HI GPI – ADJUSTED PERSONAL CONSUMPTION EXPENDITURE

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Adjusted Personal Consumption Expenditure (+PCE_ADJ)

 

GPI = U(PCE_ADJ + PP + KB + KS + KH – SC + KN – POL – DKN)

where PCE_ADJ = (PCE – DEFR – HI – CDE)*INQ

 

Adjusted Personal Consumption Expenditure (+PCE_ADJ)

PCE_ADJ is calculated as Personal Consumption Expenditure (PCE) minus: Defensive and Regrettable Expenditures (-DEFR), Household Investment (-HI), and Consumer Durable Expenditures (-CDE); the result of which was then adjusted for income inequality in society. PCE is household and/or individual annual consumption, the base upon which GPI adjustments are made. DEFR= Costs of food & alcohol + tobacco + insurance & financial services + household pollution abatement + medical & legal services + food waste + energy waste. Growth in PCE_ADJ was driven by PCE. DEFR impacted declines in Adjusted PCE the most.

HI GPI and ADJ PCE Excel Table

 

Adjusted Personal Consumption Expenditure Sub Indicators:

Defensive and Regrettable Expenditures (-DEFR)

Defensive expenditures serve to prevent or avoid unwanted effects of economic activity; regrettable expenses can either be welfare neutral (neither increasing nor decreasing utility) or harmful (decreasing utility). Both types of expenses are deducted from Personal Consumption Expenditure (PCE).

Defensive and regrettable expenditures steadily increased over the study period (undesirable), with a slight decline in 2020, reflecting a reduction in “classic” non-welfare enhancing expenditures during the COVID-19 Pandemic.

HI GPI and DEFR Excel Table

HI GPI – HI Excel Table

 

 

 

Household Investment (HI) Expenditures on Consumer Durables

Household Investments (HI) are portions of consumption that are investments and thus should be removed from PCE as their services will be accounted for later as positive impacts in Built Capital (KB).

HI GPI and Household Investment Excel Table

 

 

 

Consumer Durable Expenditures (-CDE)

Expenditure costs on consumer durables, such as clothing, footwear, furnishings, household equipment, and vehicle purchases, are deducted from Personal Consumption Expenditures (PCE).

HI GPI and CDE Excel Table