Introduction to the System of
National Accounts (SNA)
Lesson 5
Final Consumption Expenditure:
Household; Government; NPISH
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1
Household Final Consumption
Expenditure (HFCE)
• “Household final consumption expenditure consists of
the expenditure, including expenditure whose value
must be estimated indirectly, incurred by resident
households on individual consumption goods and
services, including those sold at prices that are not
economically significant and including consumption
goods and services acquired abroad.” (SNA 2008, 9.113)
• Although this is the SNA 2008 definition, it is identical
to the definition in earlier versions of the SNA.
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HFCE as Percent of GDP, 2005
100%
90%
Non-Food consumption
Food and beverages
80%
70%
60%
50%
40%
30%
20%
10%
0%
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3
Per capita HFCE in 2005: US Dollars
Mauritius
Botswana
Sudan
Nigeria
Ghana
Uganda
Sierra Leone
Mozambique
Liberia
0
1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000
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4
HFCE: Actual and Imputed Expenditures
Actual expenditures
• Food and Beverages
• Clothing and Footwear
• Consumer durables
• Household goods
• Motor cars, bicycles,
scooters
• Rents
• Health and education
• Other services
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Imputed expenditures
• Goods produced for own
consumption
• Imputed rents of owner
occupiers
• Income in kind
• Insurance
• FISIM
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Actual expenditures in HFCE
It is generally fairly easy to measure actual
expenditures on most items but here are some
points to watch out for:
1. Goods bought on loans. The full price must be
recorded in HFCE.
2. Goods and services bought for operating a
business must be excluded from HFCE.
3. Buying a dwelling. That is GFCF not HFCE.
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Imputed expenditures (1)
Goods produced for own consumption
• All goods produced for own consumption should
be included, for example:
–
–
–
–
–
–
Cotton and wool thread and textiles
Beer and sprits
Ceramic pots and plates
Wooden furniture and hand tools
Livestock products – milk, cheese, eggs, honey
Crops, fruit and vegetables
• In most countries, only the last two are important
• They should be valued at purchasers prices
which, in this case, are also the basic prices.
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Imputed expenditures (2)
Imputed rents of owner occupiers
• People who live in their own flats or houses are
considered to be operating a business.
• The business is an “unincorporated enterprise”
which produces “dwelling services” which are
sold back to the owner of the business –i.e. the
person living there.
• This “imputed rent” for living in your own
dwelling is the same as the rent actually paid by a
person living in the same kind of dwelling that is
owned by somebody else.
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Rents for Dwellings in All Countries in ICP
2005
0.18
y = 0.0418e2E-05x
R² = 0.0847
Expenditure share in GDP
0.16
0.14
0.12
0.1
0.08
0.06
0.04
0.02
0
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
Per capita GDP (US$ PPP)
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Imputed expenditures (3)
Income in kind and Insurance
Income in kind
Insurance
• Employees often receive
income in kind as part of
their compensation:
• Only the “net premium” is
included in HFCE.
– Food
– Meals
– Accommodation …
• All this must be shown both
as part of value added in
GDP(P) and as expenditure
in GDP(E)
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• The net premium is the
difference between
premiums and claims plus
the property income earned
on contingency funds held
by insurance companies.
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Imputed expenditures (4)
FISIM
• Financial Intermediation Services Indirectly Measured –
FISIM for short – is another name for Imputed Bank
Service Charges.
• FISIM is the difference between interest paid on
deposits and the investment income earned by banks.
• The 1968 SNA said all FISIM was intermediate
consumption, but the 1993 and 2003 SNAs recommend
that it should be distributed among the sectors that
consume it.
• Households consume some of that FISIM so it must be
shown in HFCE.
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Expenditure by resident households
• Remember that the SNA defines HFCE as
“…expenditure incurred by resident households
on individual consumption goods and services.”
• That means that expenditures by resident
households when they travel abroad must be
included in HFCE and purchases by non-residents
must be excluded.
• Whether an adjustment is required depends on
the data sources for HFCE.
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What have we learned?
• HFCE is a key aggregate in the national accounts.
• HFCE excludes purchases of dwellings and
business expenses.
• Actual expenditures are the largest part.
• But Imputed expenditures on goods produced for
own consumption and on rents of owner
occupiers must be properly estimated.
• If HFCE is estimated from data on retail sales, you
will need to add purchases by households abroad
and subtract sales to non-residents.
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13
Government Final Consumption Expenditure
(GFCE)
• General government final consumption expenditure
consists of expenditure, including expenditure whose
value must be estimated indirectly, incurred by general
government on both individual consumption goods and
services and collective consumption services. (SNA 2008,
9.114)
• This definition is from the 2008 SNA but it is the same as
in earlier versions
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Government Final Consumption Expenditure:
2005, Percent of GDP
Gambia, The
Namibia
Botswana
Sierra Leone
Lesotho
Liberia
Zambia
Kenya
Average
Mauritius
Swaziland
Uganda
Mozambique
Malawi
Ghana
Tanzania
Sudan
Nigeria
Government:individual
Government: collective
0%
10%
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20%
30%
40%
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Individual and Collective
Expenditures
Individual expenditures
• These are services produced
by government that are
consumed by individual
households.
• Some households consume
more than others.
• The main examples are
education and health services.
• Others are culture, recreation,
religious , housing and social
services
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Collective expenditures
• These are services produced
by government for the
nation as a whole.
• No-one can consume more
of them than anyone else.
• They include tax collecting,
statistics, police and
defense, ministries of
finance, trade, agriculture,
….
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Measuring GFCE
• In compiling GDP(P), we said that the output of
government is the sum of the costs of producing
government services:
–
–
–
–
–
Compensation of employees
Intermediate consumption
Consumption of fixed capital,
Operating surplus
Taxes on production
• This same amount is now transferred to GDP(E) as
Government Final Consumption Expenditure, except
that sales by government have to be deducted.
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17
Final Consumption of Non-Profit
Institutions Serving Households
• Final consumption expenditure of NPISHs consists of the
expenditure, including expenditure whose value must be
estimated indirectly, incurred by resident NPISHs on individual
consumption goods and services and possibly on collective
consumption services. (SNA 2008, 9.115)
• This definition differs from that of the SNA 1993 because in
the 1993 version all consumption expenditure of NPISH was
assumed to be individual. In the 2008 version, some NPISH
expenditures can be treated as collective.
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Estimating final expenditure of NPISH
• NPISH do not sell their services and so we have to
estimate their output in exactly the same way as for
government.
• This output which was estimated for GDP(P) is now
shown in GDP(E) as final expenditure of NPISH after
deducting the value of any sales by enpish.
• According to the 1993 SNA all NPISH expenditure is
considered to be for the provision of individual
services but the 2008 SNA allows for the possibility
that some NPISH expenditure might be collective.
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19
Actual Household Consumption
• Actual Household Consumption is made up by
combining individual services provided by
government and by NPISH with Household
Final Expenditure.
• Actual Household Consumption is a better
measure of what households actually
consume than HFCE.
• Actual Household Consumption is more
comparable between countries.
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Key Messages
•Consumption expenditures are the
biggest component of GDP(E).
•Household Final Consumption
Expenditure includes imputations for
consumption of “own-production” that
may be difficult to make but which must
be included.
•Final consumption expenditures of
government and NPISH are equal to
their output as estimated in deriving
GDP(P)
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