1. Gérard Vittek Head of section “index of the cost of construction and rent” 25 th May of 2015 Toward Short Term Statistics Business in construction Costs and prices of construction index

2. Toward Short Term Statistics Business in construction 25 th May of 2015 What do the STS cover? STS indices cover four major domains: industry, construction, trade and services. These activities are defined in relation to the statistical classification of economic activities in the European Community (NACE). STS indicators are published by Eurostat using the NACE Rev. 2 classification. For STS, industry covers Sections B to E of NACE Rev. 2, i.e. mining and quarrying, manufacturing, electricity, gas and water supply. Construction covers Section F (total construction, building, civil engineering and residential and non-residential buildings). Retail trade covers Division 47.

3. Toward Short Term Statistics Business in construction 25 th May of 2015 Indicators covered by the STS Regulation, by domain or annex

4. Toward Short Term Statistics Business in construction 25 th May of 2015 Price index and cost index in construction

5. Toward Short Term Statistics Business in construction 25 th May of 2015 STS Package 2017 for construction

6. Toward Short Term Statistics Business in construction 25 th May of 2015 How to answer now to STS package in construction?. With STS package Eurostat wanted monthly Each Member state must produce quarterly a producer price index for construction. And can still produce monthly Construction costs index (320) Material costs index (321) Wage costs index (322) KLEMS is a methodological approach to study productivity. It can be use to analyze the break down of the costs of construction in K Capital (equipment) L Labour E Energy M Materials S Services (Various services, Transport, pollution control)

7. Toward Short Term Statistics Business in construction 25 th May of 2015 Structural business statistics can be used in order to give a KLEMS break down of the costs in 41.2 and in 43 and its sub decompositions (4 or 5 digits). F CONSTRUCTION 41 Construction of buildings 41.1 Development of building projects 41.2 Construction of residential and non-residential buildings 42 Civil engineering (not relevant for construction cost index) 43 Specialised construction activities How to answer now to STS package in construction?

8. Toward Short Term Statistics Business in construction 25 th May of 2015 If a firm build totally a Construction it is analyse as a firm of 41.2. “Construction of residential and non-residential buildings”. If several firms build a house, the foundations and the wall are in 41.2 and the second works are in 43 “Specialised construction activities ”. This study will help you to determine if you needs 41.2 “Construction of residential and non-residential buildings” and 43 “Specialised construction activities” or only 41.2. The aggregate weights are the weighted structure of the sub activities structure, weighed by the turn over relative to the construction of buildings, subcontracting must be excluded. It can be relevant for the INS to create macroeconomics indicators of cost in construction (F, 41.2, 42, 43). How to answer now to STS package in construction?

9. Toward Short Term Statistics Business in construction 25 th May of 2015 Confrontation of KLEMS break down of the costs in 41.2 and in 43 and its sub decompositions (4 or 5 digits) realised with Structural business statistics with the data of the professional federation of the building and public work in order to analyse the difference. The reasons are the field of investigation, the method of accounting, the representativeness of the sample, and so on. Some statistical artefacts can blur the image (classification, habits, …) and can be corrected with the help of professional federation or by INS. Some differences are real. How to answer now to STS package in construction?

10. Toward Short Term Statistics Business in construction 25 th May of 2015. When the weights of each post are defined you need to determine the component of each post. You need to find in your database indices for: –K Equipment (Industrial producer and import price indices) –L Labour (Labour cost index in construction) –E Energy (Industrial producer and import price indices and Consumer price index) –M Material (Industrial producer and import price indices) –S various services (Industrial producer and import price indices) –T Transport (Industrial producer and import price indices or Services producer price indices) –D Pollution control (Services producer price indices) How to answer now to STS package in construction?

11. Toward Short Term Statistics Business in construction 25 th May of 2015. When the weights of each post are defined you need to determine the component of each post. K Equipment (Industrial producer and import price indices) L Labour (Labour cost index in construction) E Energy (Industrial producer and import price indices and Consumer price index) M Material (Industrial producer and import price indices) S various services (Industrial producer and import price indices) T Transport (Industrial producer and import price indices or Services producer price indices) D Pollution control (Services producer price indices) How to answer now to STS package in construction?

12. Toward Short Term Statistics Business in construction 25 th May of 2015. Who to build an Producer price index in Construction ? A price index is an instrument for measuring price changes. To do this, pure price variations must be isolated, by first removing any effect linked with changes in the content of the products in question. In this precise case, for example, this may be a rise in the price of a dwelling after the surface area of the rooms has been increased, or when stricter insulation standards have been applied or if better quality equipment has been installed. Price indices are usually prepared as follows: the current value of an intangible sample of articles is compared with what it was on a reference date, and if an article is replaced by a different model, then a “quality effect” has to be assessed, i.e. the effect this change has had on the new price. A pure price change can then be obtained by deducting the quality effect. How to answer now to STS package in construction?

13. Toward Short Term Statistics Business in construction 25 th May of 2015. The specific problem with construction is that each building is unique. It is therefore not possible to compare the price of the same construction at different periods. This means that price variations cannot be measured by simply observing them, and this blurs the perception of inflation in the construction sector. Indeed these prices depend on a large number of parameters: building layout, materials used, equipment installed, constraints related to the worksite, location and scale of the operation, type of relationship between those involved (developers, house builders, general building companies, subcontractors, clients), construction schedule, circumstances around the finalising of the deal. The calculation method has to adapt to these characteristics. How to answer now to STS package in construction?

14. Toward Short Term Statistics Business in construction 25 th May of 2015. The point is : “Are the constructions normalised by type of construction? If the answer is yes, and if the location has not any effect on the price (all is build in town with similar attractiveness and amenities) it is simple to build an index. 1.If the price of a construction depend on several characteristics of a construction, an hedonic model can solve the problem. 2.If the answer is not “yes” you must take in account the location, the scale of income in the country, an others characteristics, an hedonic model can solve the problem. How to answer now to STS package in construction?

15. Thank you for your attention! Contact M. Gérard Vittek Tél. : 01 41 17 51 15 email : gerard.vittek@insee.frgerard.vittek@insee.fr Insee 18 bd Adolphe-Pinard 75675 Paris Cedex 14 www.insee.fr Informations statistiques : www.insee.fr / Contacter l’Insee 09 72 72 4000 (coût d’un appel local) du lundi au vendredi de 9h00 à 17h00 Toward Short Term Statistics Business in construction