenditure from disposable income.

3. The durability classification:

The durability classification is a classification of expenditure according to the durable nature of the goods and services acquired. It sets durable goods against fungible goods and distinguishes goods from services. It classifies goods into three groups: major durable goods (vehicles, furniture, household or leisure equipment), semi-durable goods (textile, clothing) and non-durable goods (food, energy). This classification, which is defined on the basis of the COICOP nomenclature, is useful for short-term economic analyses.

Simplified and detailed tables of actual final consumption

Simplified tables present series of consumption by product, purpose and durability in a synthetic way. Detailed tables present available results at the lowest level and at higher levels. The code number allows to know precisely the level of detail of the considered information.