4.5 Actual final consumption

According to ESA95 (3.81) "actual final consumption consists of the goods or services that are acquired by resident institutional units for the direct satisfaction of human needs, whether individual or collective".

All expenditures on private consumption are therefore individual consumption expenditure, and public consumption expenditure is divided between individual (public) consumption and collective (public) consumption expenditure. Individual public consumption expenditure - i.e. consumption expenditure directly serving households - includes social insurance services, education, health care and social welfare services as well as recreation, culture and sporting services. Expenditures on collective consumption include other public consumption expenditure, such as public administration, defence and road and rail administration.

When individual public consumption expenditure is added to private consumption expenditure, we arrive at the total expenditures on private consumption, which at once represent the actual final consumption of households.

The remaining public consumption expenditure, i.e. collective consumption expenditure, describes the actual final consumption of general government.

Actual final consumption by households is greater than expenditures on private consumption because the public sector covers part of the costs of actual consumption (education, health care, etc.). Actual consumption by general government is accordingly smaller than public consumption expenditure because part of the expenditures on public consumption are individual.

The calculation of actual consumption by households facilitates international comparisons because education and health care services, for example, are produced in different sectors in different countries: in some cases they are produced free of charge in the public sector, in others at market cost in the private sector.