Why is the Bank of England interested in what we spend?
We regularly look at measures of household spending.
Along with other things such as spending by businesses and the amount of goods we buy and sell abroad, this helps us form a judgement about the overall strength of the economy. Household spending is particularly important as it forms most of total spending in the economy.
But we need to be careful. Just because people spend more at Christmas doesn’t necessarily mean the economy is strong.
To help us the Office for National Statistics (ONS) publishes measures of spending that are adjusted to take away the impact of seasonal events such as Christmas. This helps us capture the true strength of spending across the UK economy.
The festive period in 2017 was a good example of this. Even though consumer spending rose by over 10% between November and December, on a seasonally-adjusted basis it actually fell.
It’s these seasonally adjusted figures that you’ll normally see quoted in the news for economic data like consumer spending, output or inflation.
Taking all of this information on the economy together, we set interest rates – normally eight times a year – to help to ensure that price rises are limited. By meeting this target and for limited inflation, we help support a stable and healthy economy.