1. Review of country practice on Index of Service Production 26 June 2003 Eun-Pyo HONG OECD

2. Contents Comparison of national practices for three OECD MSs and three broad issues: - Canada, Korea and UK; - in terms of index as a whole, variables used to measure service production activities and their deflators. Conclusions and questions

3. Index: compilation ISP should measure net output or the value added of various service sectors Canada: monthly value added from deflated SA gross output - output indicators are benchmarked to the output values of deflated I/O tables. Korea and UK: in general, use gross output directly - changes in gross output are frequently used as approximate indicators of change in net output: - deflated turnover weighted by those compiled from VA of service sectors.

4. Index: titles Service Industry Activity Index (SAI) Korea Index of Services (IoS)United Kingdom Index of Tertiary Industry Activity (ITIA) Japan No specific name but published for a service sector in monthly GDP Canada, Finland

5. Index: types Canada publishes indices for more than 50 groups. UK also publishes indices at division levels in five aggregated groups in addition to one for total: - Distribution, Hotel and restaurants, Transport and communications, Business services and finance, Government and other services. Korea publishes indices for total service and for: - non-financial services and indices for each Category; - as well as indices for knowledge based service, etc.

6. Index: timeliness The overall index is available: Canada and UK: about 2 months after the end of the reference month; Korea: about 40 days after the end of the reference month.

7. Index: coverage Service sector normally defined as activities covered in categories G to P in ISIC Rev.3 - G: Wholesale and retail trade, repair of motor vehicles, motorcycles and personal and households goods - H: Hotels and Restaurants - I: Transportation, storage and communication - J: Financial intermediation - K: Real estate, renting and business activities - L: Public administration and defence, compulsory social security - M: Education - N: Health and social work - O: Other community, social and personal activities - P: Private households with employed persons

8. Coverage comparison (cont.)

9. Index: coverage (main issues) Due to the inclusion of a wide range of activities in the services sector, it is hard to compare: - differences of coverage across sectors; - differences of coverage within a sector. Differences in coverage due to: - interests of each country; - statistical environment; - user needs; - etc.

10. Variables: sources Canada: more than 30 sources, but 4 main surveys: - Survey of Employment, Payrolls and Hours; Monthly Survey of Manufacturing; Retail Trade Survey; Wholesale Trade Survey. Korea: 2 main surveys and a few other sources: - Current Service Industry Survey; Current Wholesale and Retail Trade Survey; and Data from other organisations (such as financial, insurance and health institutions). UK: a number of surveys and administrative information, e.g.: - Monthly Inquiry into the Distribution and Service Sector; Retail Sales Inquiry; Expenditure and Food Survey; etc.

11. Variables: types 2 types: volume and/or (deflated) value Korea: use no volume data but value only: - Gross turnover and gross operating revenues for all activities. Canada and UK: use of both volume and deflated value data.

12. Variables: types (cont.) Examples of variables used ValueVolume Canada Sales, Shipments, Personal expenditure, Net revenues on managed assets, Operating expenses, Cash rent paid, … Employment, Revenue freight in tonne, Volume of grains, Number of hotel and motel rooms, Number of passengers transported, … Korea Gross turnover, Gross operating revenue, Loan outstanding, Credit card settlement, Insurance premium income,… None UK Turnover, Insurance premium income, Household expenditure, Total liabilities, Total outstanding interest, Non-trading capital consumption, … Ticket holders, Freight moved, Volume of letters and parcels delivered, Number of stock broking transactions, Number of employees, …

13. Variables: level of Information (x-digit level of ISIC Rev. 3) ISIC Rev. 3 Canada KoreaUK G -50 -51 -52 3/4/53 3 3/4/5 3/4 H 35 I 3/4/553/4 J 2/3/4/553/4 K 4/553/4 L NI4 M 454 N 3/4/5 53 O 3/4/5/6 5 3/4 P 3NI2

14. Variables: coverage KoreaUK G50Covers all activities 51Excludes wholesale on fee and contract basis Covers all activities ………… I60Excludes transport via pipelines Excludes self-drive car hire, which is covered by ‘renting goods’. 61Excludes inland water transport Excludes hire of pleasure boats, which is covered ‘recreation’. ………… K70Excludes subdividing of real estate Excludes renting of short-stay holiday accommodation, which is included in ‘Hotels and restaurants’ ………… Examples of activities included or excluded within categories

15. Variable: frequency Input data Overall Index Monthly (Canada, Korea, UK) Monthly (Canada, Korea, UK) Quarterly, Annual (Canada, UK) Benchmarking, Interpolation Untimely Monthly (Korea, UK) Estimates, Forecasts Estimates, Forecasts

16. Deflators: list of deflators TypesNamesUsed by ProducerProducer price index /Industrial price indexKorea, UK / Canada Corporate service price indexUK Average earnings indexUK ConsumerConsumer price index / Retail price indexCanada, Korea / UK Household expenditure imply deflatorUK External trade Import price indexCanada, UK Export price indexCanada Combination of different types of price indicesUK GDP deflatorUK Activity specific deflatorsUK

17. Deflators: comparison Korea uses the simplest deflation system with PPI and CPI; - no combined deflators are used. Canada and UK use a wide range of deflators, which cover consumer, producer, trade, overall economy as well as combined deflators. - UK deflating system is the most complex. No common practices across the 3 countries except for ‘Hotel and Restaurant’ (H) and ‘Recreational, cultural and sporting activities’ (92).

18. Conclusions: similarities

19. Conclusions and questions (for STESEG) Similarities Types of sources Coverage across sectors Timeliness & frequency Significant differences Compilation methodology Coverage within sectors Types of variable used Types of deflator used Title of the index  Question: whether STISTF should attempt to harmonise the differences? - If it should, then to what extent?

20. Outcomes from TF meeting on 25 June It will be an advantage if the title reveals the nature of indices, It will be an advantage if the title reveals the nature of indices, - in particular, ISP. - in particular, ISP. Preference is for timely monthly ISP with linkage to QNA. Preference is for timely monthly ISP with linkage to QNA. Differences in the national practices may have to be kept as there exists many limitations, e.g. resources, priorities, statistical environment, etc. In particular, Differences in the national practices may have to be kept as there exists many limitations, e.g. resources, priorities, statistical environment, etc. In particular, - National classifications are difficult to harmonise in short-term. - National classifications are difficult to harmonise in short-term. Input from three task force activities would be used in the preparation of a final document/manual outlining options in preferred order appropriate to each service activity. Input from three task force activities would be used in the preparation of a final document/manual outlining options in preferred order appropriate to each service activity. Eurostat manual on industrial production could be used as a starting point for services. Eurostat manual on industrial production could be used as a starting point for services.