Actual Individual Consumption (AIC) consists of the goods and services actually consumed by individuals, irrespective of whether these goods and services are purchased and paid for by Households, by Government or by Non-Profit Institutions Serving Households (NPISH).
Households spend money on food, electricity bills, phone bills, rent, bus fares, fridges and so on. All of this is Household Final Consumption Expenditure (HFCE). For national accounts everyone pays rent: even if you own your own home, HFCE includes an estimate for the rent you pay yourself (see Imputed Rent). HFCE is all spending on goods or services to satisfy the household’s needs and wants.
Government and NPISH also spends money on satisfying households needs and wants, such as healthcare and education. AIC is made up of HFCE and all NPISH and Government individual expenditure. Individual expenditure has the characteristic of being attributable to a particular individual, such as with health or education expenditure. This contrasts with collective expenditure such as defence spending. The General Government and NPISH spending includes purchases from market producers (such as pharmacy payments) and non-market production by government (such as education in primary and secondary schools).
AIC is particularly useful for international comparisons of household welfare because it isn’t influenced by the extent to which services such as health and education are provided by market producers rather than non-market producers across countries.
