1. Addressing cross-cutting issues for SPPI’s – 2008 Revision Matt Berger 23 rd Voorburg Group, Aguascalientes, Mexico 2008

2. Voorburg 2008 ONS - Cross Cutting Issues for SPPI's - 2008 Revision, 22-26 September 2008 2 Why are we here? Establishing internationally comparable methodologies for service sector GDP –“Constant dollar output of the service industries” Emphasis on SPPI’s, classifications and turnover surveys –And bringing them together for service sector GDP

3. Voorburg 2008 ONS - Cross Cutting Issues for SPPI's - 2008 Revision, 22-26 September 2008 3 Revision?

4. Voorburg 2008 ONS - Cross Cutting Issues for SPPI's - 2008 Revision, 22-26 September 2008 4 Revision! Need identified at 21 st Voorburg Group, Wiesbaden 2006 Presented at 22 nd Voorburg group, Seoul 2007 –Discussion –Clarifications and suggested changes Paper updated –Presentation will focus on key issues

5. Voorburg 2008 ONS - Cross Cutting Issues for SPPI's - 2008 Revision, 22-26 September 2008 5 Product versus Industry National accounts require product level SPPI’s Industry SPPI’s exist because –National statistics office historical infrastructure –Multiple uses of SPPI’s Deflators, upstream indicators of inflation, contracts, international comparison Use of industry SPPI’s not appropriate –Except under strict assumptions regarding secondary production & quality

6. Voorburg 2008 ONS - Cross Cutting Issues for SPPI's - 2008 Revision, 22-26 September 2008 6 Scope of SPPI’s National accounts require SPPI’s to measure all outputs of service sector –Not just business-to-business –Not just domestic sales Exports of services can occur even though service delivered within geographic boundaries –Non-resident purchaser Difficulties might arise in separately identifying export transactions –But different destination mean different products

7. Voorburg 2008 ONS - Cross Cutting Issues for SPPI's - 2008 Revision, 22-26 September 2008 7 Methods based on working time Pricing method results in biased measures of GDP –Except for supply of personnel type services Arise frequently in practice because: –Model pricing too burdensome –Pricing mechanisms use working time Steps to mitigate bias –Only partial - bias still exists! Suitable only when consistent relationship between constant quality price of the service and labour inputs –Need to determine when this relationship changes Subcontracting!

8. Voorburg 2008 ONS - Cross Cutting Issues for SPPI's - 2008 Revision, 22-26 September 2008 8 Changes to the production function Changes to production function might change the service –IT changes typical example SPPI measurement needs to identify –When change occurs –Whether products have changed

9. Voorburg 2008 ONS - Cross Cutting Issues for SPPI's - 2008 Revision, 22-26 September 2008 9 Bundling Feature of a pricing mechanism Resolved via component approach –difficult in practice Aggregate of components may cross “product classification” lines –“Logistic solution” includes freight plus storage Common problem across all price indices –Work with Ottawa Group?

10. Voorburg 2008 ONS - Cross Cutting Issues for SPPI's - 2008 Revision, 22-26 September 2008 10 Questions? Thank you