Wednesday, June 6

Household consumption

I am still wrestling with the national accounts data that says we are living in the midst of a deflationary boom. It's a very rare beast; the opposite of the 1970s stagflation. Either way, I will need to find a theoretical framework to explain our fast-growing, yet price-deflating economy. (Or I can take the easy route and say that we need to look at the trend over the long term rather than focus on the data for a specific quarter).

Anyway, the next charts look at the data on household final consumption expenditure in the national accounts. First we will look at real (chain volume measure) growth in household expenditure items versus nominal (current price) growth.

From these data points we can derive implicit price deflators for each of these household expenditure items; and we can have a look at whether these prices are growing or not over the previous quarter and through the year.

And we can compare these implicit price deflators with the consumer price index.

I am not sure I can explain some of the differences between the consumer price index and implicit price deflators for household final expenditure consumption. I will need to think about this a bit more.

At least in regard to household expenditure, real growth is lower than nominal growth.

By state (from table 21 in the national accounts) we have the following ... (all in chain volume measures)

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