Review of Expenditure Aggregates
Derek Blades World Bank Consultant
Contents
Expenditure aggregates
Valuation
Two measures of consumption
Main expenditure aggregates
Expenditure Aggregates of 1993 SNAFinal Consumption ExpenditureHouseholds
Non-profit Institutions Serving Households
Government:• Individual• Collective
Gross capital formationGross fixed capital formation
Changes in inventories
Acquisitions, less disposals, of valuables
Balance of Exports and ImportsExports of goods and services
Imports of goods and services
Gross Domestic Product
Expenditure Aggregates of 1993 SNAFinal Consumption ExpenditureHouseholds
Non-profit Institutions Serving Households
Government:• Individual• Collective
Gross capital formationGross fixed capital formation
Changes in inventories
Acquisitions, less disposals, of valuables
Balance of Exports and ImportsExports of goods and services
Imports of goods and services
Gross Domestic Product
Main Aggregates Categories Groups Classes Basic Headings
Consumption expenditure by households 13 43 90 110
Consumption expenditure by NPISHs 1 1 1 1
Consumption expenditure by government: Individual Collective
5 1
7 1
16 5
21 5
Gross fixed capital formation 3 6 11 12
Change in inventories 1 1 1 2
Acquisitions less disposals of valuables 1 1 1 2
Balance of exports and imports 1 1 1 2
GDP 26 61 126 155
Household consumption expenditure
“Real” expenditures • food, clothing, transport, rent,
services….
Imputed expenditures:• rents of owner-occupiers• food and other goods for own
consumption• goods and services provided
as income in kind
Consumption expenditure by NPISHs
Examples:• religious organisations (mosques, temples, churches, schools, clinics,
hospitals)• trade unions• political parties in multi-party states• UNICEF, OXFAM, Red Crescent
Consumption expenditure is the total of:• compensation of employees, • intermediate consumption, • consumption of fixed capital, • taxes less subsidies on production • minus any payments received from households for services provided.
Only one basic heading – no breakdown by type
Consumption Expenditure by Government All levels of government are covered-central,
federal, provincial, local, townships …Consumption expenditure is the total of:
• compensation of employees, • intermediate consumption, • consumption of fixed capital, • taxes less subsidies on production • minus any payments received from households for
services provided. Divided between “individual” and “collective”
Individual versus Collective
Most expenditures on housing, health, recreation and culture, education and social protection are individual. (21 basic headings)
Expenditures on general public services, defence, public order and safety, economic affairs and environment protection are collective. (5 basic headings)
Gross fixed capital formation (GFCF)
Goods that are expected to be used in production for several years
GFCF is always measured net of sales:• sales for scrap, sales to other domestic producers, exports of
second-hand assets
1993 SNA includes expenditures on software and on mineral exploration in GFCF
Three basic headings:• Machinery and equipment• Construction• Other products
Change in inventories Work in progress - construction, ships… Stocks of raw materials, finished goods,
goods for resale, goods stored by government as strategic reserves, such as food and fuel.
Estimates may not be comprehensive but should cover important items such as food and fuel stocks, stocks of mining companies, large retailers...
Acquisitions less disposal of Valuables Valuables are goods
acquired as a store of value:• Precious metals• Paintings and antiques• Jewellery
Not used in production
Valuation
Valuation - general rule General rule is to use the prices at which
sales of goods and services are transacted - “purchasers” (or “market”) prices.
These prices may be reduced by discounts or rebates:• bargaining, sales, bulk purchases…
Note that price data for ICP must also reflect discounts or rebates.
Valuation - imputed rents
Use rents actually paid for similar kinds of dwellings, in similar locations and with similar facilities
If not possible, rents are valued at cost - consumption of fixed capital, return on capital, regular maintenance, and insurance
Valuation – goods produced for own consumption
Prices in local markets for livestock, vegetables, fruit…
Estimated basic prices for furniture, textiles, hand-tools (retail prices less sales taxes and retail margins)
Valuation – Government and NPISH Compensation of employees – not only wages
and salaries Intermediate consumption – valued at
purchasers prices Consumption of fixed capital – in current prices
(not historical) Taxes less subsidies on production minus any payments received from households
for services provided.
Valuation - GFCF GFCF is valued at purchasers’ prices Prices should include:
• cost of transport
• cost of installation
• and any fees or taxes for transfer of ownership.
Own-account production of fixed capital assets is valued at basic prices or, if not available, at the costs of production.
Valuation - Change in Inventories The change in inventories must reflect only
the physical change - not holding gains or losses due to changes in prices during the year.
The physical quantities of inventories at the beginning and end of the year are usually valued using the average prices over the year or, failing that, mid-year prices.
Valuation - Exports and Imports
Exports of goods and services
• Free-on-board (f.o.b.) prices
Imports of goods and services
• Cost, insurance, freight (c.i.f.) prices
Two Measures of Consumption
Two ways of looking at consumption
Who buys? Who consumes?
Consumption Expenditure versus Actual Consumption Consumption
expenditure
• Households
• Non-profit institutions
• Government:• Individual• Collective
Actual consumption
• Households:• Household
expenditures• Non-profit institutions• Government individual
expenditures
• Government:• Government collective
expenditures
To summarise:
Actual consumption of households consists of:• All consumption expenditure of households• All consumption expenditures of non-profit institutions serving
households• Individual consumption expenditures of government
Actual consumption expenditure of government consists of:• Collective consumption expenditures of government
ICP compares actual consumption, not consumption expenditures
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