GDP Improvement Seminar: Output Approach Office for National Statistics

INTRODUCTIONS

OVERVIEW Jacqui Jones

Overview (1) Objective: To share recent improvements in GDP with stakeholders and discuss plans for the next 12 months 1.15 Strategy Andrew Walton National Accounts work plan National Accounts revisions performance 2.00Cross-cutting Improvements Jacqui Jones Unregistered businesses Pete Lee E-commerce Jacqui Jones Construction review Pete Lee 2.30Coffee Break

Overview (2) 2.45GDPO Specific improvements Pete Lee Recent improvements in GDPO Rob Doody Progress on industry reviews Mark Stephens Progress on wider improvements Mark Stephens Removing experimental statistics status Denise Blackmore 3.45Coffee break 4.00Web Data Access Callum Foster Concluding remarks, actions and next steps 5.00Finish

STRATEGY Andrew Walton

National Accounts and Related Outputs Work Plan: 2013 – 2017 Andrew Walton Assistant Deputy Director National Accounts Coordination Division

NA Work Plan Scope Progress so far Why are we doing it? Some highlights Next steps

NA Work Plan: Scope National Accounts and components Public Sector Finances Balance of Payments and Trade Short term Indicators Regional Accounts

Progress so far Already consulted on a five-year National Accounts and related outputs plan As a result we have published an agreed plan as a basis for future discussions with users This is based on ‘expected’ resources Not set in stone Responsive to developments But recognise that this will have an impact

Why are we doing it? User interest is very high Lots of issues and improvements More effective way of prioritising Business as usual and ESA10/BPM6 takes most of the resource Manage expectations

Detail of the plan - summary For 2014 major ESA10/BPM6 demand Legally required so little choice Beyond 2015 more scope But still a lot of ESA10/BPM6 development until 2017 or 2018 Identified the other big developments Flow of funds Quarterly constant price supply and use Source improvement not quick Plan sets out some deliverables along the path

Business as Usual Improving our Business as usual Ensuring the range of publications meet user needs Presenting the statistics to both expert and lay users Making underlying data easily accessible for all users Ensuring the production of the statistics is as streamlined as possible to maximise time available for excellent presentation Implement a wider user engagement strategy Communicate with users via a programme of articles and seminars that address emerging issues. Expand the revisions database and analyses to include the main aggregates.

Developments National Accounts development & Continuous Improvement Meeting Regulatory requirements ESA10/BPM6 Comply with regulations Address GNI reservations and A points Quality initiatives Outcome of National Statistics Quality Review not yet in the plan Continuous improvement

National Statistics Quality Review Scope as in this work plan User focussed Externally led with ‘expert’ NA support Team identified over the summer Review started in September Finishing Spring 2014 Recommendations prioritised in next year’s work plan

GDP and short term indicators Various reviews Construction Industry reviews COICOP Living costs and food survey Compilation methods Supply and Use developments Annual constant price Interim solution for detailed purchases Input-output analytical tables

GDP and short term indicators Nominal GDP Improving processes Historic data Output data More detailed HHFCE and GFCF ESA10 dataset alongside Blue Book 2014 Key issue – quarterly KP SUT

Quarterly constant price Supply and Use Tables Vision would be ‘world class’ Most countries with QSUT use large amounts of modelled data In UK, would highlight some data deficiencies (income, Intermediate consumption, some household expenditure) Source improvements not yet planned Given changes to survey programme required by ESA10/BPM6, unlikely before 2019

Quarterly constant price Supply and Use Tables But we can do something Annual KP SUT gives experience of simultaneous balancing Develop quarterly ‘commodity flow’ for major products (e.g cars, oil, energy, construction, aircraft) Publish by 2015 Develop plan by 2016 for source improvement

Sector and Financial Accounts Big ESA10 challenge More sectors and accounts Transaction reviews Other international G20 data gaps, SDDS+, MIPS Historic data Working to restore pre-1987 data Key issue – Flow of funds

Flow of Funds In this context means ‘from whom to whom’ Additional data collection planned for 2018 as part of ESA10/BPM6 programme Before then? Bank ‘requirements’ Update Finstats methodological guide Articulate explicitly the coverage of the OFI sector ‘Use more data’ Resource arrived to start the work in September, so in the planning stage now

Balance of Payment and Trade Major BPM6 changes No derogations so more uncertainty over delivery Pressures on understanding new concepts Global Value Chains Digital economy No plans to do anything significant other than BPM6

Public Sector Finances Aligning PSF and NA 6 pack agreement Review of the “ex measures” ESA10 challenge Review of Network Rail State government Social security funds Classifications Deal with more cases

Regional accounts Methodological enhancements GVA(P) 'real' measure for ESA10 Balanced estimate of regional GVA NUTS boundary changes 2015 Regional HHFCE (future aspiration - post 2015) Key issue – Scottish referendum

Concluding comments Set out in detail: Plans for Blue Book 14 Beyond 2014 what’s planned For Flow of funds For Quarterly SUT For next year need to include response to NSQR

Questions?

Revisions Performance Andrew Walton Assistant Deputy Director National Accounts Coordination Division

Why is GDP revised? Andrew Walton Assistant Deputy Director National Accounts Coordination Division 2 October 2013

Outline Revisions in general How GDP is compiled GDP revisions Some numbers Levels Growths Nominal GDP revisions Conclusions What’s next?

Revisions to economic series Revisions are a fact of life for most economic series Or else: The first estimate is delayed Later information is ignored even when it tells a different story Balance between accuracy and timeliness

How GDP is compiled (1) Three approaches Output, Expenditure and Income Perfect statistical world – all equal Many sources Monthly, Quarterly, Annual Various timings Monthly turnover (IoP around 6 weeks) Annual tax returns (15 months)

How GDP is compiled (2) Preliminary estimate (25 days) Accuracy and timeliness trade-off One of the fastest in the world Based exclusively on output, 44% data Second estimate (8 weeks) Growth based on output, 83% data Publish all 3 approaches Some provisional expenditure sources Limited direct income information Use of quarterly alignment adjustments

How GDP is compiled (3) Quarterly National Accounts 13 weeks Based on output, 92% data Similar to second estimate Expenditure components more firm Revisions to previous periods but not for SU balanced years When 4 quarters are published Seasonally adjusted annual constrained to equal unadjusted annual

How GDP is compiled (4) Balanced supply and use Framework for confronting differences Levels not growths 112 industries and products First balance after around 18 months BB13 balanced 2011 Not all benchmarks always received Second balance is usually “final” except for methodological changes

Why is GDP revised? Output source data revised Expenditure and income Revised seasonal factors Annual chain-linking changes weights Supply and use balancing New methods New international frameworks

Some numbers: Revisions to GDP levels Balancing supply and use fixes annual level not quarterly growth Use quarterly path from output anchored to SUT levels Generally small apart from methods changes

The Recession: Q to Q3 2009

Revisions to Growth Preliminary to QNA growth Last 26 periods Average p.p: not biased Absolute average 0.12 p.p 7 times unchanged;12 times by +/-0.1 p.p, 4 times by +/-0.2 p.p Q revised by 0.3 p.p Q revised by -0.5 p.p (Blue Book) No benefit in delaying preliminary estimate from 25 days to 13 weeks

QNA to Latest Evidence from the recession incomplete No evidence of bias yet Actual revisions now negative +0.2 p.p for period 1998 to p.p for period 2008 to 2010 Absolute average revisions higher 0.4 p.p for period 1998 to p.p for period 2008 to 2010 Impact of methodological changes Continue to monitor closely

Nominal GDP The poor relative in the media Possible MPC spotlight ONS setting up a review of methodology Revisions performance key Work in early stages

Nominal Revisions at 2 nd estimate

CVM revisions on the same basis

CVM revisions at 1 st balanced BB

Nominal GDP at 1 st balanced BB

CVM GDP revisions across vintages

Nominal GDP revs across vintages

Total updates - CVM

Total updates – Nominal GDP

Conclusions Revisions between Preliminary and QNA for real GDP continue to be small and unbiased Subsequent revisions have been higher since 2008 but still unbiased Partly explained by BB11 methods changes Impact of Supply and Use ONS monitoring methods through the recession and recovery Nominal quarterly GDP revisions being used as a guide to possible improvements

What’s next? BB 2014 – New National Accounts framework (ESA10) Also a range of Gross National Income (GNI) reservations to clear Analyse revisions by reason rather than over time Displaying uncertainty in estimates Splitting data revisions from methodological revisions Continue to monitor revisions

References Revisions policy accounts-revisions-policy.pdf Detail of Supply and Use tables structure use-tables-structure-overview.pdf Revisions triangles Improvements to the measurement of Insurance Services articles/2011-present/blue-book-2012-insurance-services/index.html Various National Accounts articles, including "National Accounts: A short guide" articles/2011-present/index.html Why is GDP revised article from June present/why-is-gdp-revised-/updated-analysis--why-is-gdp-revised-.pdf

Questions?

CROSS-CUTTING GDPO IMPROVEMENTS Jacqui Jones

Unregistered businesses Pete Lee Assistant Deputy Director, Business Indicators & Balance of Payments, ONS

Overview of presentation Background August 2013 article Blue Book 2014

Background March 2012, 2.15 million registered businesses on IDBR January 2012, 2.7 million unregistered businesses In 2011, unregistered sole proprietorships increased by 161,000 (BIS) Cannot easily include unregistered businesses in business surveys Adjustments made within national accounts to take account of this

August 2013 article UK Service Industries: definition, classification and evolution, published 23rd August rd/national-accounts-articles/uk-service- industries--definition--classification-and- evolution/uk-service-industries-pdf.pdfhttp:// rd/national-accounts-articles/uk-service- industries--definition--classification-and- evolution/uk-service-industries-pdf.pdf

August 2013 article – highest proportions by industry Land transport (excluding rail transport) (17% of output) Motion picture, TV & video programme production, music publishing (7%) Sports, amusement & recreation services (7%) Other personal services (6%) Food and beverage services (6%) Accommodation services (5%)

Changes over time In 2006, 2.0 million unregistered businesses (49% of whole) Turnover 3.4% of all business turnover In 2012, 2.7 million unregistered businesses (55%) Turnover 2.9% of all business turnover Implication, more unregistered businesses, but smaller Updating adjustments will have an effect on GDP levels, but little on GDP growth

Blue Book 2014 Hope to have updates to the adjustments for unregistered businesses for later years

Questions ?

E-commerce Jacqui Jones Deputy Director of Business Indicators and Balance of Payments, ONS

Coverage and Measurement of GDP Slide 2 GDP = production and consumption by UK businesses and households Less imports from the rest of the world Plus exports to the rest of the world

E-commerce (1) In GDP terms the mode of transaction is not the focus – total production and consumption are. Slide 3

E-commerce (2) Examples of GDP data sources and coverage of transactions carried out by e-commerce: Slide 4 SourcesCoverage Turnover from UK businessesGood coverage of all industries Exports and imports of goods by UK businesses and households Good coverage from Intrastat and Trade Dockets Exports and imports of services by UK businesses and households Good coverage but enhancements are being made to measuring the value of UK household imports of services (see next slide). Domestic purchases by UK households Good coverage

E-commerce (3) Most e-services e.g.digital downloads are provided by non-UK registered businesses There are two aspects to the measurement of e-services directly purchased by UK households: 1.Household expenditure on e-services, which is adequately measured and increases the expenditure component of GDP 2.The value of e-service imports to UK households, as part of GDP Trade, which reduces GDP as: Trade = exports less imports There is a small risk that the current measurement of e-services, directly imported by households, is marginally overstating GDP. Slide 5

E-commerce (4) Going forward we need to ensure that we keep up to-date with changes in the: provision of e-services by UK and non-UK businesses types of e-services provided And continue our continuous improvement and quality assessment work. Slide 6

Questions ?

Developments in construction statistics Pete Lee Assistant Deputy Director, Business Indicators & Balance of Payments, ONS

Overview of presentation Background Recent changes The future

Background New monthly construction survey introduced in 2010 No seasonally adjusted monthly data available Concerns over volatility in estimates and effects on GDP Concerns over quality of deflators New orders based on ONS survey Output and new orders in separate publications

Recent changes Monthly seasonally adjusted series introduced July 2013 Chained volume estimates appeared alongside constant price (2005 base) estimates from July 2013 Constant price estimates no longer appeared in bulletin from August 2013 National accounts revisions policy adopted from July 2013 (as per IoP, IoS)

Recent changes continued Barbour ABI data replaced new orders survey from 2013 Q2 publication Major cost and compliance burden savings, with quality improvements Output and new orders bulletins merged for the third month of every quarter from September 2013

Future developments Improved processing system introduced in December 2013 (dependent on results of parallel run in October / November) This will enable CDIDs for time series data for construction output series New contract for construction deflators awarded to Davis Langdon Improved deflators expected to be available from July 2014 (including back data) Implemented September / October 2014

Questions ?

Coffee Break

SPECIFIC IMPROVEMENTS FOR THE OUTPUT APPROACH OF GDP Pete Lee

Recent improvements in output approach of GDP Rob Doody Head of Output Approach to GDP, Business Indicators and Balance of Payments, ONS

Introduction These slides will focus on the improvements made to the short term output indicators used in the Output approach of GDP The majority of the improvements were implemented alongside the Quarterly National Accounts consistent with Blue Book 2013 dataset (27 th June) Further information can be found in the GDP Output Improvement Reportthe GDP Output Improvement Report

Detail In all 10 industries had either their methods or source data improved at Blue Book 2013 as a result of the GDP Output Improvement Project This is in addition to the normal improvements that go through in a Blue Book round including; reviewing seasonal models, update of annual weights, benchmarking to annual GDP growth derived by supply use balancing etc The combined weight of the industries improved in the output measure of GDP is approximately 10%. The following slides highlights some of the main industries improved

Agriculture and Fishing (01, 03) ONS worked closely with the Department for environment, food and rural affairs to improve the estimates made for the agriculture industry (Division 01) This included adding a new indicator to cover oil seed rape, moving more in line with international standards for measuring the industry and rebasing the index to 2010=100 Through working with the Marine Management Organisation we confirmed the data and methods used were still the most appropriate for the fishing industry (Division 03) Improvements to the industry were made through rebasing the index to 2010=100 and using the most up to date weights

Mining support services (09) The review of this industry identified that the previous method of using a volume indicator linked to meters drilled and working days was not reflecting all activity within an industry that is growing in importance After a review of comparability with annual data, Work Force Jobs data was identified as a better measure of short term output for the industry The method was already being used in Services and is considered an acceptable method where turnover or deflators are unavailable

Iron and steel (24.1-3) A review of the methods used identified the only improvement necessary was updating the low level weights used to produce the index The index was therefore rebased to 2010=100 and accordingly new weights used

Construction (41-43) There were numerous improvements to the output of the construction series including; Moving to monthly seasonal adjustment Changing from fixed base constant price estimates to chained volume measures Revisions period brought into line with the national accounts revisions policy

Air transport (51) ONS worked with the Civil Aviation Authority to improve how their data is used in the output measure of GDP In particular how the birth and deaths of aviation companies are treated was analysed to improve consistency with normal ONS practices The review of the raw data also led to an improved method for one series making it more representative of the industry

Programming and broadcasting (60) A review of the sampling frame identified a reporting issue leading to inconsistencies with GDP principles A new method has been developed that will improve the accuracy and relevance of GDP growth estimates for this industry

Other improvements Publication of an extended industry level time series for output indices (back to 1990) Inclusion of more charts in the GDP preliminary estimate statistical bulletin Creation of a Gross Value Added industries weights dataset and CDID’s for all weights

Questions ?

Progress on Industry Reviews Mark Stephens GDPO Improvement Project Manager, Business Indicators and Balance of Payments, ONS

What is the process? The industry review process is to: quality assure current data and methods evaluate methods against Eurostat guidelines investigate alternative sources and methods

Prioritising reviews Priority matrix is driven by GVA weight within GDPO with a score influenced by: Eurostat rating (60%) Industry specific knowledge (20%) e.g. specific data quality, periodicity and experimental status Revisions (10%) Volatility (10%)

Timeline Industry gdp weight (1000) CommenceConsultFinalise 68 - Real estate96.9Dec 2012Dec 2013Apr Property developers 9.7Jun 2013TbcSep – Health55.2Dec 2012Mar 2014Sep /66 – Financial industries 79.5Feb 2013Mar 2015Sep – Public admin53.5May 2013Mar 2014Sep – Water transport3.0Apr 2014Dec 2014Apr /88 – Social care20.5Jun 2014Dec 2014Apr – Professional services 68.6Jun 2014Mar 2015Jul 2015 Total386.8

Questions ?

GDPO Wider Improvements Mark Stephens GDPO Improvement Project Manager, Business Indicators and Balance of Payments, ONS

Current price expansion - MBS –Main source of short-term current price estimates is the Monthly Business Survey (MBS) despatched to 31,000 businesses. Covers 41.4% of GDPO. –MBS expanded in July 2010 to: – real estate agents –75 – vets –86M – health (market sector) –91M – libraries and other culture (market) –93M – sport and recreation (market) –Quality of data being considered for inclusion in Blue Book –Expansion would improve MBS coverage to 43.8% of GDPO. –Further MBS expansion in April 2013 to: – oils and fats – grain mill products –Further expansion of MBS being considered – neutral on compliance.

Current price expansion - VAT VAT turnover data recently available due to improved methods for error correction and linkage to the IDBR. Feasibility work concentrated on the July 2010 MBS expansion industries in comparing data from VAT, Annual Business Survey and MBS. VAT turnover data has three potential uses: an indicator in its own right a benchmark possible to shrink the MBS sample and augment with VAT data

Re-basing to 2010 Producer Price Index (PPI) and Service Producer Price Index (SPPI) re-basing from 2005 to 2010 as part of BB14. Automated process at industry level but at the lower processing level for some IoP and IoS industries deflation weights will be manually updated to SPPI due to be re-assessed by the UK Statistical Authority at the end of 2013 giving scope to review SPPI use. In addition, gdp weights have to be updated at the lower processing level for some IoP and IoS industries.

Other work Review of productivity adjustments to commence in Jan These are required when using jobs and wage data. On-going work to renew delivery agreements with non-ONS organisations e.g. Marine Management Organisation (MMO), DEFRA and DECC Improving availability of methodology and information on the web by Oct 2014

Questions ?

Experimental statistics in GDPO Denise Blackmore Analysis & Methods Branch, Business Indicators and Balance of Payments, ONS

Experimental statistics (1) National Accounts, GDP and short-term indicators are labelled as National Statistics. This ‘label’ is achieved when statistics have been produced in accordance with the rigorous quality standards that underpin the ‘Code of Practice for Official Statistics’. Experimental statistics are those statistics under development which have yet to achieve National Statistics status. There are 17 industries (2-digit SIC) within Index of Services (IoS) that are still classified as Experimental statistics.

IoS Experimental Statistics Industrywt (ppt) Industry Water transport 603.3Programming & broadcasting Computer programming 633.3Information services Financial services Insurance Finance and insurance auxilliaries Real estate (fee or contract basis) 723.1Research and development 751.3Vets Rental and leasing 815.2Services to buildings 86m12.8Health (market) Residential care 889.8Social work without accommodation 946.3Membership organisations 974.7Households as employers of domestic personnel

Experimental statistics (2) August 2012 Industry Review article August 2012 Industry Review article outlined reasons why experimental status is in place for each industry - new sources to bed down, use of input indicators to measure output, new methods being developed etc. Work has begun to move six industries to National Statistics. More industries will follow in tandem with industry review process. Consultation with users is a key element of the process.

Experimental statistics (3) The six industries are: 62 Computer Programming & 63 Information Services – wage data at section level used to deflate MBS data. Wage data at industry level is less robust 65 Insurance – new insurance method introduced BB Real Estate (Fee or Contract Basis) & 75 Vets – new current price data available 77 Rental and Leasing – data sources given time to bed in Combined weight of 60.0 ppt Experimental Statistics would fall to ppt

Questions ?

Coffee Break

PROGRESS ON WEB DATA ACCESS Callum Foster - Product Owner – Web Data Access, ONS

“Just make it easy for me to find the data I need and let me do what I need to do with it” Pretty much every user I have spoken to

External factors that influence expectations Open data agenda Growth in social media Technology change What others do and provide -both inside and outside a statistical context The changing roles and tasks of users -and the changing expectations of your stakeholders and customers Expectations evolve and ONS need to understand and re-act to those continuously

ONS web improvements Theme pages (including more interactive content) Taxonomy change Others (e.g. search, accessibility etc.) A new Data Explorer and ‘Application Programming Interface’ – Web Data Access

Updates to Theme Pages

Browse by Theme (the ONS taxonomy) User studies carried out in November 2011 highlighted a number of issues with the current ONS website. These included: inconsistent navigation confusing labelling/jargon used on the site difficulty understanding the taxonomy, such as which themes hold which information

Taxonomy is five levels deep and has 1400 categories By levels 4 and 5 the same statistics are being returned, or return one or less item User studies showed clear misunderstanding over where information would be found under themes Web analytics review supports this, showing 20% of next clicks within all themes is to another theme Confusion for users once statistics have been found (what is a publication vs. Release vs. Dataset vs. Reference table etc..) Current taxonomy

Making it better – the approach User driven approach Over 300 participants (internal and external) Robust methodology, carried out by a user experience expert Analysis of the results demonstrated that users were more agreeable with proposed new taxonomy

Testing results Current‘New’

Main findings 1.Feedback from participants shows the new taxonomy to be intuitive 2.Participants happy with 4 top themes – not unusual as Australian Bureau of Statistics has 4 themes, German Federal Statistical Office 5, and Ireland Central Statistics Office 5 3.Some natural crossover of statistics that cannot be avoided. Certain subjects mean different things to different people 4.Some themes have more subjects than others 5.Other areas of website functionality require addressing beyond taxonomy 6.Great to get users to the subject or topic quicker but additional work required to improve the experience once there

Outcomes New taxonomy will have four top level themes: Business, Industry and Trade Economy Employment and Labour Market People, Population and Community Full implementation of new taxonomy will be carried out through the Autumn (exact go-live date to be confirmed) Redirects will be setup to help manage the changeover from old to new Going forward, the taxonomy will be reviewed periodically Any specific comments on plans for the new taxonomy, or more general feedback please contact

ONS and Open Data Open formats Unrestrictive licences Making more data available if we can Tools for using and analysing data

ONS commitment to open data - statements National Statistician's Guidance and-guidance/national-statistician-s-guidance/index.html Transparency and Open Data statements on StatNet: 8TMH9G 8TMH9G ONS Publication Scheme and Open Data approach: The ‘Data Buzz’ (ONS Strategy) 3.3 The data ‘buzz’ As the quantity and scope of digital information in the world grows we must adapt our processes to exploit the opportunities this presents. We are already working on the integration of different administrative, commercial and other data sources and must continue to develop these capabilities, supported by appropriate methods and standards. ONS already makes an important contribution by providing researchers and policy analysts with access to anonymised micro data from social and business surveys, and we will increasingly make more of our datasets available in ‘open’ formats to support re-use. We are already adapting the way we work, our infrastructure and our processes.

About Web Data Access (the project) The ONS will be providing new tools accessible via their website to: Maximise the use of Census and other ONS data Provide enhanced website tools to explore ONS statistics more effectively online Open up direct access to ONS data for third parties to power their own websites and applications Support the government policy on Open Data The focus so far has been on 2011 Census data, but the new tools will include wider ONS data (including economic data) over time

2 new tools for users 1.ONS Data Explorer Functionality on the ONS website to access ONS datasets (find, view, chart download etc.) 2.ONS API (OpenAPI) An interface that allows other systems to programmatically query and receive data directly Machine to machine “http requests” (discovery and delivery)

Census Structure of Data Explorer Journeys Find Use (‘explore’) Find by Topic Area First ONS website journeys External Search Dataset Details Refine Area and Topic View Table, Chart, Map Download CSV, XLS, XML Note: Existing TimeSeries Data Explorer functionality still available Search Browse by theme Data Tab

Show a time series chart (or link to highcharts) highcharts

Implementation roadmap Beta Data Explorer and API due to be launched later this month (selection of 2011 Census data only) Full release of Data Explorer and API planned for later 2013/early 2014 (more 2011 Census data and some non-Census ‘trailblazers’) Additional ONS data transitioned to become available in the new tools over time

Thanks for listening Any questions?

CONCLUDING REMARKS, ACTIONS & NEXT STEPS Jacqui Jones