INDEX OF SERVICE PRODUCTION Presentation 2012-12-03 Daniel Lennartsson Statistics Sweden daniel.lenartsson@scb.se 2018-11-26

Share of GDP

Strong correlation (0.84) with GDP

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, similar indicators to those in the industry. Production (volume) index, new orders, prices, turnover and capacity) The department of Economic statistics was given about 600 thousand Euro / year to produce new indicators. Most of this amount are used to produce a index of service production (ISP) and turnover statistics on a monthly basis. 2018-11-26

Starting points and Conditions 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 Britain’s 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 2018-11-26

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 δ is quantity for consumption a is price of quantity for consumption i is one of the produced quantities j is one of the quantities for consumption 0 is the base period t is the present period 2018-11-26

The main components to construct a short term index Output (Turnover) Deflators Weights ----------------------------------------------------- Trading Day effects Seasonal adjustment 2018-11-26

OECD:s priorities A. Best method Deflated turnover for one activity. For this a good SPPI is needed. Volume indicators. Example a) Number of passengers b) Number of flights. No deflation is needed. No qualityadjustment. B. Alternative method Deflated turnover with a less good deflator. (CPI, faktorpriceindicies, PPI, wages) C. Other method Indicators which is measuring input –hours worked, number of person employed 2018-11-26

Turnover Sampled based survey on a monthly basis Coverage NACE 45 -96 excl 64-66 Low cut off threshold (> 20 000 Euro / year) The sampling frame is stratified by activity and size (128 *6) Total sample size is 7 000 enterprises on monthly basis and 5 000 on quarterly basis 2018-11-26

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 (IPPI), import price index (IMPI) – all indices are produced on monthly basis 2018-11-26

SPPI – forcasting and extrapolation Problem – SPPI only on a quarterly basis In April we only have the price development for the first quarter. A regression model called exponential smoothing makes an estimate of the 2:nd quarters pricefigure. This forecasted value is used for all months during the second quarter. The forecasted SPPI is replaced with the actual SPPI when data for the 2nd quarter is produced. 2018-11-26

Deflators– Exp smoothing Activity Def Prel Diff (%) Priceindex Periodicit 50 104,2 104,2 0,0 CPI M 51 104,3 104,3 0,0 PPI M 52 106,3 106,3 0,0 CPI M 55 105,9 106,7 -0,8 SPPI Q 60 103,5 103,5 0,1 SPPI, CPI, FPI,WI Q, M 61 93,8 92,3 1,6 SPPI Q 62 101,4 103,8 -2,4 SPPI Q 63 106,8 106,6 0,2 SPPI, CPI, FPI,WI Q, M 64 108,0 108,0 0,1 SPPI Q 70 99,1 99,1 0,0 SPPI, CPI Q, M 71 111,0 111,0 0,0 SPPI, PPI Q, M 72 108,5 109,1 -0,6 SPPI Q 73 86,0 86,0 0,0 WI M 74 111,0 111,5 -0,5 SPPI, WI Q, M 80 104,1 104,1 0,0 SPPI, WI M 85 110,1 110,1 0,0 CPI, WI M 90 110,0 110,0 0,0 CPI, WI M 91 115,0 115,0 0,0 WI M 92 100,3 100,3 0,0 CPI, WI M 93 101,5 101,5 0,0 CPI, WI M Totalt 105,4 105,6 -0,2 2018-11-26

Weights Value added weights (from SBS survey) Yearly weights The weights updates every year (small changes though) 2018-11-26

Results, ISP compared too IIP Index present month compared to same month previous year (index=100) 2018-11-26

Results, ISP compared too Privat services within GDP Index present quarter compared to same quarter previous year (index=100) 2018-11-26