Durable goods boost consumption growth

22/02/2008 15:00

Households spent 2 percent more on goods and services in 2007. In the previous year the increase in domestic consumption was nearly 3 percent. The increase in the last two years follows a period in which households kept a tighter hand on their purses.

Domestic household consumption

Domestic household consumption

Households spent more on durable goods in particular in 2007. These include items like clothes, furniture and televisions, but also cars. Spending on durable goods rose by 4.4 percent in 2007. In 2006 spending on this category also rose strongly, by nearly 6 percent. The increase has not been this large since the last period of strong economic growth, which ended in 2000.

Consumption of durable goods

Consumption of durable goods

With its substantial growth rates, spending on durable goods was the main power behind consumption growth in both 2006 and 2007. In 2007 it accounted for nearly half of the increase in domestic consumption. This is surprising, as only one fifth of household spending consists of purchases of durable goods. Spending on services is the largest consumption category. More than half of household spending is on services, for example housing, treatment by doctors and dentists, public transport and dining out.  Spending on services grew a lot less strongly than that on durable goods in 2007, by 1.7 percent. In spite of this, because of its share in consumption, it contributed just as much to the increase in consumption.

Contribution to consumption growth, 2007   

Contribution to consumption growth, 2007

In addition to durable goods and services, consumption of food, drink and tobacco also contributed positively to consumption growth. The category ‘other goods’ was the only negative component. This was a result of gas consumption. This was much lower in the first months of 2007 than twelve months previously because of the mild weather. At the end of the year, gas consumption was substantially higher than twelve months previously, but the increase was not enough to cancel out the fall in the first months. Gas consumption thus had a net negative effect on consumption growth.