2.2Private Consumption Expenditure, by Source of Supply

TableofContents

1. GENERAL

2. MAIN FINDINGS

2.1Private Consumption Expenditure, By Type

2.2Private Consumption Expenditure, By Source of Supply

2.3Private Consumption Expenditure from Domestic Production, by Industry

2.4Consumption Expenditure of Private Non-Profit Institutions

3.TERMS, DEFINITIONS AND EXPLANATIONS

4.SOURCES OF THE DATA

5.COMPARISON TO PREVIOUS PUBLICATIONS

1.GENERAL

This publication presents detailed estimates of the composition of private consumption expenditure by industry and by type, at current prices and at 2015 prices, for the period 1995–2016. All of the data are presented at market prices, and include net VAT (VAT paid less VAT refunded).

The private consumption expenditure in this publication is composed of several categories:

1. Total private consumption expenditure (Tables 1–3);
2. Private consumption expenditure on food, beverages and tobacco (Tables 4–8).
3. Private consumption expenditure on industrial goods (Tables 9–13).
4. Private consumption expenditure on services (Tables 14–15).
5. Private consumption expenditure on housing services (Table 16).
6. Private consumption expenditure on fuel, electricity and water (Table 17).
7. Consumption expenditure of private non-profit institutions (Table 18).
8. Gross domestic product per capita and actual individual consumption expenditure per capita, at international prices (Table 19).

2.MAIN FINDINGS

In 2016, private consumption expenditure wasNIS672.2 billion, which constituted55.1% of the gross domestic product and 43.0% of the total use of resources.

Private consumption expenditure atconstant prices increased by 6.1%in 2016,following an increase of3.9% in 2015and an increase of 4.5% in 2014.

Private consumption expenditure per capita in 2016wasNIS78,700.

Private consumption expenditure per capita atconstantprices increased by 4.0%in 2016,following an increase of1.9% in 2015andan increase of 2.5% in 2014. In 2016, the expenditure per capita was 8.4 times greater than the expenditure in 1950.

From 1951 to 1970, private consumption expenditure per capita increased by an average of 4.4% per year. From 1971 to 1980, the rate of increase in expenditure decreased to an average of 2.6% per year. This was followed by average increases, per year, of 3.8% in the 1980s and 3.6% in the 1990s. During 2001–2016, private consumption expenditure per capita increased at an average rate of 1.8% per year.

Table A.- Increase in Private Consumption Expenditure per Capita,
Average per Year, at Constant Prices

Percentages

2.1Private Consumption Expenditure, By Type

In 2016, consumption expenditure on non-durable goodsconstituted86.1% of the private consumption expenditure in the domestic market (at current prices). Expenditure on non-durable goods consisted ofthe following: expendituresforvarious services – 34.5%(e.g., education, health care, domestic help, food services, entertainment, and transportation); expenditure forreal estate activities – 22.6%(including the value of owner-occupied dwellings services); expenditure forfood, beverages and tobacco – 19.0%;expenditure forother non-durable goods – 3.5% (e.g.,medication, cosmetics, and stationery); and expenditure forfuel, electricity, and water – 6.5%.

Expenditure for semi-durable goodsconstituted4.6% of the private consumption expenditure in the domestic market (including clothing and footwear, household textiles, toys, recreational and sport items, utensils, small electrical appliances, etc.).

Expenditure for durable goodsconstituted9.3% of the private consumption expenditure in the domestic market (including personal transport equipment, electronic and electrical equipment, telecommunications equipment, furniture, jewellery, etc.).

Table B.- Increase in Private Consumption Expenditure
per Capita, Average per Year, at Constant Prices

Percentages

As can be seen in Table B, the rate of increase in the expenditure on durable goods and the rate of increase in expenditure on semi-durable goods per capitawere characterized by great fluctuations, whereas the rate of increase of the expenditure on non-durable goods per capita was steady and relatively moderate.

A distribution of private consumption expenditure in the domestic market (Diagram 2) shows that the expenditure forindustrial goods increased from 13.7% in1995 to 17.8% in 2016.The expenditure forreal estate activitiesdecreased from 22.6% in1995 to22.0% in2016.The expenditure on serviceswas 34.2%in 2016, similar to the expenditure in 1995. The expenditure on fuel, electricity and waterdecreasedfrom 7.3% in1995 to 7.0% in 2016.The expenditure on food, beverages and tobacco decreased from 22.1% in1995 to 19.0% in 2016.

2.2Private Consumption Expenditure,By Source of Supply

A distribution of private consumption expenditure by source of supply (Table C)shows that domestic productionconstituted81.7% of the total consumption expenditure in the domestic market (at chained prices) in 2016, compared to 91.6% in 1995.

Table C.1- Distribution of Private Consumption Expenditure at Chained Prices*– Domestic Production and Imports, in Selected Years

Percentages

* The estimates at 2015 prices were obtained by chaining the estimates of each year to the prices of the previous year. Due to the chaining process, the components of the expenditure do not add up to the total, and the percentages do not add up to 100%.

Table C.2- Distribution of Private Consumption Expenditure at Current Prices – Domestic Production and Imports, in Selected Years

Percentages

Thedistributionof the private consumption expenditure forindustrial goods(which constituted75% of the expenditure originating in imports) by source of supply (Table D) shows a substantial increase in the share of the imports out of the total private consumption of industrial goods in recent years. The percentage of expenditure from imports reached a peak of77.7% at chained prices in 2016, compared to 50.5% in 1995.

Table D1.- Distribution of Private Consumption Expenditure on Industrial Goods at Chained Prices*– Domestic Production and Imports,in Selected Years

Percentages

* The estimates at 2015 prices were obtained by chaining the estimates of each year to the prices of the previous year. Due to the chaining process, the components of the expenditure do not add up to the total, and the percentages do not add up to 100%.

Table D2.- Distribution of Private Consumption Expenditure on Industrial Goodsat Current Prices – Domestic Production and Imports,in Selected Years

Percentages

2.3Private Consumption Expenditure from Domestic Production, by Industry

In 2016, the current private consumption expenditure deriving from domestic productionwas distributed as follows, byindustry:18.3% fromManufacturing, 4.1% from Agriculture,forestry and fishing,3.6% from Electricity, gas, Water, and Construction, and 4.8% fromRefined petroleum (gasoline and other fuels).

In 2016, the service industries (excluding Real estate activities) that together supplied42.0% of the private consumption from domestic production, were distributed as follows: the share of Transportation and storage, postal and courier activities was 20.2%; the share of Information and communication services was 7.6%; the share of Accommodation and food service activities was 19.6%; the share of Arts, entertainment and recreation was 9.2%; the share ofOther personal services and Activities of households as employers (for domestic workers) was6.8%;the share of Education, human health and social work activities was 16.2%; the share of Financial and insurance activities was 15.3%, and the share of businessservices was 5.1%.

The share of Real estate activitiesin private consumption expenditure from domestic production was 27.2%,of which 24.6% was private consumption expenditure on rent and on the imputation of services for owned dwellings, and 2.6% was expenditure for municipal taxes and building committee fees.

2.4Consumption Expenditure of Private Non-Profit Institutions

Consumption expenditure of private non-profit institutions serving households increased by 4.3% in 2016, following increases of 5.2% in 2015 and 1.7% in 2014(for a detailed description, see Table 18).

3.TERMS, DEFINITIONS AND EXPLANATIONS[2]

• Private consumption expenditure:The aggregate of consumption expenditures of Israeli households and the consumption expenditure of non-profit institutions serving households, whose main expendituresare not financed by the government. Household consumption is calculated at consumer prices, i.e., the prices paid by households, including taxes and expenses for transportation of the goods from the seller to the consumer.
• Consumption expenditure of households in the domestic market:The breakdown of consumption into components relates to the combined domestic expenditure of all households (both of Israelis and of foreign residents in Israel) on goods and services in the domestic market, due to the lack of detailed current statistics on the consumption of Israelis alone.
• Consumption expenditure of Israeli households: The consumption expenditure of households in the domestic market less the consumption of foreign residents in Israel, plus the consumption of Israelis abroad, on goods and services – including durable goods but excluding expenditure on dwellings or valuables (works of art, precious metals and stones), which serve as investments.
• Goods or services for consumption: Goods or services used by households, non-profit institutions or government units for the direct satisfaction of individual needs or collective needs of members of the community.
• Current consumption expenditure: Includes the following expenditures:

Expenditure for non-durable goods: Non-durable goods are defined as products which may be used up entirely in less than a year, assuming a normal or average rate of physical usage.

Expenditure for services:Personal services that are used as final consumption for households, non-profit institutions or government unitsto satisfy their needs.

Expenditure for real estate activities: The expenditure is valued as rent ifthe dwellings are rented out by their owners. If the owners live in the dwelling, the value of the activities is imputed as final consumption of the owners. The value of the activities is calculated as the rental fees that would be paid on the market for accommodation of the same size, quality and type. In addition to the rental fees or imputation thereof, real estate activities include municipal taxes, building committee, and house painting or small renovations.

• Durable goods: Products which may be used repeatedly or continuously over a period of more than a year. For example: private cars, television sets, washing machines, furniture, jewellery etc.
• Semi-durable goods:Products that are not durable goods, which may be used repeatedly or continuously over a period longer than a year.In contrast to durable goods,the expected lifetime use of semi-durable goods is often significantly shorter than that of durable goods, and their purchase prices are substantially lower (e.g.,wearing apparel and footwear, household textiles, books, and entertainment and recreation items).
• Consumption expenditure, excluding durable goods: Includes current consumption expenditure in addition to expenditure for semi-durable goods.
• Consumption expenditure of non-profit institutions serving households is equal to the value of their intermediate consumption, payments to employees, and indirect taxes paid on wages and consumption of fixed capital.
• Household consumption expenditure per capita at international prices: This expenditure is calculated through special currency conversion rates, PPPs (Purchasing Power Parities), which equalize the purchasing power of different currencies. That is, the PPPs provide a uniform basis for estimating the purchasing power of different currencies. Therefore, the GDP calculated by the PPP is in constant prices, and the comparison between countries reflects only the volume differences of goods and services between countries, less the price differences between countries. The volume indices (the expenditure per capita) are calculated by dividing the average relevant item per capita in each country by the average of all countries participating in the calculation.
• Actual individual consumption:The total value of household final consumption expenditure,non-profit institutions serving households’ final consumptionexpenditure, and government expenditure onindividual consumption goods and services. Anindividual consumption goodor service is one that is acquired by a household and used to satisfy the needs and wants of members of that household.

Classification of Goods:

The structure of the series of private consumption expenditure estimates was changed in accordance with the Classification of Individual Consumption According to Purpose (COICOP).

Link: COICOP Classification.

The estimates of private consumption expenditure were made according to the Standard Industrial Classification of All Economic Activities 2011,[3] which is based on ISIC Rev. 4(International Standard Industrial Classification), recommended by the United Nations.

Link: Standard Industrial Classification of All Economic Activities 2011

4.SOURCES OF THE DATA

The main estimation methods of components of private consumption were:

• Estimation based on flow of goods: For partof the household consumption expenditure, monthly data were collected on quantities of goods consumed and consumer prices. This allows for calculation of consumption expenditures by multiplying the quantities of goods by their prices. This estimate includes expenditures such as agricultural food products, tobacco, domestically produced durable goods, fuel, electricity, and person-nights in hotels. Estimates of current and constant prices are calculated for these items using this method. The sources of data on quantities are: reports of the Agricultural Produce Marketing Board; Israel Electric Corporation reports, sales reports of fuel companies,and reports by customs officials on imports of goods into Israel, as well as monthly surveys of the Central Bureau of Statistics on the supply of durable goods to the domestic market and on person-nights in hotels by rating. The prices used in the estimates are obtained from consumer price index surveys conducted by the CBS.
• Estimation based on the Household Expenditure Survey conducted annually as of 1997. This method is used to obtain data on housing services, health services, and services supplied to households by businesses, as well asdata on some industrial goods and food products. The 2015Household Expenditure Survey is the most recent one to be used as a basis for estimating private consumption for the items listed above. The survey was also used as a basis for extrapolating estimates for subsequent years. The 1997 Household Expenditure Survey was used to update the series of the previous years by interpolation of the findings to the period of the previous Family Expenditure Survey (1992/93). Extrapolation is based on measures of revenue for the domestic market in manufacturing industries (less exports), imports of consumer goods, and other measures.

As of 1964, the estimates of private consumption expenditure include the results of theHousehold Expenditure Surveys, which cover all urban households in Israel. As of the 2012 Household Expenditure Survey, the sample includes rural households as well.

In the appendix, Summary Table A shows private consumption expenditure per capita at constant prices and Summary Table Bshows private consumption expenditure per capita at current prices. In these tables, two estimates are presented for 1964, which is a linkage year.

• Imports of consumption productswere estimated on the basis of foreign trade data. The classification of goods as consumer goods, capital formation, and inputs was updated according to the results of a 2006 designated survey. Data on imports were updated for the period 2006–2016, and the import data were interpolated for the period 1988–2006.
• The consumption estimatefor foreign residents in Israel and for Israelis abroadwas obtained from the travel abroaditem in the Balance of Payments, after deduction of an estimate for business expenditure.
• The consumption estimate for non-profit institutions (labour expenditures and purchases of other goods and services), at current prices, is based on the findings of the survey of expenditures of non-profit institutions. This survey summarizes consumption expenditures from financial statements of the institutions or from special questionnaires addressed to them. For the years in which statements had not yet been received, the value of services during the last year for which data were collected was extrapolated according to changes in wages as reported to the National Insurance Institute. The estimates oflabour expenditures of non-profit institutions at constant prices were obtained by extrapolating according to the change in the number of work hours of employees in each type of institution. Purchases of other goods and services, at constant prices, were calculated using price indices adjusted for the composition of the purchases made by the institutions.
• Estimation of consumption expenditure of households per capita at international prices: This estimate was based on a project for estimating the value of PPPs that was conducted in 2014. Data were collected from 47 countries (34 of the participating countries were OECD members, and 13 were not, but participated nonetheless). Prices for the current project were collected for a basket of approximately 3,000 goods and services that comprise the index. Prices were collected over a period of three years, and were used to calculate the price ratios of individual goods and services. Afterward, the price ratios were weighted to the relevant expenditure data in the National Accounts and averages were calculated, including the GDP.

5.COMPARISON TO PREVIOUS PUBLICATIONS

The main revisions introduced into the estimates were:

Following integration of the findings of the 2015 Household Expenditure Survey, the estimates were updated for the following items:

Private consumption expenditure for Manufacturing products: footwear,cleaning products, medications, eyeglasses, flowers, pets, books,paper personal hygiene products, soaps and towelettes, toothpaste, shampoo, precious stones and jewellery,and religious articles.

Expenditure for various services: health services,maintenance and washing of motor vehicles, driving lessons, telephone, Internet, cable television, restaurants, veterinary services, and caregivers for the elderly.

Real estate activities data: rent, owned dwellings; municipal taxes; building committee payments.

Expenditure for food products: breakfast cereals,icecream, and cocoa.

Expenditure estimates for services were also updated for the various types of insurance expenditures: Car insurance, health insurance, dwelling insurance, and life insurance for 2006–2016. This was done in accordance withSNA2008 recommendations and on the basis of data from the Capital Market Division of the Ministry of Finance.

Estimates of expenditures for purchases of imported and second-hand vehicles were updated for 2015–2016 on the basis of the data on vehicles in Israel from the Ministry of Transport.

Car maintenance expenditures as a wage benefit were updated according to the income tax files for 2015. Data for 2016 were updated accordingly.For 2016, the imputation for the car benefit was calculated according to the amount imputed into the worker's wages.

Data on electricity usage were updated based on the annual statistical reports of the Israel Electric Corporation for 2016.