1. SHORT TERM INDICATORS IN THE SERVICE SECTOR
Presentation
Daniel Lennartsson
Statistics Sweden

2. Growth of service sector

3. Service sector and GDP -4 -2 2 4 6 8 10 12 14 16 1993K1 1994K1 1995K12 4 6 8 10 12 14 16
1993K1
1994K1
1995K1
1996K1
1997K1
1998K1
1999K1
2000K1
2001K1
2002K1
2003K1
2004K1
2005K1
2006K1
2007K1
GDP
01-45
50-95

4. Swedish investigation about the economic statistics 2002
The users of statistics want statistics for the growing private service sector
The users want short term indicators, similiar indicators to those in the industry. Production (volume) index, new orders, prices, turnover and capacity)
The department of Business and Labour Market was given about 600 thousand Euro / year to produce new indicators. Most of this amonth are used to produce a service production index (SPI) and turnover statistics on a monthly basis.

5. Starting points and Conditions
Project plan with purpose to develop a production (volume) index for the service sector on a monthly basis
Starting points and Conditions
-OECD manual / Eurostat manual
-Great Britain’s production volume index
-National Accounts
-Discussions with producers and users of economic statistics
Goals
-Set a design to produce a production index
-Publish the first result spring 2008.
-Timeliness 45 days after the end of the reference month

6. Production index in the service sector
The theoritical form of the production index is a
volume index of Laspeyres type
Where q is produced quantity
p is price of produced quantity
δ is quantity for consumption
a is price of quantity for consumption
i is one of the produced quantities
j is one of the quantities for consumption
0 is the base period
t is the present period

7. Production index in the service sector
Qt is just a theoretical index and can not be calculated in
practice. Instead consider it as a value added index.
According to the theory of value added index the index
should be calculated as deflated production value minus
deflated consumption value.
To calculate (deflated) value added on monthly basis is
very difficult. Instead use some other output as a proxy
for value added.
We use deflated turnover for each activity as a proxy.
To produce production index we also need to weight the activities together up to aggregates

8. How to calculate the production index in practice
Weight (wb) is
When applicate base years weights, the production index by time t can then be given by

9. The main components to construct a short term index
Output (Turnover)
Deflators
Weights
Trading Day effects
Seasonal adjustment

10. Turnover Sampled based survey on a monthly basis
Coverage NACES 50-64, 70-90, 92-93
Low cut off threshold (> Euro / year)
The sampling frame is stratified by activity and size (127 *6)
Total sample size is enterprises on monthly basis and on quarterly basis

11. Deflators Best deflator: Producers price index in the service sector
(SPPI)
Only produced on quarterly basis
Forecasting of SPPI is done for the present month by a forecasting model, exponential smoothing
Other deflators:
Consumer price index (CPI), wage index (WI), producers
price index in industry (IPPI), import price index (IMPI)
– all indicies are produced on monthly basis

12. List of deflators – per NACES
Service production index for quarter compared to 20061, constant prices in 20061
Nace Def Prel Diff (%) Priceindex Periodicity
, , , CPI Month
, , , IPPI Month
, , , CPI Month
, , , SPPI, CPI Qrt, Month
, , , SPPI, CPI Qrt, Month
, , , SPPI Qrt
, , , SPPI Qrt
, , , SPPI, CPI Qrt, Month
, , , SPPI Qrt
, , , SPPI, CPI Qrt, Month
, , , SPPI, IPPI Qrt, Month
, , , SPPI Qrt
, , , SPPI, IMPI Month
, , , SPPI Qrt, Month
, , , CPI, WI Month
, , , CPI, WI Month
, , , SPPI Qrt
, , , WI Month
, , , CPI, WI Month
, , , CPI Month
Total , , ,2

13. Weights Value added weights (from SBS survey) Yearly weights
The weights updates every year (small changes though)

14. Trading day effects and seasonal adjustment
Estimation of trading day effects
- Regression model, based on time series data (Major part of activities)
- Expert group estimating trading day effects (Retail Trade)
- It’s very difficult to adjust for trading day effects in an accurate way!!
Seasonal adjustment of the index serie
- No seasonal adjustment, because of too short serie (2005- )

15. First results, total SPI
Index present month compared to same month previous year (index=100)

16. First results, SPI by activity group
Index, first quarter 2008 compared to first quarter 2007 (index=100) 95
100
105
110
115
120
50-52
60-64
70-74
80-85
90-93
50-93
TOTAL
Activity group by NACE
Index
In current
prices
In volumes,
trading day
adjusted

17. Dissemination First publishing - Press release - Press conference
Monthly publishing
- Timeliness, 40 days after reference month
- Press release (webpage)
- Statistical databases

18. Comparison with Industrial production index (IPI)
Differences in the output
(IPI: 70 percent turnover, 25 percent volumes, 5 percent nr of working hours. SPI: 100 percent turnover)
IPI has high cut-off threshold (>10 employees)
IPI has best deflators (priceindex on monthly basis)
Same source for calculating yearly weights (SBS)
Same method to calculate index series, chain index, base year changes every year, reference year = 2005.
IPI has seasonal adjusted series
About the same timeliness (40-45 days after reference month)

19. First results, total SPI
Indexserie reference year 2005 (index=100)