Household consumption by purpose

Data extracted: 19 November 2021.

Planned article update: 28 October 2022.

Highlights

In 2020, household consumption expenditure fell by 8.1 % in the EU and by 8.7 % in the euro area compared with 2019.

In 2020, household consumption expenditure fell sharply for 'Restaurants and hotels' (-37.8 %), 'Clothing and footwear' (-17.3 %), 'Transport' (-16.8 %) and 'Recreation and culture' (-16.7 %), compared to 2019.

Household consumption expenditure by consumption purpose - COICOP, % change over the previous year, EU, 2020
Source: Eurostat (nama_10_co3_p3)

This article analyses trends in the structure of household final consumption expenditure by consumption purpose (COICOP) which can be expected to have a significant influence on citizen's wellbeing.

Full article

COVID-19 pandemic impacts on data in 2020

The outbreak of the COVID-19 pandemic in Europe had severe economic impacts that are reflected in national accounts estimates for 2020. Social distancing measures as well as government restrictions imposed on the movement of people and non-essential economic activities severely affected households' consumption expenditures. There was a huge impact on both the overall amount and the composition of household consumption even though the majority of Member States put in place government schemes to support enterprises and households in the year 2020.

This section presents the impact of the COVID-19 pandemic on the European aggregates, differences across countries and a comparison with the 2008-2009 financial crisis.

Developments by COICOP categories

To better understand the magnitude of the recent reductions in the household consumption expenditure, Figure 1 shows that certain categories of household consumption expenditure changed unprecedentedly in comparison to 2019. The largest decreases were observed for ’Restaurants and hotels’ (of 37.8 %), ’Clothing and footwear’ (17.3 %), ’Transport’ (of 16.8 %) and ’Recreation and culture’ (16.7 %). However, certain categories showed an increase, notably ’Food and non-alcoholic beverages’ (3.2 %), ’Communications’ (2.4 %) and ’Housing, water, electricity, gas and other fuels’ (0.3 %).

Figure 1: Household consumption expenditure by consumption purpose - COICOP, % change over the previous year, EU, 2020
Source: Eurostat (nama_10_co3_p3)

Developments by country

However, the severity of the impact of the COVID-19 pandemic varied at country level. All EU Member States recorded decreases in the year 2020 compared to 2019. Most predominant decreases in household consumption were recorded in Malta (22.0 %), followed by Croatia (16.2 %), Spain (15.8 %), Greece (15.6 %) and Cyprus (14.1 %). On the other hand, the smallest decreases were observed in Slovakia (2.3 %), Denmark (2.4 %), Lithuania (2.8 %) and Poland (3.3 %).

Figure 2: Household consumption expenditure by Member State, % change over the previous year, 2020
Source: Eurostat (nama_10_co3_p3)

Comparison with effects of the 2008-2009 financial crisis

Figure 3 shows a comparison of changes in household consumption expenditure during the COVID-19 pandemic with the developments during the 2008-2009 financial crisis. While consumption categories were mostly affected in the same direction, the impact of the COVID-19 pandemic was much more severe in areas affected by government lockdowns. Expenditures on ’Restaurants and hotels’ decreased by 37.8 % in 2020, compared to 4.3 % in 2009, followed by ’Clothing and footwear’ (-17.3 % in 2020 and -3.8 % in 2009), ‘Transport’ (-16.8 % in 2020 and -2.0 % in 2009) and ‘Recreation and culture’ (-16.7 % in 2020 and -1.6 % in 2009). On the other hand, increases were observed in ’Communications’ both in 2020 (by 2.4 %) and 2009 (by 2.1 %), as well as in ’Housing, water, electricity, gas and other fuels’ (by 1.0 % and by 0.3 % respectively). Different impacts were observed for ’Health’, where expenditures decreased by 4.7 % in 2020 and increased in 2009 by 0.4% as well as ‘Food and non-alcoholic beverages’ (+3.2 % in 2020 and -1.2 % in 2009).

Figure 3: Household consumption expenditure by consumption purpose - COICOP, % change over the previous year, EU, 2009 and 2020
Source: Eurostat (nama_10_co3_p3)

Composition of EU household expenditure in 2020

Looking at the composition of EU household expenditure by consumption purpose by the main 10 COICOP categories based on current price figures (see Figure 4 and Tables 1, 2), more than a quarter of EU household expenditure (25.7 % of total or 13.0 % of GDP) was devoted to 'Housing, water, electricity, gas and other fuels'. Other large shares are observed for 'Food and non-alcoholic beverages' (14.8 % of total or 7.5 % of GDP), 'Transport' (11.6 % of total or 5.8 % of GDP), and 'Miscellaneous goods and services' (11.5 % of total or 5.8 % of GDP). 'Housing, water, electricity, gas and other fuels', 'Food and non-alcoholic beverages' and 'Transport' account for more than half of the total household expenditure (52.1 %).

Figure 4. Household expenditure by consumption purpose - COICOP, EU, 2020, share of total
Source: Eurostat (nama_10_co3_p3)

'Recreation and culture' (7.8 % of total or 4.0 % of GDP) and 'Restaurants and hotels' and 'Furnishings, household equipment and routine household maintenance' (both 6.0 % of total or 3.0 % of GDP) followed. The remaining household spending was distributed over 'Health' (4.6 % of total or 2.3 % of GDP), 'Alcoholic beverages, tobacco and narcotics' (4.4 % of total or 2.2 % of GDP), 'Clothing and footwear' (4.1 % of total or 2.1 % of GDP),'Communications' (2.6 % of total or 1.3 % of GDP) and 'Education' (0.9 % of total or 0.5 % of GDP) – which together represented 22.6 % of total expenditure or 11.4 % of EU GDP in 2020.

Analysis of EU aggregates

While the figures for 2020 are impacted by the exceptional effects of the COVID-19 pandemic, the evolution of the EU household expenditure between 2000 and 2020 provides insights into longer term trends. In 2020, EU total household expenditure amounted to 50.5 % of GDP. This was a significant decrease compared with 2019, when it amounted to 52.4 % of GDP. Except for the years 2003, 2005, 2008, 2009 and 2012, an overall downward trend has been observed since 2000, where household expenditure peaked at 55.3% of GDP.

Table 1: Evolution of household expenditure by consumption purpose - COICOP, EU, 2010-2020, cumulated % of GDP
Source: Eurostat (nama_10_co3_p3)

Table 2: Evolution of household expenditure by consumption purpose - COICOP, EU, 2010-2020, share of total
Source: Eurostat (nama_10_co3_p3)

Evolution of shares compared to 2019

While the overall share of GDP fluctuated between a highest level of 54.8 % (2010) and a lowest level of 50.5 % of GDP (in 2020) over the period 2010-2020, the composition of household expenditure changed gradually over time, except for the last year where the shares of some expenditure items dropped significantly due to the COVID-19 pandemic.

Most notably, the biggest decrease in the share of total expenditure and share of GDP over 2019-2020 was noted for ’Restaurants and hotels’ (by 2.7 percentage points (p.p.) in the share of total expenditure and 1.6 p.p. in GDP,) followed by ’Transport’ (by 1.5 p.p. in the share of total expenditure, however 1.1 p.p. in GDP) and ’Recreation and culture’ (by 0.9 p.p. in the share of total expenditure and 0.6 p.p. in GDP) and ’Clothing and footwear’ (by 0.5 p.p. in the share of total expenditure and 0.3 p.p. in GDP) while the biggest increases were noted for ’Housing, water, electricity, gas and other fuels’ (by 2.2 p.p. in the share of total expenditure and 0.7 p.p. in GDP), ’Food and non-alcoholic beverages’ (by 1.8 p.p. in the share of total expenditure and 0.7 p.p. in GDP), ’Furnishings and household equipment’ (by 0.5 p.p. in the share of total expenditure and 0.1 p.p. in GDP).

Evolution of volumes compared to 2019

The analysis of household consumption in terms of volumes allows also for some interesting insights: the development of volumes (total) during the period 2010-2020 shows a gradual increase, with some few exceptions, over the whole period up to 2020. In 2020, the declines again reflect the impact of the COVID-19 pandemic. In comparison to 2019, the largest decreases were recorded in ’Restaurants and hotels’, ’Recreation and culture’ and ’Clothing and footwear’. The largest increases were recorded in ’Food and non-alcoholic beverages’, ’Communications’ and ’Furnishings and household equipment’.

Figure 5: Evolution of chain linked volumes, index 2010=100 of household expenditure by consumption purpose - COICOP, EU, 2010-2020
Source: Eurostat (nama_10_co3_p3)

The detailed table corresponding to Figure 5 is available here.

Evolution of implicit deflator

Finally, some trends in the implicit deflator ^[1]seem worth mentioning: the development of implicit prices (of total) during the period 2010-2020 shows a steady increase. The largest increases were recorded in 'Alcoholic beverages, tobacco and narcotics' (of 28.4 %), 'Restaurants and hotels' (of 18.2 %), 'Food and non-alcoholic beverages' (of 16.8 %), and 'Housing, water, electricity, gas and other fuels' (of 14.1 %); reductions were noted in 'Communications' (of -25.0 %) compared to 2010.

When comparing to 2019, the largest decreases are noted for 'Transport' (of 2.2 %), 'Communications' (of 2.1 %) and 'Clothing and footwear' (of 0.4 %)

Figure 6: Evolution of implicit deflator, index 2010=100 of household expenditure by consumption purpose - COICOP, EU, 2010-2020
Source: Eurostat (nama_10_co3_p3)

The detailed table corresponding to Figure 6 is available here.

Country specific trends

Household expenditure shares in 2020 highest in Greece and Croatia

Looking at particular countries, the analysis can also point out some interesting trends: as a ratio to GDP in 2020, the highest levels of household expenditure were found in Greece (70.3 % of GDP), Croatia (65.7 %) and Cyprus (64.7 %), while the lowest levels were found in Ireland (24.5 %), Luxembourg (30.8 %), the Netherlands (41.5 %) and Sweden (42.7 %).

Figure 7: Household consumption expenditure by Member State, 2020, cumulated % of GDP
Source: Eurostat (nama_10_co3_p3)

In the EU as a whole, as well as in nearly all EU countries 'Housing, water, electricity, gas and other fuels' was the most significant item of household expenditure, followed by'Food and non-alcoholic beverages' and 'Transport'.

As regards expenditure on 'Housing, water, electricity, gas and other fuels', the highest levels of household expenditure were found in Slovakia (30.7 %), Finland (30.5 %) and Denmark (28.9 %), while the lowest levels were observed in Lithuania (15.5 %), Malta (16.8 %) and Cyprus (18.0 %).

Figure 8: Housing, water, electricity, gas and other fuels, Member States, 2020, % of total expenditure
Source: Eurostat (nama_10_co3_p3)

For expenditure on 'Food and non-alcoholic beverages', the highest shares were found in Romania (26.4 %), Lithuania (21.7 %), Estonia (21.6 %) and Croatia (21.4 %), while the lowest shares were observed in Luxembourg (9.5 %), Ireland (9.8 % ) and Austria (11.3 %).

Figure 9: Food and non-alcoholic beverages, Member States, 2020, % of total expenditure
Source: Eurostat (nama_10_co3_p3)

Concerning expenditure on 'Transport', the highest shares of household expenditure were found in Slovenia (14.2 %), Lithuania (13.9 %) and Germany (13.1 %), while the lowest levels were found in Slovakia (5.3 %), Croatia (7.5 %) and Czechia (8.8 %).

Figure 10: Transport, Member States, 2020, % of total expenditure
Source: Eurostat (nama_10_co3_p3)

Data sources

Eurostat collects data on household final consumption expenditure according to the international Classification of individual consumption by purpose (COICOP) in the framework of ESA2010.

The transmission requirements for each dataset are defined in ESA 2010 transmission programme. For COICOP data these are T+9 months after the reference period. Therefore, in this article the latest data available refer to the year 2020.

Breakdowns

Household consumption expenditure is classified by consumption purpose according to the COICOP classification (Classification Of Individual COnsumption by Purpose, see also Commission Regulation (EC) No 113/2002 of 23 January 2002). COICOP categories at three-digit level are as follows:

P01 - Food and non-alcoholic beverages

P011 - Food

P012 - Non-alcoholic beverages

P02 - Alcoholic beverages, tobacco and narcotics

P021 - Alcoholic beverages

P022 - Tobacco

P023 - Narcotics

P03 - Clothing and footwear

P031 - Clothing

P032 - Footwear

P04 - Housing, water, electricity, gas and other fuels

P041 - Actual rentals for housing

P042 - Imputed rentals for housing

P043 - Maintenance and repair of the dwelling

P044 - Water supply and miscellaneous services relating to the dwelling

P045 - Electricity, gas and other fuels

P05 - Furnishings, household equipment and routine household maintenance

P051 - Furniture and furnishings, carpets and other floor coverings

P052 - Household textiles

P053 - Household appliances

P054 - Glassware, tableware and household utensils

P055 - Tools and equipment for house and garden

P056 - Goods and services for routine household maintenance

P06 - Health

P061 - Medical products, appliances and equipment

P062 - Outpatient services

P063 - Hospital services

P07 - Transport

P071 - Purchase of vehicles

P072 - Operation of personal transport equipment

P073 - Transport services

P080 - Communication

P081 - Postal services

P082 - Telephone and telefax equipment

P083 - Telephone and telefax services

P09 - Recreation and culture

P091 - Audio-visual, photographic and information processing equipment

P092 - Other major durables for recreation and culture

P093 - Other recreational items and equipment, gardens and pets

P094 - Recreational and cultural services

P095 - Newspapers, books and stationery

P096 - Package holidays

P10 - Education

P101 - Pre-primary and primary education

P102 - Secondary education

P103 - Post-secondary non-tertiary education

P104 - Tertiary education

P105 - Education not definable by level

P11 - Restaurants and hotels

P111 - Catering services

P112 - Accommodation services

P12 - Miscellaneous goods and services

P121 - Personal care

P122 - Prostitution

P123 - Personal effects n.e.c.

P124 - Social protection

P125 - Insurance

P126 - Financial services n.e.c.

P127 - Other services n.e.c.

Context

Consumption expenditure is what people, acting either individually or collectively, spend on goods and services to satisfy their needs and wants. A household’s economic well-being can be expressed in terms of its access to goods and services. The more that can be consumed, the higher the level of economic well-being, though the relationship between the two is not a linear one. Measuring consumption expenditure might, therefore, be a way of measuring economic well-being.

Studies of consumption investigate how and why society and individuals consume goods and services, and how this affects society and human relationships. Contemporary studies focus on meanings of goods and the role of consumption in identity making. Traditionally, consumption was seen as rather unimportant compared to production, and the political and economic issues surrounding it. However, with the development of a consumer society, increasing consumer power in the market place, the growth in marketing, advertising, sophisticated consumers, ethical consumption etc., it is recognised as central to modern life.

In national accounts, the final consumption expenditure of households is the biggest component of the expenditure approach to GDP. Its evolution allows an assessment of purchases made by households, reflecting changes in wages and other incomes, but also in employment and in savings behaviour.

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Notes

↑ Implicit deflator series are derived as a ratio of current price to chain-linked volumes series and give indication of underlying price changes.

[1] Implicit deflator series are derived as a ratio of current price to chain-linked volumes series and give indication of underlying price changes.

[1]