Benchmarking quarterly GDP to other official statistics. Andrew Mortimer Short-term Economic Indicators Branch

Purpose To demonstrate a method of constraining quarterly short-term indicators to other published statistics; To seek the views of SESCG on: –the need for benchmarking; –what source(s) to benchmark to; –timing

Differences between estimates are inevitable Actual (directly measured) values of sectoral GVA are available from: –Regional Accounts –SABS (ABI) –Scottish Supply-use tables Quarterly GVA uses completely different data sources Uses proxy measures as a short-term indicator of GVA – in constant prices. Is currently the only official measure of real growth in the economy – and consequently is used for long-run analysis Comparison of Quarterly GDP against other sources Lagged by a number of years

Example: Hotels and catering

Benefits Consistency between official statistics is desirable; Long-run growth measured using ‘actual’ GVA; Increased scrutiny of Regional Accounts / other official statistics; Focus on quarterly GDP shifts, appropriately, to its intended use – i.e. a short-term indicator of growth

Problems Choice of ‘gold standard’ Depending on the source constrained to, potentially large revisions on an annual basis; Scottish Government are involved in the quality assurance of regional accounts and have been instrumental in highlighting problems in the statistics but QA is performed using aggregates, not source data – loss of control; Whether or not to anticipate and adjust for differences: what happens if systematic bias is indentified and then cancelled out by new observations (or vice-versa)? Some component series used in quarterly GDP are expressed in constant prices at the outset – with no established deflator that could be used to ‘inflate’ them

Timing Assuming that we pursue benchmarking… 3 choices (not mutually exclusive) –Constrain constant price estimates to double- deflated constant price I-O tables (2-3 years); –Constrain to time-series of current price I-O tables (1 year) –Constrain to 32 industry-level regional accounts (immediate?).

Discussion 1.the need for benchmarking; 2.what source(s) to benchmark to; 3.Timing.