1. METAC Workshop March 14-17, 2016 Beirut, Lebanon National Accounts Compilation Issues Session 6: Trade

2. Topics Trade activities Trade output – Definition – In the SUT framework – Formula – Valuation – Estimates in volume terms Requirements for further development

3. Trade intermediation 2008 SNA, 6.146: – Wholesalers and retailers supply services to their customers by storing and displaying a selection of goods in convenient locations and making them easily available for customers to buy. – Although wholesalers and retailers actually buy and sell goods, the goods purchased are not treated as part of their intermediate consumption when they are resold with only minimal processing such as grading, cleaning, packaging, etc.

4. Types specified in ISIC Rev 4, Section G 45Wholesale and retail trade and repair of motor vehicles and motorcycles; 46Wholesale trade, except of motor vehicles and motorcycles; – 461Wholesale on a fee or contract basis – 462-469Wholesale on own account, subdivided according to the product sold 47Retail trade – 471-477Retail trade in stores 471Non-specialized 472-477Specialized, subdivided according to the range of products sold – 478-479Retail trade not in stores (via stalls and markets)

5. Trade output Trade on a fee or contract basis: – commissions and fees Trade on own account… – … is measured by the total value of the trade margins realized on the goods purchased for resale. Trade margin is defined as the difference between: – the actual or imputed price realized on a good purchased for resale and – the price that would have to be paid by the distributor to replace the good at the time it is sold or otherwise disposed of

6. Trade output In the SUT framework:

7. Trade output, formula the value of output = – the value of sales, – plus the value of goods purchased for resale and used for intermediate consumption, compensation of employees, etc., – minus the value of goods purchased for resale, – plus the value of additions to inventories of goods for resale, – minus the value of goods withdrawn from inventories of goods for resale, – minus the value of recurrent losses due to normal rates of wastage, theft or accidental damage.

8. Trade output, valuation Goods sold are valued at the prices at which they are actually sold; Goods provided to employees as remuneration in kind should be valued at the current purchasers’ prices payable by the traders to replace them, without margins; – Similarly, goods withdrawn by the traders for their own final consumption should be valued at the current purchasers’ prices payable by the traders to replace them Goods purchased for resale should be valued excluding any transport charges invoiced separately by the suppliers or paid to third parties by wholesalers or retailers – … the transport costs are part of the intermediate consumption

9. Trade output, valuation Additions to inventories of goods for resale should be valued at the prices prevailing at the time of entry into inventories. The value of goods withdrawn from inventories of goods for resale depends on whether the goods were acquired with the intention of making a real holding gain over a given period in storage, – … in principle, this valuation is necessary to exclude holding gains and losses from the measurement of output, as a general rule in the SNA.

10. Trade output in volume terms Measuring the volume of the output of trade services, in principle requires an analysis of the actual services provided by the trader to the customer… – … to make available various goods at a location and time convenient for the customer. Precise, ideal volume measurement would imply keeping track of the amount of each different service provided over time, including their changes in quality. The current state of statistical information on wholesale and retail trade does not allow such measurement

11. Trade output in volume terms Current practice: – In general, statistical offices use data on the volume of sales as indicators for the volume of trade services there is a reasonable correlation between the volume of sales and the volume of trade services it does leave aside all changes in the (quality of) trade services provided, and therefore does not give a complete picture of the activity of this branch – An approach to take changes in the quality of trade services into account: … to apply the procedures for calculations at current prices (as a margin), … i.e. to calculate the margin in constant prices as the difference between the sales and the purchases in constant prices

12. Trade output in volume terms Double deflation procedure

13. Trade output in volume terms Double deflation, cont. Such procedure requires high quality price indices – … taking into account of the change of the quality of the trade service, and … – … both indices, for deflation of sales and purchases, should be compiled in a consistent manner

14. Trade output in volume terms Using the volume of sales – … assuming that the volume of margins follows the volume of sales, … – … most widely used. Volume index of sales… – … can be obtained by deflating by sales price index – … for retail sales: retail sales price index, relevant/appropriate part of CPI for goods – … for wholesale: wholesale price index, relevant/appropriate parts of CPI and PPI can be used as a proxy

15. Trade output in volume terms Estimates, based on volume of sales, cont.

16. Trade output in volume terms Using volume of sales, cont. – from the example 2: … the volume of trade margin can be derived also by multiplying the volume of sales in current year by trade margin from the base year. It is recommended to apply this procedure at product detail, preferably by calculating trade margins in constant prices within the detailed framework of supply and use tables (trade margin sub-matrix). Then, the margin-to-sales ratio on a specific cell of the use table calculated in the previous year can be applied to the volume of that cell in the current year …

17. Trade output in volume terms Output for maintenance and repair of motor vehicles and motorcycles: – … available PPIs, or if not… – … CPIs (corrected for any taxes or subsidies). Trade services that are paid on a fee or contract basis: – fees paid should be the basis for deflation, in combination with the prices of the products sold. … when the fee is a percentage of sales’ value, a proper price index would combine the change in fee percentages and the change in commodity price.

18. Requirements for further development More detailed and accurate information by type of traders and by commodity – Constrains regarding difficulties in measuring of the unrecorded informal and underground activities – More detailed and systematic information to be obtained from big super-stores Further development of price statistics – Improvements in CPIs – Development of PPIs – Development of wholesale price index ? – Development of exports and imports price indices

19. References 2008 SNA, Chapter 15 Handbook on price and volume measures in national accounts, Eurostat

20. Thank you