The component corrects the welfare calculation by the time-lag between expenditure for consumer durables and their subsequent use. Unlike non-durable goods like food, that are consumed promptly and therefore create benefits in the period of purchase, the actual benefit of durable goods (such as cars or washing machines) results over the whole product lifetime.
Since in national accounts expenditures are counted as private spending only at the time of the purchase a correction is made here: On the one side the expenditure for consumer durables are deducted from weighted private consumption, on the other side an estimated value for the annual benefit from the use of the stock of consumer durables is added to the NWI of the respective year. By this correction, the benefit of consumer durables is accounted in the year of their actual use.
The cost- benefit-balance of consumer durables has been negative for the last two decades: Costs for new purchases outweighed the annual “benefit flows” from the stock of durables. Thus, the component so far always led to a deduction in the calculation of the welfare index.
It must be noted that a downward trend could be identified until 2004: The difference between cost and benefits was generally shrinking due to minor increases of stock of consumer durables. This could indicate the reach of a saturation point due to a high equipment of private households with consumer durables. An opposite trend is prevailing if a “throw-away-mentality” leads to a situation in which consumer durables are used not that long as they could be used. Even more, there is the phenomenon of “planned obsolescence” that is not considered here.
Since 2005 considerable fluctuations between values of 7 to 15 billion euro draw a less clear picture. The largest increases with more than 69 percent were between 2008 and 2014 for goods in the category “Leisure and Entertainment”. No saturation point seems to be reached here yet. Small negative changes can recently be seen only regarding private vehicles (-4,75 % in 2014 compared to 2010).
For a sustainable economy the extension of the use time of products once bought is a crucial contribution. However, the purchase of high-quality and particularly durable goods is usually associated with higher cost. Such effects need to be taken into account from a sustainability perspective when interpreting higher deductions, otherwise positive changes towards durable consumption goods cannot be understood. In a retrospect the development of the indicator would show that a longer time of use would reward higher initial investments by lower resource uses and other ecological impacts with continued “benefit streams”.