1. Factoryless Goods Production – a Case Example from Current Prices to Volume Measures in Finland
Ville Lindroos, based on presentation by Mirjami Rajala & Lotta Sjöblom
Price and Volume Measures for Service Activities, 10 – 11 October 2017

2. 1 2 3 Contents Global production adjustments
FGP case company: Identification & Decision
Challenges
10 – 11 October 2017
Ville Lindroos

3. Global production adjustments1
10 – 11 October 2017
Ville Lindroos

4. Global production adjustments – Finland, 2014
% of export/import of goods totals
% of export/import of services totals
Kalvot 3-7 yhteen, muutokset animaatioilla.
10 – 11 October 2017
Ville Lindroos

5. Effects on inward processing
Global production adjustments – Finland, 2014
% of export/import of goods totals
% of export/import of services totals
Effects on inward processing
Kalvot 3-7 yhteen, muutokset animaatioilla.
10 – 11 October 2017
Ville Lindroos

6. Effects on outward processing
Global production adjustments – Finland, 2014
% of export/import of goods totals
% of export/import of services totals
Effects on outward processing
Kalvot 3-7 yhteen, muutokset animaatioilla.
10 – 11 October 2017
Ville Lindroos

7. Effects on merchanting
Global production adjustments – Finland, 2014
% of export/import of goods totals
% of export/import of services totals
Effects on merchanting
Kalvot 3-7 yhteen, muutokset animaatioilla.
10 – 11 October 2017
Ville Lindroos

8. Global production adjustments – Finland, 2014
% of export/import of goods totals
% of export/import of services totals
Effects on factoryless
production
Kalvot 3-7 yhteen, muutokset animaatioilla.
10 – 11 October 2017
Ville Lindroos

9. Global production adjustments – Observations
Influence on total trade is not very big
Finland is a small economy – big firms dominating, change in a global production activity could affect the surplus/deficit in trade balance
Case by case analysis, covering about 70 companies
Otsikko muutettu
10 – 11 October 2017
Ville Lindroos

10. FGP case company: Identification & Decision2
10 – 11 October 2017
Ville Lindroos

11. COMPANY, OUTPUT, PRODUCT, INDUSTRY AND COUNTERPART COUNTRY INFORMATION
FGP case company – Identification & Analysis in NA
Identification & Analysis in NA
Decision in NA
COMPANY, OUTPUT, PRODUCT, INDUSTRY AND COUNTERPART COUNTRY INFORMATION
Otsikko muutettu
10 – 11 October 2017
Ville Lindroos

12. COMPANY, OUTPUT, PRODUCT, INDUSTRY AND COUNTERPART COUNTRY INFORMATION
FGP case company – Identification & Analysis in NA
Identification & Analysis in NA
Decision in NA
PRIMARY SOURCES
business statistics data warehouse
YTY
FINANCIAL STATEMENTS INQUIRY FOR ENTERPRISES * turnover from trade MARGIN – not deliveries of products * no raw-material costs, high costs on R&D, marketing, subcontracting
SALES INQUIRY * high share of turnover from sales abroad to abroad
INQUIRY ON INTERNATIONAL TRADE IN SERVICES AND INTERNATIONAL FLOWS OF GOODS * records sales and purchases of FGP incl. counterpart countries
PRODCOM * no product information
BUSINESS REGISTER * NACE – manufacturing
INTERNATIONAL TRADE IN GOODS STATISTICS (CUSTOMS) * small share of goods export compared to turnover
COMPANY, OUTPUT, PRODUCT, INDUSTRY AND COUNTERPART COUNTRY INFORMATION
Otsikko muutettu
10 – 11 October 2017
Ville Lindroos

13. FGP case company – Identification & Analysis in NA
Case: Equipment Ltd.
10 – 11 October 2017
Ville Lindroos

14. FINANCIAL STATEMENTS INQUIRY FOR ENTERPRISES
FGP case company – Identification & Analysis in NA
Case: Equipment Ltd.
FINANCIAL STATEMENTS INQUIRY FOR ENTERPRISES
TURNOVER
Deliveries of products 0€
Trade €
COSTS
Purchased trade goods €
Raw materials
R&D
HIGH €
Marketing
Subcontracting
BUSINESS REGISTER
NACE
28 (Manufacturing)
PRODCOM
Product information
NULL
Raw material information
SALES INQUIRY
Abroad to abroad
HIGH €
10 – 11 October 2017
Ville Lindroos

15. COMPANY, OUTPUT, PRODUCT, INDUSTRY AND COUNTERPART COUNTRY INFORMATION
FGP case company – Identification & Analysis in NA
Identification & Analysis in NA
Decision in NA
PRIMARY SOURCES
business statistics data warehouse
YTY
FINANCIAL STATEMENTS INQUIRY FOR ENTERPRISES * turnover from trade MARGIN – not deliveries of products * no raw-material costs, high costs on R&D, marketing, subcontracting
SALES INQUIRY * high share of turnover from sales abroad to abroad
INQUIRY ON INTERNATIONAL TRADE IN SERVICES AND INTERNATIONAL FLOWS OF GOODS * records sales and purchases of FGP incl. counterpart countries
PRODCOM * no product information
BUSINESS REGISTER * NACE – manufacturing
INTERNATIONAL TRADE IN GOODS STATISTICS (CUSTOMS) * small share of goods export compared to turnover
COMPANY, OUTPUT, PRODUCT, INDUSTRY AND COUNTERPART COUNTRY INFORMATION
Otsikko muutettu
10 – 11 October 2017
Ville Lindroos

16. COMPANY, OUTPUT, PRODUCT, INDUSTRY AND COUNTERPART COUNTRY INFORMATION
FGP case company – Identification & Analysis in NA
Identification & Analysis in NA
Decision in NA
PRIMARY SOURCES
business statistics data warehouse
YTY
FINANCIAL STATEMENTS INQUIRY FOR ENTERPRISES * turnover from trade MARGIN – not deliveries of products * no raw-material costs, high costs on R&D, marketing, subcontracting
SALES INQUIRY * high share of turnover from sales abroad to abroad
INQUIRY ON INTERNATIONAL TRADE IN SERVICES AND INTERNATIONAL FLOWS OF GOODS * records sales and purchases of FGP incl. counterpart countries
PRODCOM * no product information
BUSINESS REGISTER * NACE – manufacturing
INTERNATIONAL TRADE IN GOODS STATISTICS (CUSTOMS) * small share of goods export compared to turnover
GUIDELINE
GUIDE TO MEASURING GLOBAL PRODUCTION (2015) * recommendations for FGPs
ESA2010 and BPM6
ARTICLES ABOUT FGP
COMPANY, OUTPUT, PRODUCT, INDUSTRY AND COUNTERPART COUNTRY INFORMATION
Otsikko muutettu
10 – 11 October 2017
Ville Lindroos

17. COMPANY, OUTPUT, PRODUCT, INDUSTRY AND COUNTERPART COUNTRY INFORMATION
FGP case company – Identification & Analysis in NA
Identification & Analysis in NA
Decision in NA
PRIMARY SOURCES
business statistics data warehouse
YTY
FINANCIAL STATEMENTS INQUIRY FOR ENTERPRISES * turnover from trade MARGIN – not deliveries of products * no raw-material costs, high costs on R&D, marketing, subcontracting
SALES INQUIRY * high share of turnover from sales abroad to abroad
INQUIRY ON INTERNATIONAL TRADE IN SERVICES AND INTERNATIONAL FLOWS OF GOODS * records sales and purchases of FGP incl. counterpart countries
PRODCOM * no product information
BUSINESS REGISTER * NACE – manufacturing
INTERNATIONAL TRADE IN GOODS STATISTICS (CUSTOMS) * small share of goods export compared to turnover
GUIDELINE
GUIDE TO MEASURING GLOBAL PRODUCTION (2015) * recommendations for FGPs
ESA2010 and BPM6
ARTICLES ABOUT FGP
COMPANY, OUTPUT, PRODUCT, INDUSTRY AND COUNTERPART COUNTRY INFORMATION
SUPPORTING SOURCES
FIRM’S ANNUAL REPORT * information about outsourcing production abroad
LCU COMPANY VISIT * company defined itself to be FGP
Otsikko muutettu
EMPLOYMENT STATISTICS * major share of company workers are experts (engineers, designers etc.)
10 – 11 October 2017
Ville Lindroos

18. PRICE SOURCES FOR NET BASIS
FGP case company – Identification & Analysis in NA
Identification & Analysis in NA
Decision in NA
PRICE SOURCES FOR NET BASIS
EXPORT PRODUCER PRICE INDICES
PRICE AND VOLUME INFORMATION
VOLUME INDEX FOR WHOLESALE TRADE
Bigger
10 – 11 October 2017
Ville Lindroos

19. PRICE SOURCES FOR NET BASIS GUIDELINE & LEGISLATION
FGP case company – Identification & Analysis in NA
Identification & Analysis in NA
Decision in NA
PRICE SOURCES FOR NET BASIS
GUIDELINE & LEGISLATION
HANDBOOK ON PRICES AND VOLUME MEASURES IN NA (2016)
THE MANUAL ON PRODUCE PRICE INDICES (IMF)
PRODUCER PRICE INDICES
PRICE AND VOLUME INFORMATION
VOLUME INDEX FOR WHOLESALE TRADE
STS REGULATION
THE METHODOLOGICAL GUIDE FOR DEVELOPING PRODUCER PRICE INDICES FOR SERVICES (EUROSTAT&OECD)
Text bigger
10 – 11 October 2017
Ville Lindroos

20. COMPANY, OUTPUT, PRODUCT, INDUSTRY AND COUNTERPART COUNTRY INFORMATION
FGP case company – Decision in NA
Identification & Analysis in NA
Decision in NA
COMPANY, OUTPUT, PRODUCT, INDUSTRY AND COUNTERPART COUNTRY INFORMATION
CO-OPERATION IN HOUSE
NA ENTERPRISE TEAM
NA SUT TEAM
DEFLATION GROUP
SOURCE STATISTICS and LCU EXPERTS
NA SENIOR ADVICER
NA GLOBAL PRODUCTION COORDINATOR
BOP TEAM
SUPPLY AND USE TABLES BY PRODUCTS IN CURRENT AND FIXED PRICES
PRICE AND VOLUME INFORMATION
Deflation group paikka + coordinator
10 – 11 October 2017
Ville Lindroos

21. Case: Equipment Ltd. FGP case company – Decision in NA
10 – 11 October 2017
Ville Lindroos

22. Case: Equipment Ltd. FGP case company – Decision in NA
On SUPPLY side EQUIPMENT LTD's production is divided into two products: "final product" CPA 28 (90 %) and wholesale trade services -product CPA 46 (10 %)
On USE side EQUIPMENT LTD's production is shown only as a "final product" CPA 28 with value items "basic price" and "wholesale trade margin"
DEFLATION: (Export/)PPI (CPA 28)
COMPANY INFORMATION
SUPPLY
USE
OUTPUT
EXPORT
Company ID
Company name
NACE
CPA
CPA heading
Basic price
118W Wholesale
trade margins
Purchasers' price
EQUIPMENT LTD. 28 46
Machinery and equipment
n.e.c.
Wholesale trade services,
except of motor vehicles
and motorcycles
DEFLATION: Wholesale trade price index (CPA 46)
10 – 11 October 2017
Ville Lindroos

23. Identification & Analysis in NA
FGP case company – Decision in NA
Identification & Analysis in NA
Decision in NA
Previously: One big player – the electronic and telecommunication cluster outsourced production abroad already mid 2000s, until then FGP was not a topic
ESA2010 & BPM6 not available
NA decided to split the margin into the service products in SUT according to the activities of these companies in Finland – R&D, head office and agency services
Deflation group paikka + coordinator
10 – 11 October 2017
Ville Lindroos

24. Identification & Analysis in NA
FGP case company – Decision in NA
Identification & Analysis in NA
Decision in NA
Previously: One big player – the electronic and telecommunication cluster outsourced production abroad already mid 2000s, until then FGP was not a topic
ESA2010 & BPM6 not available
NA decided to split the margin into the service products in SUT according to the activities of these companies in Finland – R&D, head office and agency services
Now: More companies are acting as FGPs  Wider variety of players and products produced
Methodological change from statistical year 2014 onwards to show output in goods
Similar treatment in NA and BOP (integrated information system in use since June 2017)
Otsikko muutettu
10 – 11 October 2017
Ville Lindroos

25. Identification & Analysis in NA
FGP case company – Decision in NA
Identification & Analysis in NA
Decision in NA
Supporting factors:
to identify FGPs
In company visit by LCU the company defined itself as FGP
to show output in GOODS instead of SERVICES
The end-user buys the final product and IPP “services” are only a component of the final product
Is also recommended in Global Production Guide
to show NET instead of GROSS
The principal does not supply material inputs, no information about the content of intermediate consumption, what is the price to use
to keep FGPs in MANUFACTURING instead of TRADE
Decision of Statistics Finland: manufacturing firms that have outsourced production abroad are classified according to the final products they are producing globally
Flagging of FGP firms from merchants because of the high IPP content in products
Otsikko muutettu
10 – 11 October 2017
Ville Lindroos

26. Challenges 3
10 – 11 October 2017
Ville Lindroos

27. Challenges – Prices and volumes of FGP
The current values are ”correct” based on financial statements, but have we chosen the right products and/or prices?
At the moment there is no explicit recommendation for volume measures on FGP
Statistics Finland studied the question and came to the conclusion, that FGP could be deflated with the same principles that are recommended for the merchanting margin
Price information which is available is limited. PPI for exports covers only export from Finland, not export from other countries. Volume index for wholesale trade covers domestic companies total revenues, not the margin
Otsikko muutettu
10 – 11 October 2017
Ville Lindroos

28. Challenges – International challenges
Do the international organizations have any plans to support NSIs global production volume calculations in practice?
FGPs NACE industry?
UN ISIC Rev 4.: Trade but further research needed
NAICS 2017 : FGPs recommendation not implemented, further research needed (Federal register notice: 79 FR 46557)
Global production adjustments – country practices differ?
Otsikko muutettu
10 – 11 October 2017
Ville Lindroos

29. Ville Lindroos Senior statistician National Accounts
Thank you
Ville Lindroos Senior statistician National Accounts