1.GENERAL
This publication presents detailed estimates of the composition of private consumption expenditure, by division and by type, at current prices and 2000 prices, for the years 1995-2003.
Three categories of private consumption expenditure are presented in this publication:
- Total private consumption expenditure (Tables 1-3);
- Private consumption expenditure on food, beverages and tobacco and other industrial goods (Tables 4-10);
- Private consumption expenditure on other services, fuel and housing (Tables 11-13).
For each category, the private consumption expenditure was classified according to:
Source of supply – domestic production or imports;
Division – the division in which the different goods or services are usually produced (Tables 2, 3, 6, 7, 8, 9, 10, 12);
Type – classification by groups of goods and services, such as: food, beverages, tobacco, clothing, footwear, household equipment, healthcare, education, transportation, etc., which the households purchased (Tables 1, 4, 5, 11, 13).
In addition, this publication provides data on services provided to households by non-profit institutions whose main expenses are not funded by the government (table13).
2.MAIN FINDINGS
In 2003, private consumption expenditure reached NIS 295.4 billion, which constitutes 58.8% of gross domestic product.
Private consumption expenditure, in constant prices, increased in 2003 by 1.3%, compared to an increase of 1.1% in 2002, 2.7% in 2001, 7.7% in 2000, 3%-4% per annum between 1997 and 1999, and 5.5% in 1996.
Private consumption expenditure per capita in 2003 amounted to NIS 44.1 thousand.
Private consumption expenditure per capita, in constant prices, increased from 1950 to 2003 by 3.5% per annum, on the average. In 2003, the expenditure per capita was 6.0 times greater than the expenditure in 1950.
From 1951 to 1970, private consumption expenditure per capita increased by 4.3% per annum, on the average. From 1971 to 1980, the increase in expenditure decreased to 2.6% per annum, on the average. This was followed by another increase, of 3.8% and 3.2% per annum in the 1980s and 1990s, respectively. In 2001-2003, private consumption expenditure per capita decreased at an average rate of 0.3% per annum.
Table A.- The Increase in Private Consumption Expenditure per Capita,
Average per Year, in Constant Prices
Percentages
Years / Private Consumption Expenditure per Capita1960-1951 / 4.3
1970-1961 / 4.4
1980-1971 / 2.6
1990-1981 / 3.8
2000-1991 / 3.2
2003-2001 / -0.3
Private consumption expenditure, by type
Current consumption expenditure (total consumption expenditure less purchases of durable goods) was 91.5% of the private consumption expenditure in 2003 in the domestic market (at current prices); 29.9% of the expenditure in the domestic market was for various services, such as education, health care, domestic help, food services, entertainment, transportation, etc.; 23.3% was for housing, including the value of owner-occupied dwellings; 22.1% was for food, beverages and tobacco; 10.8% was for footwear, clothing, personal items, newspapers, books, etc. and 5.5% was for fuel and electricity.
Expenditure for durable goods - private vehicles, furniture and household equipment (such as refrigerators, televisions, washing machines and air-conditioners) comprised 8.5% of the total private consumption expenditure in the domestic market in 2003.
As can be seen in Table B, until 2000, the average rate of increase in expenditure on durable goods per capita (5.3%-9.0%, in average, per annum) was higher than the increase in the current private consumption expenditure per capita (2.0%-4.0%, in average, per annum).
By contrast, in 2001-2003 the expenditure per capita on durable goods decreased by 7.4% per annum, on the average, compared to an increase of 0.4% in the current consumption expenditure. It should be noted that in the past there were also few years in which the expenditure per capita on durable goods declined (see Summary Tables).
Table B.- The Annual Increase in Private Consumption Expenditureper Capita, in Constant Prices,Percentages
Years / Current Consumption Expenditure per Capita / Durable Goods per Capita1960-1951 / 3.9 / 5.3
1970-1961 / 4.0 / 9.0
1980-1971 / 2.1 / 6.3
1990-1981 / 3.3 / 7.7
2000-1991 / 2.9 / 6.2
2003-2001 / 0.4 / -7.4
As shown in the following diagram, the percentage of expenditure on services increased over the years 1995-1999 but from 2000 and on there was a moderate decrease in this percentage. The percentage of expenditure on food decreased until 2000 but in 2001-2003 there was a moderate increase in expenditure on food. The percentage of expenditure on fuel and electricity remained relatively stable over the years. A moderate decrease in the percentage of expenditure on housing can be identified between 1995 and 2000, but between 2001 and 2003 there was a slight seen in the percentage of expenditure on housing out of the total expenditure in the domestic market. No specific direction of change in the percentage of expenditure on industrial goods can be identified over the years.
Private consumption expenditure, by source of supply
In 2003, 85.7% of the private consumption expenditure in the domestic market (in constant prices) was from domestic production, compared to 86.0% and 85.0% in 2002 and 2001, respectively. As can be seen, due to government policy of exposure to imports, the percentage of domestic production out of the total private consumption expenditure decreased over the years from 87.9% in 1980 and 89.2% in 1985 to 86.9%-86.5% in 1995 to 1999, to 84.6% in 2000. As stated before, the percentage of domestic production out of the total private consumption expenditure increased again, to 86% in 2002-2003.
Table C.- Private Consumption Expenditure from Domestic Production and Imports,
Percentages
Year / Private Consumption ExpenditureDomestic Production / Imports
1980 / 87.9 / 12.1
1985 / 89.2 / 10.8
1990 / 87.2 / 12.8
1995 / 86.9 / 13.1
1996 / 86.3 / 13.7
1997 / 86.5 / 13.5
1998 / 86.8 / 13.2
1999 / 86.5 / 13.5
2000 / 84.6 / 15.4
2001 / 85.0 / 14.9
2002 / 86.0 / 14.0
2003 / 85.7 / 14.3
An examination of private consumption of industrial goods (by source of supply), which constitutes a major part of consumption originating in imports, shows the results of the policy of exposure to imports, and reveals an even more substantial increase in the share of the import out of total private consumption of this group over a 10-year span. During the 1990s the share of imports out of total private consumption of industrial goods increased. In 2000, there was a substantial increase of over 6% in its relative share, whereas in 2001-2003 the share of imports out of total private consumption of industrial goods decreased, at moderate rates.
Table D.- Private Consumption of Industrial Goods,
from Domestic Production and Imports
Percentages
Consumption Expenditure of Industrial GoodsYear / Domestic Production / Imports
1990 / 57.0 / 43.0
1995 / 53.2 / 46.8
1996 / 51.4 / 48.5
1997 / 51.5 / 48.5
1998 / 51.2 / 48.7
1999 / 52.0 / 47.9
2000 / 46.0 / 54.0
2001 / 46.0 / 54.0
2002 / 47.6 / 52.3
2003 / 46.8 / 53.1
Private consumption expenditure from domestic production, by industry
Data on the distribution of private consumption supply from domestic production in 2003, by industry and at current prices, reveal that 31.1% of the sources were from manufacturing, 4.8% were from agriculture, and 4.2% were from the electricity, water and construction industries.
Together, the various service industries supply about 35% of private consumption from domestic production; the transport and communication industry supplies about 11.3% of consumption from domestic production. Financial services supply about 5%, whereas the business services, supply less than 1%. Accommodation services supply about 4.1% of the domestic production, and education, health services and social work industries supply about 8%. Cultural services and personal services supply, together, 5.5% of private consumption from domestic production.
Consumption of housing services is entirely from domestic production, and it supplies about 25% of all private consumption from domestic production.
3.DEFINITIONS AND EXPLANATIONS[1]
Private consumption expenditure: is the aggregate of private consumption expenditures for goods and services of Israeli households and of non-profit institutions serving households, whose expenditure is not mainly financed by the government.
Goods or services for consumption are defined as goods or services used by households, non-profit institutions or government units for the direct satisfaction of the individual or collective wants or the needs of the individuals.
Consumption expenditure of households in the domestic market: due to lack of detailed current statistics on consumption by Israelis, the breakdown of consumption into its components relates to the combined domestic expenditure of all households (both of Israeli residents and of foreign residents) in the domestic market.
Israeli households final consumption expenditure: expenditure by resident households, in Israel and abroad, on goods and services, including durable goods, but excluding expenditure on fixed assets such as dwellings or valuables which serve as investments (works of art, precious metals and stones). Household consumption is calculated at consumer prices; i.e. the prices paid by the households, including taxes and necessary expenses for transportation of the goods from the seller to the consumer.
Durable goods: durable goods are defined as a product that can be used repeatedly or over a period of a year or more, assuming average physical use.
Housing services: housing services are calculated as rent money when dwellings are rented out by their owners. When the owners live in the dwelling, the value of housing services is imputed as final consumption of the owners. The housing services produced are deemed to be equal in value to the rentals that would be paid on the market for accommodation of the same size, quality and type. In addition to the rentals or imputation thereof, housing services include municipal taxes, payments for water, tenants committee and house painting or small renovations.
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 depreciation.
4.CLASSIFICATION
Expenditure for each group of goods or services is broken down by source of supply - domestic production or imports. In addition, private consumption from domestic production and imports is classified by the characteristic industry. Goods and services are grouped according to characteristic products of the economic industries[2].
5.SOURCES OF THE DATA
Private consumption expenditure:
The main estimation methods of components of private consumption are:
Estimation based on flow of goods: For some of the household consumption - agricultural food products, tobacco, some domestically produced durable goods, fuel, electricity, person-nights in hotels, cinema visits, commercial hospital services - monthly data are gathered on quantities of goods consumed and consumer prices. This allows calculation of consumption expenditures by multiplying the quantities of goods by their prices. 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, the Israel Electric Corporation reports, fuel company sales reports, 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, and reports of the Ministry of Health on the number of hospitalization days in commercial hospitals, by type of hospital. The prices used in the estimates are obtained from surveys conducted by the CBS.
Estimates based on the Household Expenditure Survey conducted annually as of 1997: This method is used for estimates of housing services, business services, and for some manufacturing products that are not food products or fuel. The Household Expenditure Survey for 2002 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 indicators such as sales in manufacturing industries (less exports) and imports of consumer goods.
As of 1964, the estimates of private consumption expenditure included the results of comprehensive household survey (as of 1968/9) of all urban households. Estimates for previous years were based on household expenditure surveys that cover only urban households of employees. In the above summary tables, two estimates are presented for 1964, which is the connection year.
Imports of consumption products are estimated using the foreign trade data. Classification of goods as consumer goods, investment and inputs is based on the results of the "Import Destination Survey", which was conducted in 1988. Since 1988, the classification of imports and exports has been based on the harmonized system. For imports, their classification includes about 13,000 goods, three times more than the previous classification (Bruxell classification).
The consumption estimate for foreign residents in Israel and for Israelis abroad is obtained from the "Travel" item in the Balance of Payments, after deduction of the 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 a survey of expenditures of non-profit institutions. This survey summarizes consumption expenditures from financial reports of the institutions or from special questionnaires sent to them. For the years in which reports had not yet been received, the value of services during the last year for which data were available was extrapolated according to changes in wages as reported to the National Insurance Institute. The estimates for labour 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 institutions' purchases.
Current purchases of goods and services by non-profit institutions, at constant prices, were classified by source of supply and by the characteristic production industry based on a detailed analysis conducted during the preparation of the Input-Output Tables for 1995. Classification of purchases at current prices took into consideration the changes in prices for purchasing from domestic production, by industry and from import.
6.COMPARISON TO PREVIOUS PUBLICATIONS
Data published in the previous publication (“Private Consumption Expenditure by Industry 1995-2002”, Special Publication No. 1219), were revised for the years 1995-2002 according to the findings of the Household Expenditure Survey for 2002 and the transference of the expenditure of the government and non-profit institutions on food and medical products, that was so far included in the private consumption expenditure, to the general government consumption expenditure. Expenditures on food, beverages and tobacco, which are included in other items of the national accounts (such as business expenses, etc.) and net exports to Judea, Samaria and the Gaza area, were separately deducted from each division. The series on tourists and foreign workers consumption was also revised because the method of calculating this data had been updated.
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[1] The definitions for the years 1995-2003 are based on the new System of National Accounts (SNA 93), which was prepared by five international organizations: the United Nations, the International Monetary Fund, the World Bank, the OECD and EUROSTAT. The new system is presented in the guidebook: System of National Accounts 1993, Commission of the European Communities, International Monetary Fund, Organization for Economic Cooperation and Development, United Nations, World Bank, Brussels/Luxembourg, New York, Paris, Washington D.C. 1993.
The definitions for the years 1950-1995 were compiled according to the recommendations of the UN Statistical Office in 1968.
[2]Standard Industrial Classification of All Economic Activities, Technical Publication No. 63,
The Central Bureau of Statistics, Jerusalem, 2003.