By Robert Hamilton of the Bank’s Structural Economic Analysis Division and Beverley Morris of the Bank’s Inflation Report and Bulletin Division.
Household consumption in the United Kingdom grew by about 4% during 2001. This was largely accounted for by unusually strong spending on durable goods - growth in spending on other goods and services slowed to around a six-year low. This article discusses why spending on durable goods needs to be analysed differently from that on other types of goods, and provides some possible explanations for its recent unusual strength. In addition, an alternative estimate of consumption is presented that replaces the expenditure on durable goods with the flow of services derived from them. Over the past year, this alternative measure has grown less strongly than the standard expenditure series.