Final consumption expenditure (P.3)

3.75 Definition:

Final consumption expenditure consists of expenditure incurred by resident institutional units on goods or services that are used for the direct satisfaction of individual needs or wants or the collective needs of members of the community. Final consumption expenditure may take place on the domestic territory or abroad.

3.76 Household final consumption expenditure includes the following borderline cases:

  1. services of owner-occupied dwellings;
  2. income in kind, like:
    1. goods and services received as income in kind by employees;
    2. goods or services produced as outputs of unincorporated enterprises owned by households that are retained for consumption by members of the household. Cases in point are food and other agricultural goods, housing services by owner-occupiers and household services produced by employing paid staff (servants, cooks, gardeners, chauffeurs, etc.).
  3. items not treated as intermediate consumption, like:
    1. materials for small repairs to and interior decoration of dwellings of a kind typically carried out by tenants as well as owners;
    2. materials for repairs and maintenance to consumer durables, including vehicles.
  4. items not treated as capital formation, in particular consumer durables, that continue to perform their function in several accounting periods; this includes the transfer of ownership of some durables from an enterprise to a household (see transactions in existing goods, paragraph 3.148.);
  5. financial services directly charged and the part of financial intermediation services indirectly measured used for final consumption purposes by households;
  6. insurance services by the amount of the implicit service charge (see paragraph 3.63);
  7. pension funding services by the amount of the implicit service charge (see paragraph3.63);
  8. payments by households for licences, permits, etc. which are regarded as purchases of services (see paragraphs 4.79, 4.80);
  9. the purchase of output at not economically significant prices, e.g. entrance fees for a museum (see paragraph 3.45).

3.77 Household final consumption expenditure excludes:

  1. social transfers in kind, like expenditures initially incurred by households but subsequently reimbursed by social security, e.g. some medical expenses;
  2. items treated as intermediate consumption or gross capital formation, like :
    1. expenditures by households owning unincorporated enterprises when incurred for business purposes – e.g. on durable goods such as vehicles, furniture or electrical equipment (gross fixed capital formation), and also on non-durables such as fuel (intermediate consumption);
    2. expenditure that an owner-occupier incurs on the decoration, maintenance and repair of the dwelling not typically carried out by tenants (treated as intermediate consumption in producing housing services);
    3. the purchase of dwellings (treated as gross fixed capital formation);
    4. expenditure on valuables (treated as gross capital formation).
  3. items treated as acquisitions of a non-produced assets, in particular the purchase of land;
  4. all those payments by households which are to be regarded as taxes, such as licences to own vehicles, boats or aircraft and also licences to hunt, shoot or fish (see paragraphs 4.79 – 4.80);
  5. subscriptions, contributions and dues paid by households to NPISHs, like trade unions, professional societies, consumers' associations, churches and social, cultural, recreational and sports clubs;
  6. voluntary transfers in cash or in kind by households to charities, relief and aid organisations.

3.78 Final consumption expenditure of NPISHs includes two separate categories:

  1. The value of the goods and services produced by NPISHs other than own-account capital formation and other than expenditure made by households and other units;
  2. Expenditures by NPISHs on goods or services produced by market producers that are supplied – without any transformation – to households for their consumption as social transfers in kind.

3.79 Final consumption expenditure (P.3) by government includes two categories of expenditures, similar to those by NPISHs:

(a) the value of the goods and services produced by general government itself (P.1) other than own-account capital formation (corresponding to P.12) and sales. Market output (P.11) and payments for the other non-market output (P.131);

(b) purchases by general government of goods and services produced by market producers that are supplied to households, without any transformation, as social transfers in kind (D.6311 + D.63121 + D.63131). This implies that  general government just pays for goods and services that the sellers provide to households.

3.80 Corporations do not make final consumption expenditures. Their purchases of the same kind of goods or services as used by households for final consumption are either used for intermediate consumption or provided to employees as compensation of employees in kind, i.e. imputed household final consumption expenditure. Even where, for example through advertising, they finance individual consumption, this expenditure is treated as intermediate.