United Nations Statistics Division Overview of quarterly gross domestic product Expert Group Meeting on Short-Term Economic Statistics in Western Asia February 2016 Amman, Jordan

Outline of presentation  What is quarterly gross domestic product (QGDP)?  Key features of QGDP  Scope of QGDP  Timeliness of QGDP  Uses of QGDP  Overview of data sources  Reconciliation of QGDP  Setting up QGDP 2

What is QGDP?  QGDP constitutes a system of integrated quarterly time series measuring the unduplicated value of production within an economic territory coordinated through an accounting framework Accounting framework could be based on the 1993 or 2008 SNA  QGDP follows the same principles, concepts, definitions and structure as the annual GDP (AGDP)  QGDP can be compiled using the three approaches Production Expenditure Income 3

Key features of QGDP  Presents the short-term movements of the economy, providing a coherent measure of such movements within the methodological framework of national accounts In contrast with AGDP, QGDP focuses on growth rates and their temporal characteristics such as acceleration, deceleration or changes in sign  Has same standard classification as in AGDP, albeit at a higher level of aggregation AGDP are available at much more disaggregated levels to provide information on structural details about the economy 4

Key features of QGDP  Is available in non-seasonally and seasonally-adjusted forms due to variations in the intensity of economic activity within a year  Has to be reconciled to AGDP estimates Annual estimates and the sum of the corresponding quarterly estimates should be equal which implies the possible need for benchmarking  Undergoes more substantial and frequent revisions than for AGDPA due to characteristics of data sources and compilation methods 5

Scope of QGDP  In principle, QGDP can cover the same breakdown as and structure as AGDP  Scope will usually evolve over time  Countries can consider compiling the following QGDP to fulfil the minimum dataset requirement for the scope of the implementation of the 2008 SNA Nominal and volume measure of QGDP by industry or by expenditure components 6

Scope of QGDP 7 Scope of implementation of 2008 SNA Minimum requirement indicates an adequate scope of implementation of the 2008 SNA, when relevant. Recommended: recommended for compilation by all countries Desirable: Useful statistics that should be compiled, if possible

Timeliness of QGDP  Flash QGDP estimates To be released within one month after the end of the reference quarter In some instances, estimates of all approaches to compiling QGDP may not be available  Actual QGDP estimates Have more detailed expenditure, production and income data than flash QGDP estimates To be released within three months after the end of the reference quarter Estimates of prior quarters may be revised as well 8

Uses of QGDP  Provides a picture of current economic developments that is More timely than that provided by AGDP More comprehensive than that provided by individual short-term statistics through the use of an integrated framework 9

Uses of QGDP  Supports policy needs and monitoring by Providing early warning on occurrence and timing of economic upturns and downturns Measuring short-term impact of internal and external shocks on production and consumption Supporting formulation of national budgets Ensuring prompt and effective fiscal and monetary policy response 10

Uses of QGDP  Allows analysis of dynamic relationships between macroeconomic aggregates by providing time series of quarterly data in a coherent accounting framework  Provides basic data for business cycle analysis and economic modelling 11

Uses of QGDP  Has a role to play for accounting under high inflation and where annual source data are based on varying fiscal years  Provides a coordinating conceptual framework for design and collection of economic source statistics  Provides a framework to identify major gaps in the range of short-term statistics 12

Overview of data sources  Compared to AGDP, QGDP data sources are More limited in detail and coverage Expected to be more timely  Could affect data availability and increase data collection costs  QGDP compilation may rely on indicators that best capture movements in the target variable  Basic principle – obtain indicators that best reflect the economic activity being measured 13 General issues

Overview of data sources  Indicators can be Value indicators  Imports of consumption goods  Domestic production of consumption goods  Government accounting data  Supply of building materials  Registration and licensing of transport equipment Volume indicators  Index of industrial production  Retail sales index  Number of hours worked  Building permits  Physical quantities of some goods, for example, agriculture 14 Indicators

Overview of data sources  Assumption – indicator is able to reflect changes in target variable  Review indicators regularly to take into changes in economic conditions  Chosen indicator may be a Primary item of a data collection system By-product of the system  Assess qualitatively the suitability of an indicator by examining the similarities and differences with the target variable  Assess quantitatively the suitability of an indicator by comparing the rates of change in the annual sum of the quarterly indicator with the growth rates of the corresponding annual GDP growth 15 Choice of a suitable indicator

Overview of data sources  May be limited to large enterprises and establishments in some major activities  Survey frame may be outdated because of delays in Including new businesses Removal of non-operating businesses Reclassifying businesses that change economic activity  Problem of survey non-response may be more acute for quarterly surveys 16 Surveys of businesses

Overview of data sources  May provide good coverage of own-account production of goods, purchases from informal sector activity and purchases of services May be useful in developing countries in preference to business surveys  Reporting quality and omissions of sensitive items may be a problem  Errors may be caused by recall of purchases  Purchases of consumer durables may be allocated to the incorrect quarter 17 Surveys of households

Overview of data sources  Are relatively cheaper to obtain compared to survey data  May be more timely  May be more widely used in compiling QGDP than AGDP  May have limitations in terms of consistency of definitions, coverage, scope, timing differences, etc.  Examples Value added tax data Merchandise trade statistics 18 Administrative data

Overview of data sources  Consult industry associations, industry experts or leading enterprises in a particular industry in deriving quarterly indicators if survey or administrative data are not available or inadequate  If no quarterly indicators are available, consider using the following A related item as an indicator A range of other items as an indicator The overall economy (excluding the target components) as an indicator Mathematical methods based on distribution of annual data and extrapolation of past annual trends 19 Other data sources

Overview of data sources  Use of these alternative sources should be temporary  Data gaps should be closed as soon as is feasible using more conventional data sources 20 Other data sources

Reconciliation of QGDP  In principle, QGDP based on the three approaches should be equal  In practice, discrepancies occur due to the use of different data sources  Methods that can be used to reconcile the estimates include Eyeball testing Logical checks Plausibility checks Balancing using a quarterly supply-use model 21

Setting up QGDP  Setting up a system to compile QGDP is typically not an easy task and some key steps are needed to ensure the project runs smoothly  Consult potential stakeholders concerning Possible uses Required scope, detail, timing of release…  Take inventory of Annual compilation methods Available quarterly and annual source data 22

Setting up QGDP  Design compilation methods and procedures Consider relationship to sources and methods used in AGDP Decide scope of QGDP Determine compilation level Choose integrated or separate AGDP-QGDP compilation system Make compilation schedule including timeliness of first release and revision policy  Review quality of source data and compilation procedures Study correlation between annual and quarterly source data Study revisions to main aggregates 23

Setting up QGDP  Generate time series of QGDP for past years Benchmark to AGDP  Perform real-time tests and update current year QGDP Link monthly and quarterly source data for current quarters with estimates for back series through, say, extrapolation  Release first estimates 24

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