1. GDP flash estimates at T+30
Experience in France
15/01/2015

2. Overview of QNA in France 5 years of tests : an assessment
Layout
Overview of QNA in France
5 years of tests : an assessment
Room for improvement
Work schedule
GDP flash at T+30 days – Task force meeting Den Haag
15/01/2015

3. Overview of QNA in France
GDP flash at T+30 days – Task force meeting Den Haag
15/01/2015

4. Production process
QNA present the fully integrated 3 approaches of GDP
Expenditure approach (supply and use balances)
Output approach (“industry” approach: Supply and use tables and input-output tables)
Income approach: generation of income accounts by branches and sectors
GDP flash at T+30 days – Task force meeting Den Haag
15/01/2015

5. Production process Output approach
Production, intermediate consumption and value added published
For French QNA, disaggregated by a 48 industries classification (publication :17 industries)
GDP flash at T+30 days – Task force meeting Den Haag
15/01/2015

6. Expenditure approach (48 products disaggregation)
Production process
Expenditure approach (48 products disaggregation)
Private and public consumption
Gross fixed capital formation (disaggregated by institutional sector)
Imports and exports (goods and services)
Change in inventories
GDP flash at T+30 days – Task force meeting Den Haag
15/01/2015

7. Production process Income approach
Quarterly sector accounts distinguishing households, financial and non- financial firms, general government, NPISH
Compensation of employees
Operating surplus and mixed income
Taxes and transfers
Gross disposable income and savings
GDP flash at T+30 days – Task force meeting Den Haag
15/01/2015

8. What’s required by Eurostat :
Publication calendar
What’s required by Eurostat :
GDP and demand components at T+60
Sector accounts at T+85
« GDP Flash » (without demand components) at T+45
What’s published by French QNA :
« first results» at T+45
GDP and demand components
« detailled results » at T+85
Revised GDP and demand components
Sector accounts
GDP flash at T+30 days – Task force meeting Den Haag
15/01/2015

9. Production process Econometric method
A large number of indicator series are collected
Volume index of industrial output,
- Sales of goods and services at current prices
Price indexes…
Input-output disaggregated at 48 products/industries
Benchmark : 1 indicator serie for each operation & for each product
An econometric relation is estimated between annual account series and annualized indicator series
The relation is applied to the monthly indicator
GDP flash at T+30 days – Task force meeting Den Haag
15/01/2015

10. Compilation of Supply and Use Table (SUT)
GDP flash at T+30 days – Task force meeting Den Haag
15/01/2015

11. Estimation technique of the GDP
A mix of the three approaches, the « construction » approach:
Supply and use balance (SU) for « goods » :
Built in the « production » approach and balanced on inventories
Consumption of goods has no direct impact on GDP, only through trade margins and VAT.
SU for « services » :
Built in the « demand » approach, and balanced on production ;
Only demand indicators (final consumption, GFCF and foreign trade has an impact on GDP.
SU for « administration » :
- Built in the « income » approach (production estimated bu the costs : salaries, intermediate consumption and fixed capital consumption).
Same estimation method at T+45 and T+90
GDP flash at T+30 days – Task force meeting Den Haag
15/01/2015

12. At T+45, missing data need to be extrapolated
At T+45, most indicators are available for the whole quarter :
IPI, price indexes, planning permission, customs, balance of payments …
When indicators are not available, they are extrapolated  :
3rd month of VAT indicators ;
2 last months of health services (from social security) ;
Full quarter for telecommunications services (from regulation authority) …
Unless these indicators are released sooner, a GDP estimate at T+30 requires a lot more of extrapolations.
in some rarer cases (consumption of goods and consumption prices), 3 months of indicators are available at T+30.
GDP flash at T+30 days – Task force meeting Den Haag
15/01/2015

13. Main extrapolated indicators
GDP flash at T+30 days – Task force meeting Den Haag
15/01/2015

14. Missing data need to be extrapolated
The extrapolation technique is the same than for T+45 estimates : let the ARIMAs speak and validate the result
Modifications are « hand-made » when the Arima is at odds with what we know of the economic situation ;
As this mean a lot of estimations need to be made, an automatic model selection program, based on a bayesian information criterium (BIC), has been developped.
This approach is acceptable as long as the effect of an extrapolation error is limited  :
For indicators with low volatility ;
For the last month of a quarter (which contributes to 1/9th of the quaterly growth) ;
Without too many indicators directly contributing to GDP in the construction approach.
If those conditions are met for T+45 estimates, it is less clear in the case of T+30 estimates :
More extrapolations are needed, for more volatiles indicators (last month of industrial production and customs, second month of VAT, etc.)
GDP flash at T+30 days – Task force meeting Den Haag
15/01/2015

15. 5 years of tests : an assessment15
GDP flash at T+30 days – Task force meeting Den Haag
15/01/2015

16. Assessment of the tests
More extrapolations mean more revisions
On the indicator itself
On seasonal adjustment (-> on past and present)
Tests enable to quantify those revisions
10 tests realised since 2008 Q4
Only during Q3 et Q4 (due to organisation constraints)
Two « blind tests » at Q and 2014
GDP flash at T+30 days – Task force meeting Den Haag
15/01/2015

17. Assessment of the tests – GDP revision
The first test and the two blind tests are to be analysed separatly
GDP flash at T+30 days – Task force meeting Den Haag
15/01/2015

18. Contributions to GDP revision – construction approach
Main revisions are in services
2 months of extrapolation for the VAT indicators in consumption and GFCF
GDP flash at T+30 days – Task force meeting Den Haag
15/01/2015

19. Revisions of demand components
Biggest revisions are in foreign trade
Extrapolation of the 3rd month of customs (volatile)
Revision is compensated by change in inventories
GDP flash at T+30 days – Task force meeting Den Haag
15/01/2015

20. Special cases – first test (2008 Q4)
Revision was above average…
…In a very special economic context (one of the biggest fall in GDP since 1949)
In the USA, GDP has been revised down by 0.6 points (quaterly) between T+30 and T+45
In the « construction » approach, the revision mainly comes from goods SU balance
GDP flash at T+30 days – Task force meeting Den Haag
15/01/2015

21. Special cases – first test (2008 Q4)
In the demand approach, GDP is greatly revised down
The downfall in imports in December could not be forecast : after this first test, it seemed impossible to publish demand components à T+30 days.
GDP flash at T+30 days – Task force meeting Den Haag
15/01/2015

22. Special cases – blind test (2013 and 2014 Q2)
Done during summer holidays (July) : everyone is not here at the same time
ARIMA extrapolations are integrated without checking the results. Only the agregates are checked.
No meetings for analysis and validation
Revisions at T+45 : in 2013, in 2014
Revisions are above average
They are due to GFCF and consumption in services
-> VAT indicators
GDP flash at T+30 days – Task force meeting Den Haag
15/01/2015

23. Assessment of the french tests
Mean absolute revision (MAR) between T+30 and T+45 :
Inc. special cases : 0.07 point
Exc. special cases : 0.04 point
For comparison, MAR is 0.06 point between T+45 and T+90 ( )
GDP flash at T+30 days – Task force meeting Den Haag
15/01/2015

24. Assessment of the french tests
GDP estimate seems good enough for publication
But
Demand components are more fragile
Especially balance between foreign trade and inventories
Good quality of demand components estimates is needed, to publish them with GDP at T+30 24
GDP flash at T+30 days – Task force meeting Den Haag
15/01/2015

25. Room for improvement
GDP flash at T+30 days – Task force meeting Den Haag
15/01/2015

26. Way of improvment
The validity of the ARIMA extrapolation need to be looked at every time
Models are crude, and do not take into account available information like business and household surveys
Can we use use these surveys to forecast the missing months of the indicators ?
Series of tests have been run, but the results are disappointing
GDP flash at T+30 days – Task force meeting Den Haag
15/01/2015

27. Constraints The alternative method must :
Be based on simple extrapolation models
Limit the extra work needed (schedule is tight)
Limit the extra number of series
Take into account information on economic context
Through business and household surveys
Outperform simple extrapolation using ARIMA Tests are needed
GDP flash at T+30 days – Task force meeting Den Haag
15/01/2015

28. Dynamic regression Performances of ARIMA are compared with …
… dynamic regression models forecasting monthly indicators (taken y-o-y) with balance of opinion from household and business surveys
GDP flash at T+30 days – Task force meeting Den Haag
15/01/2015

29. « Out of sample » tests Example of « catering » :
St. dev. of errors ( ) :
ARIMA
Régression (-1,7 %)
GDP flash at T+30 days – Task force meeting Den Haag
15/01/2015

30. Results of tests Explanation:
With regards to st. dev. of errors, performances of the regression models are worse or slighty better than simple ARIMA.
In more than half of the cases (57%) , performances were worse
Explanation:
At monthly frequency, surveys are too noisy
Surveys are more agregated than QNA
So we decided to keep ARIMA models
GDP flash at T+30 days – Task force meeting Den Haag
15/01/2015

31. Other ways of improvment
Get more timely information from the indicator we already use
Talks in progress with data producers (IPI, Customs, etc.) to receive information before their publication, based on the first firms that answered them
Data will only be used if response rates are high enough, branch by branch
For VAT indicators, possibility to publish sooner (T+55) :
- tests has been run
- would enable to use two months of data instead of one for T+30 estimates
GDP flash at T+30 days – Task force meeting Den Haag
15/01/2015

32. Work schedule GDP flash at T+30 days – Task force meeting Den Haag
15/01/2015

33. Content of publication
As of now, GDP is published at T+45 with demand and production breakdowns
If publication at T+30, we would like to publish as much information
GDP need more information to be interpreted
Our readers are used to it
It seems possible to do it
Difficult to add a fourth publication (30/45/60/85)
GDP flash at T+30 days – Task force meeting Den Haag
15/01/2015

34. A solution : no publication at T+45 ?
A way to manage this is to publish at T+30/60/85
Need to have same quality of information at T+30
Work is needed on demand components
T+60 would become more important
As of now, additional data on sector accounts is only sent to Eurostat
No publication to a broader audience
Schedule of yearly account would need adjustment for publication of first quarter 34
GDP flash at T+30 days – Task force meeting Den Haag
15/01/2015

35. Conclusion GDP flash estimates at T+30 are robusts for the GDP
… but demand components are more fragile
The use of business and household surveys does not help to improve extrapolations of the 3rd months of indicators by ARIMA
To improve estimates, we need to work with data producers to have information sooner
Regarding work schedule, a fourth publication is impossible.
But T+45 estimate may be skipped if T+30 is good enough
Would mean a lot of adjustment of our time schedule (including yearly accounts)
GDP flash at T+30 days – Task force meeting Den Haag
15/01/2015

36. GDP flash estimates at T+30 Experience in France
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