OECD household income growth picks up in the fourth quarter of 2018, outpacing GDP growth

Growth in real household income per capita, which provides a better picture of changes in households’ economic well-being than real GDP growth per capita, picked up to 0.5 % in the OECD area in the fourth quarter of 2018, compared with 0.1 % in the third quarter of 2018, outpacing real GDP growth per capita, which stood at 0.2 % in the fourth quarter.

In the United States, growth in real household income per capita picked up to 0.9 % in the fourth quarter of 2018 (from 0.4 % in the previous quarter), while real GDP per capita growth slowed to 0.4 % (from 0.7 %).

In France, real household income per capita grew at a robust rate of 1.0 % in the fourth quarter, compared to 0.3 % in the previous quarter. Growth in real GDP per capita remained stable at 0.3 %.

In the United Kingdom and Germany, growth in real household income per capita accelerated strongly to 0.7 % in the fourth quarter (from 0.0 % and -0.1 % respectively in the previous quarter). On the other hand, real GDP per capita growth slowed to 0.1 % in the United Kingdom (from 0.5 % in the previous quarter), while it was flat in Germany (from -0.3 % in the previous quarter).

Over the last two years, in the OECD as a whole, growth in real GDP per capita outpaced growth in real household income per capita by 0.2 percentage point. Among the Major Seven economies, the gap was largest in France (0.7 pp) and Italy (0.5 pp). By contrast, growth in real household income per capita outpaced real GDP per capita growth in the United Kingdom (1.4 pp), the United States (0.4 pp), Canada (0.2 pp) and Germany (0.1 pp).

Since the first quarter of 2010, among the Major Seven economies, the gap between growth in real household disposable income per capita and real GDP per capita was highest in the United Kingdom (5.5 pp), while in the United States growth in real household income outpaced growth in real GDP by 3.1 percentage points.

In Italy, real household income per capita continued to contract in the fourth quarter of 2018 by (minus) 0.4%. Real GDP per capita contracted as well by (minus) 0.1% in the fourth quarter.

In Canada, real household income per capita was flat in the fourth quarter, while real GDP per capita contracted by (minus) 0.4%.

In the Euro Area, growth in real household income per capita accelerated slightly in the fourth quarter, from 0.2 % to 0.3 %. Growth in real GDP per capita was stable at 0.1 %.

Technical notes for OECD Growth and economic well-being

A key indicator of households’ material conditions, or economic well-being, is per capita household income, after deducting taxes and social contributions and including social benefits. It provides a better gauge than gross domestic product (GDP) of the resources households have at their disposal to buy goods and services or save for the future.

Over the very long term the average annual growth rates of the two statistics tend to be similar, since the incomes earned by households account for a large share of the total income generated through production in the economy, as recorded by GDP. However, over shorter time periods, especially during severe economic recessions or rapid expansions, trends in household disposable income and GDP may differ significantly. Many factors can contribute to such a divergence; for instance, changes in the government’s policies related to taxes or social benefits, or in how companies allocate their earnings between dividends, retained earnings and compensation of employees.

Definition of the indicators:

Real GDP per capita

Gross domestic product (GDP) is the standard measure of the value added generated through the production of goods and services in a country during a certain period. Equivalently, it measures the income earned from that production, or the total amount spent on final goods and services (less imports). While GDP is the single most important indicator to capture these economic activities, it falls short of providing a suitable measure of people’s material well-being.

Real GDP per capita shows GDP, adjusted for inflation by the GDP deflator, per member of the population.

Real household disposable income per capita

Household disposable income equals the total income received, after deduction of taxes on income and wealth and social contributions, and includes monetary social benefits (such as unemployment benefits). It does not include in-kind transfers, such as those related to health and education provided free or at economically insignificant prices by government.

Household disposable income may be used either for final consumption or saving. Disposable income thus represents the maximum amount households can consume without reducing their net wealth (without taking into account holding gains or losses on assets).

Real household income per capita shows household disposable income, adjusted for inflation in household final consumption, per member of the population. Note that households in this release include households and non-profit institutions serving households (e.g. non-profit sports membership clubs) as these cannot be separately identified across all countries.

Because the composition of GDP and household final consumption differs, the evolution of deflators for these two measures can differ, sometimes significantly, particularly in resource rich and export intensive economies. The GDP deflator, for example, includes price changes in exports unlike the deflator for household final consumption, which includes only the aggregate price of consumer goods and services acquired by households.

Country notes

The statistical data in this publication are supplied by and under the responsibility of the relevant statistical authorities. The use of such data by the OECD is without prejudice to the status of or sovereignty over any territory, or to the delimitation of international frontiers and boundaries.

Japan – Household income is currently compiled and provided by the national statistical authority only once a year. Therefore, it is not available for the most recent quarters.

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