SHORT TERM INDICATORS IN THE SERVICE SECTOR Presentation 2008-06-23 Daniel Lennartsson Statistics Sweden daniel.lenartsson@scb.se 2018-12-01

Growth of service sector 2018-12-01

Service sector and GDP -4 -2 2 4 6 8 10 12 14 16 1993K1 1994K1 1995K1 2 4 6 8 10 12 14 16 1993K1 1994K1 1995K1 1996K1 1997K1 1998K1 1999K1 2000K1 2001K1 2002K1 2003K1 2004K1 2005K1 2006K1 2007K1 GDP 01-45 50-95 2018-12-01

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 service production index (SPI) and turnover statistics on a monthly basis. 2018-12-01

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 45 days after the end of the reference month 2018-12-01

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 2018-12-01

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 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 2018-12-01

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 2018-12-01

The main components to construct a short term index Output (Turnover) Deflators Weights ----------------------------------------------------- Trading Day effects Seasonal adjustment 2018-12-01

Turnover Sampled based survey on a monthly basis Coverage NACES 50-64, 70-90, 92-93 Low cut off threshold (> 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 2018-12-01

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 indicies are produced on monthly basis 2018-12-01

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 IPPI 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, IPPI 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 91 115,0 115,0 0,0 WI Month 92 100,3 100,3 0,0 CPI, WI Month 93 101,5 101,5 0,0 CPI Month Total 105,4 105,6 -0,2 2018-12-01

Weights Value added weights (from SBS survey) Yearly weights The weights updates every year (small changes though) 2018-12-01

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) - It’s 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- ) 2018-12-01

First results, total SPI Index present month compared to same month previous year (index=100) 2018-12-01

First results, SPI by activity group Index, first quarter 2008 compared to first quarter 2007 (index=100) 95 100 105 110 115 120 50-52 60-64 70-74 80-85 90-93 50-93 TOTAL Activity group by NACE Index In current prices In volumes, trading day adjusted 2018-12-01

Dissemination First publishing - Press release - Press conference Monthly publishing - Timeliness, 40 days after reference month - Press release (webpage) - Statistical databases 2018-12-01

Comparison with Industrial production index (IPI) Differences in the output (IPI: 70 percent turnover, 25 percent volumes, 5 percent nr of working hours. SPI: 100 percent turnover) IPI has high cut-off threshold (>10 employees) IPI has best deflators (priceindex on monthly basis) Same source for calculating yearly weights (SBS) Same method to calculate index series, chain index, base year changes every year, reference year = 2005. IPI has seasonal adjusted series About the same timeliness (40-45 days after reference month) 2018-12-01

First results, total SPI Indexserie reference year 2005 (index=100) 2018-12-01