1. Impact of updating weights on tracking performance and volatility: Industry survey G. Bruno, L. Crosilla, P. Margani, A. Righi EU Workshop on Recent Developments in BCS, 13-14 November 2014, Brussels

2. Outline  Aim of the study  The ISTAT Industry survey: methodological aspects  The updating weights  The impact of updating weights : Analysis of volatility Analysis of performance of the series  Concluding remarks EU Workshop on Recent Developments in BCS, 13-14 November 2014, Brussels

3. Aim of the study EU Workshop on Recent Developments in BCS, 13-14 November 2014, Brussels  This study is aimed to provide evaluations on the impact of updating weights on ISTAT Industry time series in terms of volatility and tracking performance  As the weighting is used to improve the quality of the estimates, ISTAT recently decided to update the weights at stratum level - without changing the overall sampling scheme - for two reasons: In order to make the reference year of the weights as close as possible to the year of the survey To improve the quality of value added data using a new available source: the ISTAT Statistical Information System “SBS Frame”

4. The ISTAT Industry survey: methodological aspects EU Workshop on Recent Developments in BCS, 13-14 November 2014, Brussels  The sample is a fixed panel of about 4000 enterprises with at least 5 employees selected from the ISTAT Statistical register of active enterprises (ASIA)  The sample strata are identified by:  firm size (5-9; 10-49; 50-249; 250-999; 1000 and more)  geographical areas (N-W; N-E; C; So-Is)  economic sectors (two-digit sectors of NACE rev.2 from 10th to 33 and three-digit sectors of divisions 10,13,20,25,26,27,30,32)  The sampling method provides:  a random sampling scheme for firms with less than 1000 employees  a census sample for the ones with 1000 or more employees  for firms with less than 1000 employees the sample allocation is based on the Robust Optimal Allocation with Uniform Stratum Threshold (ROAUST)  for larger firms a census survey is designed

5. The ISTAT Industry survey: methodological aspects EU Workshop on Recent Developments in BCS, 13-14 November 2014, Brussels  A weighting system is used to process the results  The weighting scheme considers: at firm level, size weights (the number of employees) at stratum level, a weighting coefficient reflecting the relative significance of each stratum in the population (the value added is used) in order to reflect the structure of the economy

6.  In the data processing, the current weights based on National Accounts information referring to year 2005 are replaced by a set of weights updated to year 2012  The new source (based on micro level information) : For small and medium enterprises - new ISTAT SBS Frame an integrated statistical information system for estimating structural economic variables on business accounts, based on micro data from survey, different administrative sources integrated with Statistical register of active enterprises (ASIA) For large enterprises - Survey on enterprise accounting system integrated with the administrative sources  Benefits: higher reliability of information for main economic aggregates (v.a.) higher levels of consistency between business statistics and NA The updating weights EU Workshop on Recent Developments in BCS, 13-14 November 2014, Brussels

7.  Main results are synthetized in the following comparison of the percentage composition of the weights in terms of value added according to the NACE rev.2 two-digit sectors  Small changes for all the divisions; Div.28 (Manufacture of machinery and equipment n.e.c.), presents the bigger change being around +3%  This is probably due to the better comparative economic performance shown by Italian mechanical firms during the post-2008 period economic crisis The updating weights

8. EU Workshop on Recent Developments in BCS, 13-14 November 2014, Brussels NACE(REV.2) VALUE ADDED 2005 (%) VALUE ADDED 2012 (%) DIFFERENCES DIV. 108.19.21.1 DIV. 111.21.80.6 DIV. 120.10.0-0.1 DIV. 133.82.7-1.1 DIV.144.03.3-0.7 DIV. 152.63.10.5 DIV. 162.31.6-0.7 DIV.172.12.30.2 DIV.182.31.7-0.6 DIV. 191.91.10.0 DIV.204.64.80.2 DIV. 213.14.11.0 DIV. 224.35.20.9 DIV. 236.14.4-1.7 DIV.244.93.9 DIV. 2512.611.7-0.9 DIV. 263.63.70.1 DIV. 274.55.10.6 DIV.2812.415.63.2 DIV. 293.54.40.9 DIV. 302.53.00.5 DIV. 313.42.4 DIV. 322.41.9-0.5 DIV.333.52.9-0.6 TOT100.0 0.0

9.  The Confidence climate (COF) and component variables series (seasonally adjusted data) are considered in the analysis: Time span: Jan.2000-Aug. 2014 Disaggregation: total Industry and Main Industrial Groupings  Since January 2009, the series are rebuilt with the new weights  The Month of Cyclical Dominance (MCD) (This indicator shows the number of months to be taken into account in order to ensure that the cyclical component is dominant on the irregular one) is calculated to compare the volatility of the new and outdated series  The correlation between Confidence climate and the reference series (that is the production index - year-on year percentage change) is calculated to compare the performance of the updated and outdated series The impact of updating weights

10. MCD remains unchanged for all the considered series The impact of updating weights Analysis of volatility : MCD EU Workshop on Recent Developments in BCS, 13-14 November 2014, Brussels Series MCD - weights 2005 MCD - weights 2012 Total sector Current level order book22 Inventories44 Production expectations33 Confidence climate22 MIG (Main Industrial Groupings) Consumer goods - Confidence climate 44 Capital goods - Confidence climate22 Intermediate goods- Confidence climate 22

11. The impact of updating weights Analysis of performance: Visual inspection EU Workshop on Recent Developments in BCS, 13-14 November 2014, Brussels Reference series: production index (year-on-year percentage change) The new COF series is more in line with the evolution of the industrial production index

12. The impact of updating weights Analysis of performance: Correlation COF - reference series EU Workshop on Recent Developments in BCS, 13-14 November 2014, Brussels  Reference series: production index (year-on-year percentage change)  The cross-correlation analysis highlights a light improvement at lead -1 (months) for the confidence climate weighted with value added 2012 production index t+3 production index t+2 production index t+1 production index t Confidence climate (weights 2005) 0.730.780.80 Confidence climate (weights 2012) 0.760.810.83

13. Concluding remarks EU Workshop on Recent Developments in BCS, 13-14 November 2014, Brussels In the case of the Industry survey a substantial qualitative improvement and updating of the weights shows  a small positive effect on tracking performance of COF series witnessed by an improvement of the cross-correlation analysis at lead-1 (months)  No effect on the volatility of the series: MCD remain unchanged