1. Statistics for economic analysis and policy making in Europe Part 10
CONTRACTOR IS ACTING UNDER A FRAMEWORK CONTRACT CONCLUDED WITH THE EUROPEAN COMMISSION

2. National accounts: Quarterly and regional – Overview
Quarterly accounts
Regional accounts
Regional accounts – Operational role
Background and limits

3. Quarterly accounts
Quarterly national accounts play a crucial role in economic research and economic policy.
They are indispensable for assessing the situation of an economy in the business cycle: key aggregates are therefore included in the set of PEEI.
The use of the results of quarterly accounts in volume terms in econometric models of cyclical behaviour and models for short-term forecasting has a long tradition (e.g. Brookings model for the USA, 1965).

4. Quarterly accounts
As set out in Chapter 12 of the ESA 2010 “Quarterly national accounts are national accounts whose reference period is a quarter. They are a system of integrated quarterly indicators”.
Quarterly national accounts are based on the same principles, definitions, and structure as annual national accounts as far as possible.
In practice, the constraints on data availability, time, and resources mean that quarterly national accounts are less complete than annual national accounts.

5. Quarterly accounts
Quarterly national accounts focus on the short-term movements of the economy.
Emphasis is placed on growth rates and their characteristics over time such as acceleration, deceleration or change in sign.
Like many other infra-annual results used for business cycle analysis quarterly national accounts statistics present a seasonal pattern and are affected by calendar events.

6. Quarterly accounts Time of recording
Specific measurement problems with respect to the time of recording arise due to the shorter period of recording. This affects, in particular, measuring of:
(a) work-in-progress;
(b) activities in specific periods within a year; and
(c) low-frequency payments.
A single process has to be split into separate periods. This is more difficult for quarterly national accounts than for annual national accounts.

7. Quarterly accounts Balancing and benchmarking
The ESA 2010 (12.23 pp) sees quarterly accounts as an integral part of the national accounts framework that need to be consistent with annual accounts.
The internal consistency of quarterly accounts has to be achieved by reconciling estimates of supply and use for the accounts on a quarterly basis.
The consistency with annual accounts has to be ensured either by benchmarking quarterly accounts to annual accounts or by deriving annual accounts from quarterly accounts.

8. Quarterly accounts Balancing
Additional balancing procedures are requested for quarterly accounts:
(a) maintaining consistency between seasonally adjusted and unadjusted data;
(b) ensuring consistency between current price and volume measures;
(c) reconciling measures from the different approaches to the compilation of GDP.

9. Quarterly accounts Benchmarking
Discrepancies between quarterly and annual accounts are mainly due to differences in sources, and availability of information from shared sources.
Many different methods can be used for reconciling quarterly and corresponding annual aggregates.
Very often, the reconciliation between quarterly and annual aggregates results from a mix of benchmarking approaches.

10. Quarterly accounts Chain-linked measures of price and volume changes
For annual national accounts, the measure of price and volume changes is in principle through an annual chain index.
For the sake of coherence, the quarterly measures of price and volume changes are constrained to the annual chain-linked measures (ESA ).

11. Quarterly accounts Chain-linked measures of price and volume changes
Quarterly national accounts chain-linked volume series are quarterly volume changes using the annual averages of prices of the previous year. Three approaches for annually chain linking quarterly volume indexes may be used:
(a) annual overlap;
(b) one-quarter overlap; and
(c) over-the-year approach.

12. Quarterly accounts Seasonal and calendar adjustments
The presence of seasonal and calendar effects in quarterly national accounts time series obscures the trend in growth of quarterly national accounts aggregates.
Adjustments for seasonal effects and calendar effects assist in the drawing of inferences on trends from quarterly national accounts.

13. Quarterly accounts Flash estimates
Flash estimates are early estimates normally calculated on incomplete data. The main characteristics are:
timeliness: flash estimates are available earlier;
accuracy: Flash estimates are in general more prone to revision than the traditional ones;
coverage: the number of variables covered by flash estimates is more limited than traditional estimates;
estimation method: due to the lack of data, flash estimates rely more on econometric methods and assumptions.

14. Regional accounts
According to Chapter 13 of the ESA 2010 regional accounts are defined as regional specification of the corresponding accounts of the national economy.
Regional accounts provide a regional breakdown for major aggregates such as gross value added by industry and household income.
National accounts concepts shall be used for regional accounts unless indicated otherwise.

15. Regional accounts
Conceptual and measurement problems result in a set of accounts for regions which are more limited in scope and detail than national accounts.
The tables on regional production activities by industry show:
(a) the size and the dynamic of production and employment by region;
(b) the contribution of regions to national aggregates;
(c) the specialisation of each region;
(d) the role of the various regions for each industry.

16. Regional accounts
Regional household income accounts show primary and disposable household income by region, as well as the sources and distribution of income amongst regions.
The lack of sufficiently complete, timely and reliable regional information requires assumptions in compiling regional accounts. This implies that some differences between regions are not necessarily reflected in regional accounts (ESA ).

17. Regional accounts Regional territory
The regional territory consists of the part of the economic territory of a country that is directly assigned to a region, including any free zones, bonded warehouses and factories.
The extra-regio territory is made up of parts of the economic territory of a country which cannot be assigned to a single region.
The NUTS classification provides a single, uniform breakdown of the economic territory of the EU.

18. Regional accounts Statistical units Institutional units
(a) Uniregional units, where the centre of predominant economic interest is in one region.
(b) Multiregional units, where the centre of predominant economic interest is in more than one region.
Local kind-of-activity units.

19. Regional accounts Statistical units – local KAU
(a) A production activity with significant labour input at a fixed location. Significant labour input, in this context, at a minimum is the yearly equivalent of one person regularly working half a day.
(b) A production activity without significant labour input at a fixed location is generally not to be considered as a separate local KAU.
(c) For a production activity without a fixed location the concept of residence at the national level is applied.

20. Regional accounts Methods of regionalisation (a) bottom-up methods;
(b) top-down methods; or
(c) a combination of bottom-up and top-down methods.
The bottom-up method consists of collecting data directly for resident units.
The top-down method is distributing a national total across the regions. The national figure is distributed using an indicator that is distributed across regions in the same way as the variable to be estimated.

21. Regional accounts
Per-inhabitant figures can be calculated for the GDP of all regions. These figures are not calculated for extra-regio measures.
Regional GDP per inhabitant can be significantly influenced by commuter flows between regions. Net commuter inflows into regions increase production beyond that possible by the resident active population. GDP per inhabitant appears relatively high in regions with net commuter inflows and relatively low in regions with net commuter outflows (ESA ).

22. Regional accounts – Regional policy
In the EU regional policy aims at reducing structural disparities between EU regions.
A variety of financing operations are used to achieve this objective, principally through the Structural Funds and the Cohesion Fund.
In the period , the EU's regional policy is the EU's second largest budget item, with an allocation of 348 billion EUR.

23. Regional accounts – Operational role
Resources for the investment for growth and jobs goal shall be allocated among the following three categories of NUTS 2 regions (Article 90 of Regulation No 1303/2013): (a) less developed regions, whose GDP per capita is less than 75 % of the average GDP of the EU-27; (b) transition regions, whose GDP per capita is between 75 % and 90 % of the average GDP of the EU-27; (c) more developed regions, whose GDP per capita is above 90 % of the average GDP of the EU-27.

24. Regional accounts – Operational role
Resources for the Investment for growth and jobs goal
(Article 90 of Regulation No 1303/2013):
The classification of regions under one of the three categories of regions shall be determined on the basis of how the GDP per capita of each region, measured in purchasing power parities (PPS) and calculated on the basis of Union figures for the period , relates to the average GDP of the EU-27 for the same reference period.
The Cohesion Fund shall support those Member States whose GNI per capita, measured in PPS and calculated on the basis of Union figures for the period , is less than 90 % of the average GNI per capita of the EU-27 for the same reference period.

25. Regional accounts – Operational role
Resources for the Investment for growth and jobs goal
(Article 90 of Regulation No 1303/2013):
The Member States eligible for funding from the Cohesion Fund in 2013, but whose nominal GNI per capita exceeds 90 % of the average GNI per capita of the EU-27 as calculated under the first subparagraph shall receive support from the Cohesion on a transitional and specific basis.
In 2016, the Commission shall review the eligibility of Member States for support from the Cohesion Fund on the basis of Union GNI figures for the period for the EU-27.

26. Regional accounts – Operational role
Determination of co-financing rates (Article 120 of Regulation
No 1303/2013):
The co-financing rate at the level of each priority axis and, where relevant, by category of region and Fund, of operational programmes under the Investment for growth and jobs goal shall be no higher than:
(a) 85 % for the Cohesion Fund;
(b) 85 % for the less developed regions of Member States whose average GDP per capita for the period was below 85 % of the EU-27 average during the same period and for the outermost regions including the additional allocation for outermost regions in accordance with point (e) of Article 92(1) and Article 4(2) of the ETC Regulation;

27. Regional accounts – Operational role
Determination of co-financing rates (Article 120 of Regulation
No 1303/2013):
(c) 80 % for the less developed regions of Member States other than those referred to in point (b), and for all regions whose GDP per capita used as an eligibility criterion for the programming period was less than 75 % of the average of the EU-25 but whose GDP per capita is above 75 % of the GDP average of the EU-27, as well as for regions defined in Article 8(1) of Regulation (EU) 1083/2006 receiving transitional support for the programming period; developed regions other than those referred to in point (c).
(d) 60 % for the transition regions other than those referred to in point (c);
(e) 50 % for the more developed regions other than those referred to in point (c).

28. Regional accounts – Operational role
In the “Guidelines on regional State aid for ” (Doc 2013/C 209/01) the Commission sets out the conditions under which regional aid may be considered to be compatible with the internal market and establishes the criteria for identifying the areas that fulfil the conditions of Article 107(3)(a) and (c) of the Treaty.
These guidelines also make extensive use of results from regional accounts.

29. Regional accounts – Operational role
The Commission considers that the conditions of the Treaty are fulfilled in NUTS 2 regions that have a GDP per capita in PPS below or equal to 75 % of the EU-27 average (based on the average of the last three years for which Eurostat data are available ( ‘a’ areas)
The eligible ‘a’ areas are set out by Member State in a specific Annex I.

30. Regional accounts – Operational role
Non-predefined ‘c’ areas are defined on the basis of the following criteria:
(a) Criterion 1: contiguous areas of at least inhabitants located in NUTS 2 or NUTS 3 regions that have:
— a GDP per capita below or equal to the EU-27 average; or
— an unemployment rate above or equal to 115 % of the national average.
(b) Criterion 2: NUTS 3 regions of less than inhabitants that have:

31. Regional accounts – Operational role
Non-predefined ‘c’ areas are defined on the basis of the following criteria:
(c) Criterion 3: islands or contiguous areas characterised by similar geographical isolation (for example, peninsulas or mountain areas) that have:
— a GDP per capita below or equal to the EU-27 average, or
— an unemployment rate above or equal to 115 % of the national average, or
— less than inhabitants.

32. Regional accounts – Operational role
Non-predefined ‘c’ areas are defined on the basis of the following criteria:
(d) Criterion 4: NUTS 3 regions, or parts of NUTS 3 regions that form contiguous areas, that are adjacent to an ‘a’ area or that share a land border with a country outside the EEA or the European Free Trade Association (EFTA).
(e) Criterion 5: contiguous areas of at least inhabitants that are undergoing major structural change or are in serious relative decline, provided that such areas are not located in NUTS 3 regions or contiguous areas that fulfil the conditions to be designated as predefined areas or under Criteria 1 to 4.

33. Background and limits
Although quarterly accounts and regional accounts are fully integrated into the system of national accounts, they are not just the results of a further disaggregation either on the time axis or by regions.
Given the trade-off between the analytical goal and the information accessible to direct observation, they are of different cognitive character compared to national accounts on the national and annual level.
Quarterly and regional accounts have a significantly higher content of ‘model results’ than standard national accounts.

34. Background and limits
Because of the high ‘model content’ and the multitude of methodological alternatives it is difficult to guarantee a high degree of comparability.
A number of methodological approaches laid down in the ESA 2010 are only ‘second best solutions’ for other-than-operational purposes.

35. Background and limits
Share of value added (in %) of regional homogeneous
units in total value added by NUTS 2 regions - Trade
Source: Statistics Austria, Structural business statistics 2012

36. Background and limits
Due to the lack of information a number of sub-optimal solutions are accepted for operational purposes:
Regional GDP per inhabitant is neither an ideal measure for net production nor an ideal measure for aggregate income on the regional level.
Regional GDP (taking at least some of the specific properties of the regional economy into account) is expressed in PPS, calculated on the national level, assuming the same price level across regions.

37. Thank you for your attention
CONTRACTOR IS ACTING UNDER A FRAMEWORK CONTRACT CONCLUDED WITH THE EUROPEAN COMMISSION