University

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• University Higher School of Economics
  Institute of Statistical Research and Knowledge
  EconomicsConjuncture Research Centre
• Practice of business tendency surveys in Russia
  methodology aspects and possibilities for early
  warning of economic activity changes
• Third International Seminar on Early Warning
• and Business Cycle Indicators
• 17-19, November 2010

Conjuncture Research Centre
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Outline

• 1. Practice of business tendency surveys in
  Russia
• Methodology
• Organization
• Developments
• 2. Relevance for warning of economic activities
  changes
• Application surveys results for economic analysis
  and short-term forecasting
• Focus on recent economic crisis
• 3. Pilot services survey
• Methodology
• Results

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Business climate monitoring in Russia based on
business tendency surveys

• With a view of expansion of traditional
  statistical measurements possibilities there is a
  necessity to use alternative sources of the
  information on economic development
• Business climate surveys which are based on
  revealing of businessmen opinions about current
  and future business tendencies, provide a
  short-term qualitative information
• Methodology strategy of the Conjuncture Research
  Centre (CRC) in the field of organization of
  business climate monitoring is formation of the
  Complex Harmonized System of Business Tendency
  Surveys in various sectors of Russian economy,
  adapted to the international standards

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Business climate surveys
Sectors Starting year Sample sizes, number of enterprises Groups of enterprises Surveys frequency
Industry 1995 about 4000, including 600 basic Economic activities Patterns of ownership Organizational and legal forms Regions Monthly
Construction 1993 about 7000 Patterns of ownership Number of employed Regions Quarterly
Trade 1998 retail more than 4000 wholesale about 3000 Size of daily turnover Number of employed Regions Quarterly
Financial leasing 2002 about 900 Economic activities Regions Quarterly
Investment 2001 more than 10000 Economic activities Yearly
Services 2010 more than 4000 Economic activities Regions Yearly
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Methodology principles of business climate
surveys organization

• Adequacy for current economic conditions and
  national economics peculiarities
• Comparability with statistical instruments of
  national economics analysis
• Comparability with international analogues,
  particularly with the information of Harmonized
  EU Programme
• Abilities of receiving short-term reliable data
• Representativeness of samples
• Stability of constant indicators blocks and
  actualization of variable blocks
• Harmonization and partial unification of the
  questionnaires for comparability of the sector
  survey results
• Possibilities
• processing and generalization of quality
  information
• organization of monitoring
• indication of business cycles and turning points
  of business climate
• integration in macroeconomic analysis and
  short-term forecasting

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Potential of the business climate surveys

• Strengths
• adequacy for current economic situation
• methodology harmonization with Eurostat and OECD
• timely of monthly surveys all surveys
  information is received before similar statistic
  data
• representative samples
• no revisions
• long-term database
• width of coverage regions, economic activities,
  questions
• abilities of business cycles indication,
  integration in macroeconomic analysis and
  short-term forecasting
• Shortcomings
• rather inflexible to changes due to harmonisation
  and collecting information through state
  statistical system (Rosstat)
• lack of monthly construction and trade surveys

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Organization of surveys
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Rosstat
Methodology improvement questionnaires, sampling methods, methods for processing information and using it in economic practice

Sampling design

Conducting pilot surveys

Adaptation of surveys to the statistical practice, collection and transfer information to CRC ISSEK HSE

Information analysis 1. Processing aggregation, weighting, seasoning adjustment, identification of periods of contraction, recession, expansion and peaks 2. Calculating of composite confidence and business climate indicators 3. Database support (source and summary)

Issue of press releases, other information and analytic papers

Data dissemination and publication (national and international)
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Business tendency surveys indicators system
structure and principles of building

• First block contains a constant set of questions
  for all surveys, including harmonized questions,
  recommended OECD and European Commission
• Second block contains special questions,
  regularly replicating during several surveys and
  concerning stable specific tendencies in Russian
  economy
• Third block contains special questions about
  phenomena either incipient or inertial in progress

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• Questions about characteristics of surveying
  organization activity
• Questions concerning indicators changes should be
  exactly connected with time lag of survey (month,
  quarter, etc.)
• For questions concerning changes of indicators
  answers are usually given according to a 3-option
  ordinal scale
• increased (improved) ()
• remain unchanged ()
• decreased (deteriorated) ()
• Questions concerning current situation assessment
  include comparison of the real situation with a
  normal situation (usual for economic conditions
  and period) in spite of subjectivity of answers
• more than sufficient ()
• sufficient ()
• not sufficient ()
• All information is qualitative excepted some
  quantitative indicators. Number of employed in
  all surveys is used as statistical weight of unit

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Information possibilities of business climate
surveys

• Industry
• branch situation demand-output
• actual and expected price tendencies
• level of fluctuation in stock of raw material
  and products
• investment possibilities and intentions of the
  industrialists
• level and tendency of capacities use
• dominants among sources of financing and factors
  limiting development of production
• structure of the debts
• employment strategy
• tendencies of export abilities and import needs
• general economic situation in a sector
• Construction
• dynamics of orders book
• actual and expected modifications of physical
  volume and cost tendencies of construction works
• situation with financial resources and debt
  receivable
• strategy of employment in the construction sector
• distribution of the factors limiting building
  activity on a degree of significance
• priority of objects in construction
• economic situation in a sector

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• Retail and wholesale trade
• actual and expected modifications of trade
  turnover, volume of stock of goods and
  assortment, number of employed
• condition of resource and financial basis
• distribution of trade organizations on sources of
  receipt of documentary resources, variants of
  accounts with the suppliers
• factors limiting trade activity and priority
  directions of its development and extension
• Investment
• current and expected volume of investments into a
  fixed capital
• main purposes and sources of investments in the
  current and the next years
• factors limiting investment activity
• condition, implementation and retirement of
  capital assets
• Financial leasing
• level and dynamics of demand for leasing
  activity, cost and physical volume of concluded
  contracts
• priority sources financing of leasing activity
  and major restrictive factors
• business situation and competitive position of
  organizations

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Key areas of analysis of qualitative short-term
information - surveys results

• Processing of time series of business activity
  indicators (seasonal adjustment, identification
  of recessions, expansions and peaks in cyclical
  component)
• Calculation of various coincidence types business
  climate composite indicators on the base of
  results of cross-correlation analysis of survey
  and statistical indicators time series
• Calculation of weight coefficients for composite
  indicators components using principle components
  method (at a development stage)

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• Approaches to the integration of survey results
  and statistical quantitative indicators, in
  particular
• cross-correlation analysis of connection
  closeness and synchronism of compared indicators
  cycle profiles (for example, time series of
  industry surveys indicators and industrial
  production index)
• short-term GDP forecast based on
  correlate-regression analysis results
• Identification of structural-temporal correlation
  of indexes and groups with uniform quality on the
  basis of cluster analysis
• Approaches to the non-response problem decision,
  considering character of probability assessment
  distribution and organization size
• Assessment of business information quality and
  responses coordination
• Calculating of Economic Sentiment Indicator
  summarizing results of real sector, services and
  consumer surveys

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Confidence indicators

• Industry
• current order books
• current stocks of finished products (with
  inverted sign)
• production expectation over next 3 months
• Construction
• current order books
• expected change of firms total employment over
  next 3 months
• Retail and wholesale trade
• present business situation of organization
• future business situation of organization
• level of stocks (with inverted sign)
• Services
• recent evolution of business situation
• recent evolution of demand
• expected evolution of demand

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Sample design of business surveys

• Requests to sample
• territorial approach of sample (as a whole on
  Russia)
• representation of sample at the level of regions,
  and in an industry - at level of each leading
  industry branch
• minimal sample size (at the level of regions)
• Determination of a necessary sample size
• minimum and allowable for a regional level of
  development of survey materials (without a
  further grouping of parameters)
• sufficient for deriving an authentic evaluation
  of a parameter
• The minimum and allowable sample size for
  generalized information about quantitative
  parameters of business activity of the
  enterprises at a regional level accepts volume in
  60 observation units
• Thus, it is applied multivariate stratified
  sample with random or mechanical selection of
  observation units in stratum

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Data dissemination

• 1. Timetable

Economic activities Reporting to Rosstat Reporting from Rosstat to CRC
Industry 10 numbers of current month 14 working day of current month
Construction 10 numbers of the 2nd month of current quarter 20 working day of the 2nd month of current quarter
Wholesale trade 10 numbers of the 3rd month of current quarter 8 working day after current quarter
Retail trade 15 numbers of the 2nd month of current quarter 6 working day of the 3rd month of current quarter
Investment On October, 20th current year On December, 3rd current year
Financial leasing On February, 10th current year On March, 12th current year
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• 2. Publications
• Press releases are sent to mass-media on the 3rd
  4th day after receiving information from
  Rosstat
• Information and analytic materials (including
  indicators of confidence) and quarterly
  newsletter Business Climate in Russia
• available on the site of HSE http//www.hse.ru/or
  g/hse/monitoring/del
• are submitted to government bodies, mass-media,
  scientific community, employers' organizations
• Revues of business climate tendencies in various
  economic sectors based on business tendencies
  surveys data are regularly broadcasted by
  TV-channel Russia-24
• Parts in international yearbooks of Federal State
  Statistic Service
• Russia and Countries of the World
• Russia and Countries-Members of the European
  Union
• Great Eight in Figures

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Methodological aspects of the analysis and
processing of business surveys results

• Analysis basis is quantification of the
  qualitative indicators, including quantitative
  representation and measuring procedures of the
  analysis of the qualitative information on a
  level and short-term tendencies of the business
  climate indicators
• The first stage of quantification measurement of
  qualitative characteristics (scaling) the
  formalized definition quantified characteristics
  (level or change of analyzed survey indicators)
• The second stage of quantification the analysis
  of indicators connections within the limits of
  each survey formalization of indicators
  relations
• The purpose "compression" of survey results,
  information consolidation to all characteristics
  in groups coherent as high as possible for
  simplification of interpretation and analysis
  creation of the composite indicators

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Key areas for second phase of quantification

• 1. Integration of business tendencies survey
  results
• Assessment of quality of surveys data
  estimation of answers coordination depending on
  scaling method and surveys data co-variation
• Non-response problem solving counting full and
  partial non-response according to character of
  probabilities distribution of respondents
  estimations and an indicator of the enterprises
  size

Horizontal Vertical (indicator approach)
Calculating of simple indicators of a level or changes of business climate measures opinion balances, average rates (for example, capacity utilization, competitive position) Identification of structural and temporal relations provisional calculating of statistically admissible composite indicators (method of principle components) Consolidation of organizations in various groups with uniform quality (by cluster analysis methods)
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• The third stage of quantification the
  dynamic analysis of survey results for the
  purpose of their integration into the
  macroeconomic analysis and the short-term
  forecast

Building of composite indicators of cyclic character in the presence of short time series of quality surveys indicators Building of composite indicators of cyclic character in the presence of sufficient length time series of quality surveys indicators
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Key areas of information and analytical activity
development

• Creation of the Complex Harmonized System of
  short-term indicators of a business climate in
  various economic sectors, including indicators
  generalizing character
• Creation of the National Harmonized Economic
  Sentiment indicator generalizing results of real
  sector, services and consumer surveys
• Formation of a uniform policy of distribution of
  business climate monitoring results taking into
  account the international standards, information
  representations in the international
  organizations (European Commission, OECD, etc.)
• Expansion of sectoral coverage and adaptation of
  the methodology of business tendencies research
  on regional monitoring level

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• Specific targets
• Regular studying of updated methodological and
  practical aspects of the European Union business
  tendencies researches
• Adaptation of the European experience of
  questionnaires design, information collecting and
  processing to the Russian conditions
• Adoption in surveys practice of the updated
  international standards of information
  collecting and dissemination
• Actualization of business climate surveys
  programs
• questionnaires unification
• harmonization of non-quantitative short-term
  indicators
• comparability of surveys results on various
  aspects of respondents activity taking into
  account specificity of regional development of
  Russian economy
• Identification of structural-temporal
  correlations of business climate indicators,
  revealing of qualitative-homogeneous groups of
  economic agents, including on various aspects of
  their activity

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• Development of program, methodological and
  technological instruments of business surveys in
  various sectors of economics, including services
  and consumers, their adaptation to the
  international standards (to Eurocommission and
  OECD recommendations)
• Preparation of all necessary methodical,
  practical materials and conducting of pilot
  regional surveys for the organization of regular
  business tendencies surveys in various sectors,
  including services and consumers for use of their
  results in a complex estimation of a business
  climate of Russia
• Adoption of the updating methods of a
  generalizing estimation of business tendencies by
  means of composite business climate indicators,
  including the European Harmonized Economic
  Sentiment Indicator with separation of seasonal
  and cyclic components
• Identification of leading cyclic components and
  composite indicators for expansion of
  possibilities for early warning of economic
  activities changes

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• Relevance business climate surveys results for
  economic analysis
• and short-term forecasting

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Indication of economic activity changes over a
period of crisis 1998 (Industry)
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Indication of economic activity changes over a
period of crisis 2008 2009 (Industry)
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Industry and Gross Domestic Product (quarterly
information)
2nd quarter 2008 maximum GDP, IIP, ICI
2nd quarter 2009 minimum GDP
High correlation of quarter GDP and Index of
industrial production (0.94) Good correlation of
time references and Industrial confidence
indicator (0.86) with leading for 1 quarter
relatively GDP
1st quarter 2009 minimum IIP and ICI
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Retail trade
Quarterly Retail trade confidence indicators and
Retail turnover time series demonstrate
acceptable correlation (0.78) and average leading
1 -2 quarters
Crisis 2008 - 2009decline of confidence
indicator 2nd quarter 08decline of turnover
3rd quarter 08 increase of confidence indicator
1st quarter 09 increase of turnover 3rd quarter
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Crisis 1998 decline of confidence indicator
1st quarterdecline of turnover 3rd
quarter increase of confidence indicator 3rd
quarter increase of turnover 1st quarter 99
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Construction
1st quarter 2008 maximum
2nd quarter 2009 minimum
Construction confidence indicator and
Construction value added are changed
synchronously
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Investment expectationsin comparison with
previous year
Balances,
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Services business tendencies surveys

• Premises and actuality
• strengthening of the role of businessmen opinions
  at the formation of a favorable business
  environment
• activization of requirements of various
  categories of users, including the international
  organizations, in estimations of short-term
  tendencies of all of economic sectors development
• essential and constantly increasing contribution
  of services to Russian economy (more than third
  of gross value added)
• necessity of creation of the integrated Economic
  Sentiment Indicator, generalizing estimations of
  short-term development of real sector, sectors of
  services and consumers for the purpose of early
  indication of possible changes of GDP
• General purpose expansion of monitoring of
  business tendencies for the formation of the
  Complex Harmonized System of short-term
  indicators of a business climate in Russia
• Current purpose approbation of the unified
  program of services business climate survey and
  its further introduction in statistical and
  economic practice
• Specificity of services surveys
• necessity of unification activity indicators,
  samples, methods of processing and the analysis
  for service organizations, essentially differ
  according to specific features of each type of
  services, their results, technologies, sizes,
  consumers
• absence in Russia of experience in services
  business tendencies surveys

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Pilot services surveys

• For harmonization of services surveys and
  achievement of comparability of their results the
  following complex of works has been spent
• the list of the economic activities covered by
  survey is defined
• criteria of a choice of sampling observation
  methods and observation units selection methods
  are defined
• the unified system of business climate monitoring
  indicators in the services, harmonized with the
  surveys spent by CRC ISSEK HSE and the
  international analogues, is developed
• coordination of methodological and technological
  works on the pilot survey organization by
  regional statistical divisions is provided
• Survey was spent by the Information and
  publishing center Statistics of Russia under
  the order and methodology of CRC ISSEK HSE in
  August, 2010
• Survey format
• self-filling of the questionnaire or carrying out
  of personal interview with heads of the
  organizations
• not less than 10 the selective control of a
  survey conducting
• visual and logic control of the source information

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Pilot services surveys coverage of economic
activities
Economic activities Sections Subsections Number of units
Total 4230
Hotels and restaurants H 55 237
Land transport I 60 170
Travel agencies and tour operators I 63.3 505
Financial intermediation J 65, 66, 67 348
Real estate activities K 70 597
Computer and related activities ? 72 490
Research and development ? 73 265
Other business activities ? 74 125
Education M 80 375
Health and social work N 85 468
Recreational, cultural and sporting activities ? 92 350
Other services activities O 93 300
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Pilot services surveys sample design

• Sample size 4230 observation units
• Organizations realizing commercial activity only
• Organization size were no limited (for reason of
  there being a lot of small-scale enterprises in
  services)
• Sample
• zoned on 8 federal districts
• multivariate
• stratified
• representative at every level
• probabilistic method observation units selection
  in everyone stratum
• sample basis an information file of the Uniform
  state register of the enterprises and the
  organizations conducted by Rosstat

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Pilot services surveys indicators system

• Unified questionnaire for all organizations
• Basic indicators (level, tendencies and
  expectations) include harmonized indicators
  recommended by Eurostat and OECD and used for
  confidence indicators calculating
• Special questions blocks about specific
  activities in questionnaires for
• Travel agencies
• IT-sector organizations
• Education institutions
• Health organizations
• Major factors negatively influencing
  organizations activity

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• All information is qualitative
• A 3-option ordinal scale is used for the
  estimation of indicators of changes
• increased (improved) ()
• remain unchanged ()
• decreased (deteriorated) ()
• For estimation of current condition, the actual
  situation is compared with a normal (usual)
  level
• more than sufficient ()
• sufficient ()
• not sufficient ()
• Services confidence indicator is calculated in
  main kinds of economic activities as the
  arithmetic average of the balances of answers to
  the questions
• recent evolution of business situation
• recent evolution of demand
• expected evolution of demand

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Services confidence indicators in January -
June, 2010
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Factors negatively influencing services activity
Share of the organizations from their total
number,
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• Thank you
• for the attention!

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