SHORT TERM INDICATORS IN THE SERVICE SECTOR

1
SHORT TERM INDICATORS IN THE SERVICE SECTOR

• Presentation
• 2008-09-23
• Jonas Färnstrand
• Statistics Sweden
• jonas.farnstrand_at_scb.se

2
Growth of service sector
3
Service sector and GDP
4
Swedish investigation about the economic
statistics 2002

• The users of statistics want statistics for the
  growing private service sector
• The users want short term indicators, similiar
  indicators to those in the industry. Production
  (volume) index, new orders, prices, turnover and
  capacity
• The department of Business and Labour Market was
  given about 600 thousand Euro / year to produce
  new indicators. Most of this amonth are used to
  produce a index of service production (ISP) and
  turnover statistics on a monthly basis.

5
Project plan with purpose to develop a production
(volume) index for the service sector on a
monthly basis

• Starting points and Conditions
• -OECD manual / Eurostat manual
• -Great Britains production volume index
• -National Accounts
• -Discussions with producers and users of economic
  statistics
• Goals
• -Set a design to produce a production index
• -Publish the first result spring 2008.
• -Timeliness 35 days after the end of the
  reference month

6
Production index in the service sector

• The theoritical form of the production index is a
• volume index of Laspeyres type

Where q is produced quantity p is price of
produced quantity d is quantity for intermediate
consumption a is price of quantity for
intermediate consumption i is one of the produced
quantities j is one of the quantities for
intermediate consumption 0 is the base period t
is the present period
7
Production index in the service sector
Qt is just a theoretical index and can not be
calculated in practice. Instead consider it as a
value added index. According to the theory of
value added index the index should be calculated
as deflated production value minus deflated
intermediate consumption value. To calculate
(deflated) value added on monthly basis is very
difficult. Instead use some other output as a
proxy for value added. We use deflated turnover
for each activity as a proxy. To produce
production index we also need to weight the
activities together up to aggregates.
8
How to calculate the production index in practice

• Weight (wb) is
• When applicate base years weights, the production
  index by time t can then be given by

9
The main components to construct a short term
index

• Output (Turnover)
• Deflators
• Weights
• --------------------------------------------------
  ---
• Trading Day effects
• Seasonal adjustment

10
Turnover

• Sampled based survey on a monthly basis
• Coverage NACES 50-64, 70-90, 92-93
• Low cut off threshold (gt 20 000 Euro / year)
• The sampling frame is stratified by activity and
  size (127 6)
• Total sample size is 7 000 enterprises on monthly
  basis and 6 000 on quarterly basis

11
Deflators

• Best deflator
• Producers price index in the service sector
• (SPPI)
• Only produced on quarterly basis
• Forecasting of SPPI is done for the present month
  by a forecasting model, exponential smoothing
• Other deflators
• Consumer price index (CPI), wage index (WI),
  producers
• price index in industry (PPI), import price index
  (IMPI)
• all indices are produced on monthly basis

12
List of deflators per NACES

• Service production index for quarter 20071
  compared to 20061, constant prices in 20061
• Nace Def Prel Diff ()
  Priceindex Periodicity
• 50 104,2 104,2 0,0
  CPI Month
• 51 104,3 104,3 0,0
  PPI Month
• 52 106,3 106,3 0,0
  CPI Month
• 55 105,9 106,7 -0,8
  SPPI, CPI Qrt, Month
• 60 103,5 103,5 0,1
  SPPI, CPI Qrt, Month
• 61 93,8 92,3 1,6
  SPPI Qrt
• 62 101,4 103,8 -2,4
  SPPI Qrt
• 63 106,8 106,6 0,2
  SPPI, CPI Qrt, Month
• 64 108,0 108,0
  0,1 SPPI Qrt
• 70 99,1 99,1 0,0
  SPPI, CPI Qrt, Month
• 71 111,0 111,0 0,0
  SPPI, PPI Qrt, Month
• 72 108,5 109,1 -0,6
  SPPI Qrt
• 73 86,0 86,0 0,0
  SPPI, IMPI Month
• 74 111,0 111,5 -0,5
  SPPI Qrt, Month
• 80 104,1 104,1 0,0
  CPI, WI Month
• 85 110,1 110,1 0,0
  CPI, WI Month
• 90 110,0 110,0 0,0
  SPPI Qrt

13
Weights

• Value added weights (from SBS survey)
• Yearly weights
• The weights are updated every year (small changes
  though)

14
Trading day effects and seasonal adjustment

• Estimation of trading day effects
• - Regression model, based on time series data
  (Major part of activities)
• - Expert group estimating trading day effects
  (Retail Trade)
• - Its very difficult to adjust for trading day
  effects in an accurate way!!
• Seasonal adjustment of the index serie
• - No seasonal adjustment, because of too short
  serie (2005- )

15
First results, total SPI
Index present month compared to same month
previous year (index100)
16
First results, SPI by activity group
Index, first quarter 2008 compared to first
quarter 2007 (index100)
17
Wholesale price index

• First publishing
• - Press release
• - Press conference
• Monthly publishing
• - Timeliness, 50 (35) days after reference month
• - Press release (web page)
• - Statistical databases

18
Wholesale price index

• PPI data for 76 products (CPA)
• PPI with 1990 100
• These products are weighted together to 15
  product groups (Statistics Sweden product groups)
• Weigthing in this step is done by weights from
  PPI (which is based on yearly Prodcom data)

19
Wholesale price product groups

• Agricultural and chemicals
• Paper, skins and leather materials
• Iron, steal, metal and scrap
• Building and hardware materials
• Machine and equipment related goods
• Food
• Alcoholic beverages
• Other everyday commodities
• Clothes, shoes and suitcases
• Home equipment and electronics
• Sportswear, toys, motorbikes
• Pharmaceptical products
• Cars and trucks
• Parts and accessories of motor vehicles
• Gas and motor fuel

20
Deflators for activities

• ISP results for 15 activities within NACE 51
• (511, 512, 513, 5141-5142, 5143-5144, 5145-5147,
  5151, 5152, 5153, 5154, 5155, 5156, 5157, 518 and
  519)
• Turnover by products calculated within SBS
  (earlier presentation)
• Wholesale product group price indices weighted
  together by the turnover shares from SBS within
  each activity
• Deflators with 1990 100
• Calculated with average of last year as base

21
Wholesale trade deflators
22
Wholesale trade deflators
23
Price changes
24
Wholesale price index
25

• Thank you!
• Questions?