1. ONS Economic Forum Email:economicforum@ons.gov.uk Twitter:@ONS #ONSeconomy Website: http://www.ons.gov.uk/ons/about-ons/get- involved/events/events/economic-forum/index.htmlhttp://www.ons.gov.uk/ons/about-ons/get- involved/events/events/economic-forum/index.html WIFI code for Glaziers Hall: event123 19 May 2015 1

2. ONS Economic Forum – May 2015 09.45Introduction & welcome 10.00What’s new 10.40What’s next 11.20Refreshment break 11.50Measuring living standards 12.30Close Agenda 2

3. Introduction and welcome Sir Andrew Dilnot, Chair, UK Statistics Authority ONS Economic Forum 19 May 2015 3

4. What’s new Peter Patterson, Deputy Chief Economic Adviser ONS Economic Forum 19 May 2015 4

5. Points from the latest ONS economic statistics Preliminary estimate of GDP for 2015Q1 Today’s inflation statistics (CPI/PPI April, HPI March) Other prices developments (CPIH, house price indices) Construction prices What’s new - outline 5

6. Labour market continues to grow at above average rate 6

7. Unemployment down by 2pp over past 18 months 7 %, percentage points

8. Regular pay growth picks up 8

9. Productivity and real compensation growth 9

10. EU and non-EU trade volumes 10

11. GDP preliminary estimate: 2015 Q1 GDP estimated to have increased by 0.3% in 2015 Q1 Services growth 0.5% slowing from 0.9% in 2014 Q4 Production fell 0.1% (manufacturing rose 0.1%) Construction fell 1.6% following a fall of 2.2% in Q4 Services slowdown mainly attributed to Business, Services and Finance (2015 Q1 0.1%, 2014 Q4 1.3%) Many of the large upwards contributors in Q4 are either falling or fairly flat in Q1 (Finance, Architectural Services, Employment Activities) 2014 Q4 growth highest since 2011 Q3 2015 Q1 growth lowest since 2010 Q4 11

12. Latest data The March release of Production data estimated 2015 Q1 growth at 0.1% (up from -0.1% at Prelim) The March release of Construction data estimated 2015 Q1 growth at -1.1% (up from -1.6% at Prelim) Services, the largest industrial grouping is published 28 May 12 Weight (%)Cont’n to prelim GDP growth (pp) Cont’n to GDP growth – latest data (pp) Agriculture0.60.00Pub 28 May Production14.6-0.01+0.01 Construction6.4-0.10-0.06 Services78.40.41Pub 28 May

13. Monthly growth contributions 13 * NB: March 2015 services figure is estimate used to compile the Q1 preliminary GDP estimate *

14. Construction output – new work 14

15. Data content The preliminary estimate of GDP is made using 44% (approx) of the total that is required for the final output based estimate But in addition to this there are early responses to monthly business surveys that help inform estimates for the third month Data content by industry grouping is quiet varied Government and other services has a particularly low data content but is usually fairly steady making forecasting easier 15

16. Output estimate of GDP: data content by sector 16 NB: The chart provides approximate estimates of data content by industrial grouping

17. Prices update Richard Campbell Head of Consumer Price Statistics Production & User Engagement Prices Division Office for National Statistics 17

18. Prices update – outline Summary of today’s numbers. CPIH improvements. Definitive house price index. Construction Prices. 18

19. CPIH Improvements National Statistics status was suspended for CPIH in August 2014 Improvements to OOH in CPIH were introduced as part of the 2015 annual update on 24 March 2015 Growth in private rents now more responsive to recession Also took opportunity of revision to VOA data to align OOH weight in CPIH with national accounts estimates historically and anticipate methodological changes to the measurement of imputed rents, planned for BB16. 19

20. CPIH- revising OOH index 20

21. CPIH - revising OOH index and weight 21

22. CPIH - next steps ONS has made information available to the UK Statistics Authority’s Monitoring and Assessment team to enable them to judge when it would be appropriate for the re-assessment of CPIH as a National Statistic to start Following this, expectation is that revisions in CPIH will revert to that which is usual for consumer price indices 22

23. Definitive house price index Following successful consultation and user engagement a business case for a single, definitive HPI is being developed. Work underway to address remaining methodological challenges. Publication of final methodology in summer. Further information on transition to new index in autumn. 23

24. Construction Prices - background Construction Price and Cost Indices were formerly the responsibility of BIS (produced under contract by BCIS) In July 2013 contract awarded to AECOM Publication suspended by BIS and subsequently de-designated in December 2014 Responsibility transferred to ONS on 1 April 2015 24

25. Construction Prices - Interim solution User demand for us to make construction price statistics available quickly – particularly for Construction Output. The interim solution is a project cost approach that makes use of existing ONS data. New Work – uses AWE, SPPI and PPIs R&M – uses CPI and PPIs Full details published in article on 8 th May http://www.ons.gov.uk/ons/guide-method/method-quality/specific/business-and-energy/output-in-the- construction-industry/update-on-construction-price-statistics.pdf 25

26. Future for Construction Prices Publish data using interim methods on June 12th Interim solution not a substitute for full development of Construction Price and Cost Indices Working with ONS stakeholders on solutions Full details of long-term development plans will be published as soon as possible. Users will be engaged in process Any questions... Kat Pegler – 01633 456 468 Construction@ons.gov.uk 26

27. What’s next Darren Morgan, Deputy Director, National Accounts Coordination ONS Economic Forum 19 May 2015 27

28. What’s next - outline Blue Book 2015 plans and timetable New GNI (Gross National Income) figures Forthcoming changes to claimant count Developing a strategy for economic statistics Productivity puzzle unresolved – further work planned Creation of micro-business research hub New ONS website 28

29. Blue and Pink Books 2015 Darren Morgan Deputy Director National Accounts Co-ordination Economic Forum: 19 May 2015 29

30. What am I going to cover? Timing Scope Information already available When will further information become available? 30

31. Timing 31

32. Timing 30 Sep 15: Quarterly National Accounts & Balance of Payments consistent with Blue and Pink Books 30 Oct 15: Blue and Pink Books published 32

33. Scope 33

34. Scope Three types of changes: 1.GNI: improvements to remove ESA 1995 reservations ‘Exhaustiveness’ Non-Profit Institutions Serving Households Cross Border Property Income Repairs and maintenance on dwellings by households Consumption of fixed capital on roads Vehicle registration tax 34

35. Scope (cont.) 2.Classification Changes Network Rail: private to public sector Transport for London subsidiaries (most): Public Corps to Local Govt. 3G/4G phone spectrum sales: asset transaction to a rent transaction payable tax credits classified to Govt. expenditure payments from national govt. to multilateral development banks: re- classified from equities to current transfers 35

36. Scope (cont.) 3. Other methodological changes deflation of software in Gross Fixed Capital Formation construction prices non-monetary gold last base and reference year moved to 2012 from 2011 36

37. Information already available http://www.ons.gov.uk/ons/guide-method/method-quality/specific/economy/national- accounts/changes-to-national-accounts/blue-book-and-pink-book-2015-changes/index.html 37

38. Information already available 1.Deflation of Software in GFCF (26 March 2015) two aspects:  own account production (in-house development)  bought in pre-packaged software current method:  SPPI for computer consultancy, programming & related activities new method:  US PPI adjusted by PPP for bought in pre-packaged software  no change for own account production 38

39. Information already available 1.Deflation of Software in GFCF (cont.) Indicative Impact:  1997 to 2013: GFCF chain volume measure – growth revised up 2.6 ppts 39

40. Information already available 2. Changes to GNI on an ESA 1995 basis (19 May 2015) Background GNI perhaps not as familiar as GDP GNI = GDP + net property income from abroad Property income: includes distributed income of corporations.....  interest, dividends, repatriated profits ...and rent on land 40

41. Information already available 2. Changes to GNI on an ESA 1995 basis Background used in calculation of EU Member States’ contribution to EU budget comparability key! Eurostat audits and makes recommendations to all countries to make improvements related to ESA 1995 standards 41

42. Information already available 2. Changes to GNI on an ESA 1995 basis Changes Exhaustiveness: improved estimates for:  concealed income/activity  under-coverage of unincorporated small businesses Non-Profit Institutions Serving Households: builds on 2014 improvements:  NPISH unchanged but impact on other sectors and GDP reduced  improvements to the weights given to the new data 42

43. Information already available 2. Changes to GNI on an ESA 1995 basis Changes Cross Border Property Income:  MFI FDI income measured on current operating performance basis (COP) rather than all-inclusive (AI) basis: removes holding gains and losses  reinvested earnings of mutual funds  second homes: UK abroad and foreign residents in the UK  no impact on GDP  first two already in UK published figures 43

44. Information already available 2. Changes to GNI on an ESA 1995 basis Changes Repairs & Maintenance on dwellings by households:  small double counting with minor repairs in household intermediate consumption and GFCF removed  DIY spending on major repairs Vehicle Registration Tax:  treated as tax of a product rather than a fee for a sale of a service 44

45. Changes to GNI on ESA 1995 basis: indicative impact -£11.9bn or 0.1% of total GNI over the 2002 to 2010 period 45

46. Changes to GNI on ESA 1995 basis: indicative impact -£11.9bn or 0.1% of total GNI over the 2002 to 2010 period 46

47. When will further information become available? 47

48. When will further information become available? ContentProvisional Date Impact on GDP Current Price annual estimates 1997-2010 To include changes due to new methods or data which are not ESA1995 based 12 June 2015 Impact on GDP Chained Volume Measure annual estimates 1997-201024 June 2015 Impact on GDP Current Price and Chained Volume Measure quarterly and annual estimates 1997-2013 5 August 2015 Summary of impact of changes on Sector and Financial Accounts 1997-20139 September 2015 Summary of impact of changes on Balance of Payments 1997-20139 September 2015 Quarterly National Accounts Q2 2015 (consistent with Blue Book 2015)30 September 2015 Balance of Payments Q2 2015 (consistent with Pink Book 2015)30 September 2015 Impact of changes in the national accounts and economic commentary for 2015 Quarter 2 (Apr to June) 30 September 2015 GDP(Output) improvement project report30 September 2015 Blue Book and Pink Book 201530 October 2015 48

49. Forthcoming changes to claimant count Currently based on Job Seeker’s Allowance (JSA) Universal Credit (UC) introduced in April 2013, to ‘pilot’ areas across UK Minimal impact at UK level Headline claimant count (CC) currently excludes UC UC roll-out has now increased across the UK As the impact of UC exclusion sufficiently increased at a UK level, an indicative CC was introduced in June 2014 - as the total of JSA and UC From June 2015, the indicative figure will become the official Claimant Count JSA figures will continue to be produced, but as a supplementary dataset 49

50. Productivity puzzle remains unresolved 50

51. Developing an economic statistics strategy Fulfilling the mission of the official statistics system: “High quality statistics, analysis and advice to help Britain make better decisions.” Initial phase of horizon scanning – to determine how we think the requirements from economic statistics will change over the next 5-10 years as a result of: o Future policy changes o Structural economic changes o Measurement challenges o New data sources o Other user needs Also - what can we stop doing? Programme of consultations, workshops and other events for users to give their views 51

52. Coverage of micro businesses In 2014, an estimated 43% of UK businesses were registered for VAT and/or PAYE and therefore appear on Inter Departmental Business Register (IDBR). The share of economic activity and employment represented by remaining businesses is small, and an adjustment for IDBR under-coverage is made in GDP estimates. This will be updated in Blue Book 2015. ONS working with Middlesex University, University of St Andrews and BIS to pool information from different sources and create an on-line data repository in order to understand the UK’s business population – especially the unregistered portion - in terms of size, employment, activities, growth, etc. 52

53. ONS website development: private to public Beta Successful live launch of experimental prototype (Alpha), Dec 2014 Currently in private Beta phase Developing a publishing tool with the aim to improve speed of publishing Setting up secure and efficient infrastructure with the aim of updating the site very regularly after launch On track to release a Beta for testing with users at scale over the Summer 53

54. Measuring living standards Philip Wales ONS Economic Forum 19 May 2015 54

55. ‘Measuring living standards’ Lots of interest in statistics on living standards over the last few months Contributions to debate on measurement: The Johnson Review of Consumer Price Statistics, January 2015 UK Statistics Authority monitoring review “The coherence and accessibility of official statistics on income and earnings”, February 2015 Correspondence between Ed Miliband MP and Sir Andrew Dilnot on ‘Statistics on living standards’, Jan/Mar 2015 Purpose of this session Recent developments to relevant existing ONS statistics Recent ONS analysis which contributes to the debate on earnings growth To set out plans for future developments 55

56. Improving measurement Contributors to the debate on measuring of living standards have highlighted several areas for potential improvement: More holistic (‘single measure’ – Ed Miliband) Timely Comprehensive – including impacts of wages, prices, taxes & benefits Meaningful – including distributional information Within a coherent framework Deflated appropriately Coverage – NPISH, self employment income 56

57. GDP & RHDI growth 57 RHDI per capita & GDP per capita, 2008=100

58. RHDI growth, incl. & excl. NPISH 58 RHDI per capita, Incl. & Excl. NPISH, 2008=100

59. RHDI growth, incl. & excl. NPISH 59 RHDI per capita, Incl. & Excl. NPISH, Quarter on same quarter a year ago, %

60. Household consumption per capita 60 HHFCE per capita, indexed to pre-downturn peak Source: ONS Economic Review, April 2015 edition

61. Household consumption per capita 61 HHFCE per capita, indexed to pre-downturn peak Source: ONS Economic Review, April 2015 edition

62. ASHE analysis 62 Distribution of weekly earnings: 2013

63. ASHE analysis 63 Distribution of weekly earnings: 2013

64. ASHE analysis 64 Distribution of weekly earnings: 2014

65. ASHE analysis 65 Note published which analyses how the earnings distribution has changed through time, examining median earnings of the ‘full time continuously employed’ in particular. (18 th May)

66. ASHE analysis 66 An alternative way of using ASHE is to examine the distribution of earnings growth rates each period. This approach answers the question ‘what is the average experience of earnings growth?’ Also relates closely to questions of labour market spare capacity and wage growth: while the long run determinant of wages is productivity, the ‘tightness’ of the labour market is also important – especially in the short run.

67. ASHE analysis 67 Distribution of Gross Weekly Nominal Earnings Growth, % % of continuously employed who received within 0.5pp of the stated earnings growth Fraction of employees who received 0% nominal earnings growth

68. ASHE analysis 68 Distribution of Gross Weekly Nominal Earnings Growth, % % of continuously employed who received within 0.5pp of the stated earnings growth

69. ASHE analysis 69 Distribution of Gross Weekly Nominal Earnings Growth, % % of continuously employed who received within 0.5pp of the stated earnings growth

70. ASHE analysis 70 Distribution of Gross Weekly Nominal Earnings Growth, % % of continuously employed who received within 0.5pp of the stated earnings growth

71. ASHE analysis 71 Distribution of Gross Weekly Nominal Earnings Growth, % % of continuously employed who received within 0.5pp of the stated earnings growth

72. ASHE analysis 72 Distribution of Gross Weekly Nominal Earnings Growth, % % of continuously employed who received within 0.5pp of the stated earnings growth

73. ASHE analysis 73 Distribution of Gross Weekly Nominal Earnings Growth, % % of continuously employed who received within 0.5pp of the stated earnings growth

74. ASHE analysis 74 Distribution of Gross Weekly Nominal Earnings Growth, % % of continuously employed who received within 0.5pp of the stated earnings growth

75. ASHE analysis 75 Distribution of Gross Weekly Nominal Earnings Growth, % % of continuously employed who received within 0.5pp of the stated earnings growth

76. ASHE analysis 76 Distribution of Gross Weekly Nominal Earnings Growth, % % of continuously employed who received within 0.5pp of the stated earnings growth

77. Distribution of earnings growth 77 Proportion of Cont. FT employees by real earnings growth rate Source: ONS Economic Review, March 2015 edition

78. Drivers of earnings growth 78 Contributions to average nominal earnings growth by average earnings quantile: 2014 Note: Quantiles of earnings growth for the continuously full-time employed population Source: ONS Economic Review, May 2015 edition

79. Movers and stayers 79 *The 5 th quantile contains those with 0% earnings growth, who make up more than 5% of the continuously employed population. Job-movers and stayers among the cont. emp. pop. by quantile of earnings growth, 2014 %

80. Future Plans - Timeliness 80 ONS investigating ‘now-casting’ techniques to provide early estimates of key indicators (e.g. median equivalised disposable income) Now-casting involves updating existing data to reflect: Changes in earnings, labour market participation, population structure, etc. Policy changes, including changes to tax thresholds and benefit rates, as well as more structural reforms Initial methodological article to be published beginning July Subject to user feedback on approach/methods, intend to release experimental 2014/15 figures late Summer.

81. Future Plans - Alternative measures of saving ratio Following BB14 changes, there is more unobserved income (ie imputed employers’ pension contributions) in the saving ratio. There is some user demand for an additional measure which captures household saving excluding these ‘unseen’ items. ONS has been exploring ways of producing this, starting with the OECD’s ‘Income, Consumption and Wealth’ (ICW) framework for statistics. Several variants proposed, which vary in their treatment of 1.Social contributions in kind 2.Pension entitlements 3.Payments relating to insurance policies 4.Employers social contributions. Some preliminary results – affecting the level, rather than the profile of savings – but which will be subject to further consultation 81

82. Indicative Initial findings Savings ratio: multiple bases: % 82

83. Event on UKSA Monitoring Review UKSA to hold an event on the Monitoring Review of Income and Earnings on 2 nd July. ONS will be presenting some recent developments at this event, and will be looking ahead to the broader income and earnings statistics agenda If you are interested in attending this event, please give your contact details to Malindi Myers at the close of this session 83

84. ONS Economic Forum The next Economic Forum will take place on Monday 13 July 2015 Email:economicforum@ons.gov.uk Twitter:@ONS #ONSeconomy Website: http://www.ons.gov.uk/ons/about-ons/get- involved/events/events/economic-forum/index.htmlhttp://www.ons.gov.uk/ons/about-ons/get- involved/events/events/economic-forum/index.html 19 May 2015 84