1. Populating Quarterly Constant Price Supply and Use Tables with Seasonally Adjusted Data
Simon Compton
Methodology Directorate
Office for National Statistics
United Kingdom

2. Structure of Presentation
Describe supply and use tables and their use in the estimation of GDP
Introduce some key processes of GDP compilation: balancing, seasonal adjustment, chain-linking and aggregation
Consider some of the interactions between these processes
Describe development work in the UK

3. Gross Domestic Product
Main measure of economic activity and growth
Can be measured in three ways:
Output = Expenditure = Income or GDP(O) = GDP(E) = GDP(O)
Supply = Demand:
Domestic Production + Imports = Household Expenditure + Intermediate Consumption + Capital Formation + Exports + Change in Stocks
GDP(O) = GDP(E)
Domestic Production – Intermediate Consumption = Household Expenditure + Capital Formation + Change in Stocks + Exports - Imports
GDP(I) = wages and salaries + profits

4. Compilation and Balancing
Each component can be measured separately,
annually, quarterly or monthly
Results in three different estimates of GDP
Data confrontation exercise, known as ‘GDP balancing’ to reconcile these estimates
Results in one ‘best’ estimate of GDP

5. Supply and Use Tables
Enables data reconciliation at a more disaggregated level:
GDP(O) and GDP(E) by product
GDP(O) and GDP(I) by industry
ONS considering a breakdown into 369 products and 197 industries

6. Supply and Use Table

7. Example of an Input-Output Table

8. Seasonal Adjustment

9. Supply & Use and Seasonal Adjustment
Supply and Use tables need to be populated with seasonally adjusted series:
for data validation
facilitates the balancing analysis
focus on final published outputs

10. Prices
Adjustment needed to take account of inflation in order to estimate ‘real’ economic growth
Achieved by deflation – dividing the ‘current price’ series by a price index
Need some way of weighting together different series – use prices, to generate constant price series combining different goods and services
Relative prices change over time
Chain-linking – generates chain volume measures BUT not additive

11. Seasonally Adjusted Series Required for Constant Price Supply and Use Tables
Domestic production and intermediate consumption tables for 197 industries by 369 products in current prices and previous year prices
Expenditure components of GDP by product in current prices and previous year prices
Income components by industry in current prices only

12. Aggregation and Seasonal Adjustment
Aggregation required for supply and use at a very low level of disaggregation
Problematic, particularly for series from sample surveys where sampling error may account for most variation
Practical problems with seasonal adjustment for a high volume of series

13. Chain-linking and Seasonal Adjustment
Some research indicates greater potential for bias if seasonal adjustment precedes chain-linking
Research based on the UK method of chain-linking suggests the opposite (better to remove seasonality first)
Seasonality may be reintroduced after chain-linking
More research needed in this area
Careful testing for residual seasonality after chain-linking is advisable

14. Chain-linking, Aggregation and Balancing
Ideally chain-linking should take place at the most detailed level possible - the level at which deflation takes place.
Balancing at a low level of disaggregation difficult unless an automated procedure
A more analytical, judgemental approach is only feasible at a higher level of aggregation

15. Order of Processing
At the level of deflation express quarterly constant prices in previous year prices (PYPs)
Aggregate PYPs to the level of seasonal adjustment
Chain-link quarterly PYPs to Chain Volume Measures (CVMs).
Seasonally adjust this series
Unchain this series to create seasonally adjusted current year and previous year prices
Aggregate to the level of publication and chain-link

16. Transition of Seasonal Adjustment
Current system involves seasonal adjustment of many thousands of series
This seasonal adjustment incorporates much knowledge about the series
Strategy for transition involves:
Use of a sophisticated and robust automatic option for seasonal adjustment
A prioritised programme of seasonal adjustment review, setting up tailored seasonal adjustment for individual series, where appropriate.

17. Some complications
The need for additional published outputs, sometimes using different classifications or dimensions to those of the supply and use tables
The interdependent nature of many parts of the accounts with data being used in two places, or estimates derived from one component used in another
Some technical adjustments bridging the gap between producer (‘basic’) and retail (‘market’) prices, which are conceptually difficult for seasonal adjustment and deflation.
Some particular conceptual complexities and data issues around series for changes in stocks
Likewise for intermediate consumption

18. Conclusions
Populating quarterly constant price supply and use tables with seasonally adjusted data not easy and requires comprise
Disaggregated level of seasonal adjustment a particular concern
Design requires careful consideration of each component of GDP and order of processing issues
New design not yet implemented in the UK
Many benefits offered by the new framework with the analytical opportunities it offers.