Index of production

1. Index of production Presentation 2011-10-07 Daniel Lennartsson, Unit for business structure

2. Structure of the presentation 1) Background 2) What is a index of production 3) Short description of IIP, ISP, and ICP 4) Swedish economy 5) Work in the project 6) Results from the project 7) Data results

3. 1. Background The National bank and the users of economic statistics has expressed a demand for a monthly index of production for the business sector. Statistics Sweden started a project in January 2010, financed by the National bank. The project should look into the possibilities of producing a monthly index of production.

4. 2. What is a index of production –Macro economic terms GDP-growth is the change between two time periods, expressed as the change in value added volumes. Definition of the value added within one activity: Value added = Production value – Intermediate consumption In the real life it is hard to collect value added on a monthly basis. Deflated production value (or a proxy for production value; like turnover). This is the main source in both IIP and ISP Weighting of a sample of quantities (is used for some part of IIP) Hours worked, which is an input to the production (Used by ICP and parts of IIP)

5. 2. Mathematical methods To calculate an index for an activity group B or a total the detailed activities is weighted as follows where weights (wb)is

6. 3. Index of industrial production • The IPI is based on different types of data. • Most of it is based on data on turnover (93 %) compiled to produce business cycle statistics for industry. • Turnover data are retrieved from a sample survey, with a cut-off at 10 employees, consisting of about 2 300 businesses. • A smaller part of the IIP is based on data on hours worked (3 %). • Data on production volumes (4 %), collected from a sample of businesses, are used for some activities.

7. 3. Index of service production • Output – Turnover for all activities except for the real estate activities where figures for newly created flats is used. • Deflation – Is done with a large setup of price index, SPPI, PPI, CPI and wage index • Weighting – Is done by value added • The preliminary version of the Turnover statistics is build on 7500 enterprises and approximately 12500 enterprises in the definite version

8. 3. Index of construction production (ICP) • ICP cover private production within NACE 41 -43 and separate series is calculated of the total industry, buildings and houses. • The index builds on an weighting of hours worked from LFS, Wage statistics in the private sector (KLP) and register based survey for wages, payroll and preliminary taxes (LAPS). The last one is deflated with labour cost index so it can be compared with the other sources. • ICP is a monthly chain index with reference year 2005 = 100 and start year 1994. • A volume serie and a working day adjusted serie is calculated. • To get a better production measure the ICP is adjusted with the productivity growth within the activity. Figures for productivity is taken from the National accounts. The serie is adjusted afterwards.

9. 4. Shares of valueadded by activity 1950 -2006

10. 5. The phases of the project First phase • Evaluate the quality of ICP and ISP • Look into the possibilities to bring forward monthly production figures for not covered activities. (Financial sector and agriculture, forest and fishing) • Develop statistical methods for index calculation Second phase • The production index shall be calculated and tested during the second half of 2010. Comparisons shall be done against the quarterly GDP figures for the same activities. • Develop methods for working day adjustment and seasonal adjustment. • Calculate the costs for the production of the index.

11. 6. Evaluation of ISP

12. 6. Evaluation of ICP

13. 6. Indexmethod • The Total index of production shall be an index of Laspeyres type according to the chain index method • Linking to an indexserie is done by ”Annual Overlap”-technique • Weighing to totals is done by the sub-activities year-month links • The total index of production can be seen as standing free from sub index • The method is used both in volume and working day adjusted volume

14. 6. Development of seasonaladjustment • Shall there be consistency between the totals and sub indexes? Shall the total be superior or subordinated of the sub indexes? If the total index of production is superior changes has to be done in the seasonal adjustment of the sub-index. • A decision were taken that the Total index of production should be subordinated the sub index. • Seasonal adjustment for the total is build up weighing the subindex up to the totals in a regression approach

15. 7. Test results – WDA Volume

16. Work going on right now • Track – Total production index build up by IIP, ISP and ICP • Production system for seasonal adjustment of index of construction and the total production • Finalize the production system for index calculation • Investigation of ICP, where the Eurostat manual for ICP is used as a base.

17. Thank you for your attention!