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Overview of Weights When producing the output approach to measuring gross domestic product (GDP(O)), there are a number of different types of weights used to produce the estimates. This paper aims to summarise the weights used. In order to produce estimates, data are collected by classification. There are two main classifications used within the National Accounts; 1. Standard Industrial Classification 2007 (SIC 2007), which classifies businesses according to the type of economic activity. In National Accounts there are 112 industries. 2. Classification of Products by Activity 2008 (CPA 2008), which classifies the products by common characteristics. In National Accounts there are 112 products. The data collected for these classifications is available at varying different levels. In order to have the data on a consistent basis ONS has to aggregate lower level SIC industries and CPA products up to the 112 level. As data are not always available on a consistent the basis, such as turnover or employment and consumer prices or business to business prices, ONS has to weight together the low level components to produce the best estimate at 112 industry and product level. This is done using low level weights. Low Level Industry Aggregation Weights On the SIC 2007 classification, data are collected on a volume and current price basis. The low level aggregation weights are used to aggregate the low level industry components together up to the 112 industry level. Once aggregated to the 112 industry level, these current price data are deflated by the 112 products. The weights are produced from a number of sources with the main source being estimates of gross value added (GVA) from ONS’s Annual Business Survey and Supply and Use Tables. The low level aggregation weights are updated once every five years. Further information on low level aggregation weights can be found in ‘Low Level Industry Aggregation’ on the GDP(O) methods page. Low Level Deflator Weights Price indices are collected and classified using the CPA 2008 classification. The low level deflator weights are used to aggregate low level price indices for products by activity to the 112 product level. The weights are produced using a number of sources with the main source being estimates of turnover from ONS’s Annual Business Survey and Services Turnover Survey. The low level deflator weights are updated once every five years. Further information on low level deflator weights can be found in ‘Deflation’ on the GDP(O) methods page. Product Proportions Once ONS has the 112 industry data and the 112 product deflators, the industry data which is on a current price basis is deflated using the 112 product price deflators. Deflation is a complex process; it is not simply the deflation of an industry with the corresponding product deflator but requires deflating the industry with proportions of different product deflators to take account of the main and ancillary products that are produced by each industry. These product proportions are calculated annually and derived from output totals produced in the Author: Samantha Roe Last updated: October 2014 Supply and Use Tables. Further information on the deflation process and product proportions can be found in ‘Deflation’ on the GDP(O) methods page. Gross Value Added Weights Once the 112 industries have been deflated using the appropriate products, they are then aggregated using gross value added (GVA) weights. GVA weights are annual weights which are used to aggregate the 112 industries up to section, sector and whole economy level. They are calculated based on the contribution each of the 112 industries has on the overall economy using GVA totals produced in the Supply and Use Tables. The weights are updated annually and are used in the chain-linking process. The weights themselves sum to 1000 for each year and the weights for the industries are described as parts per 1000. Further information on GVA weights can be found in ‘Derivation of GVA Weights’. For the Index of Production (IoP) and the Index of Services (IoS) the weights are derived in a similar manner. The only difference is that for example; IoS only covers industries classified to services (SIC 45-97). So each industry is calculated as a proportion of the services industries and the sum of the IoS GVA weight is 1000. A summary of all the weights used can be found in table 1.1 on the next page. A full list of weights used in the calculation of GDP(O), IoS and IoP can be found in the GDP(O) Source Catalogue along with the detailed sources of raw data. Author: Samantha Roe Last updated: October 2014 Table 1.1 - Summary table of weights used in the production of the IoP, IoS and GDP(O) Type of Weight Output Where the weight Source of weight is used Sum of total Updated weights Low level IoP, IoS and Aggregating low Where weights Every five industry GDP(O) level industry are used the sum year components of each industry = aggregation Various sources weights 100% Low level deflator IoP, IoS and Aggregating low weights GDP(O) Various sources Where weights Every five level product are used the sum years components of each industry = 100% Product IoP, IoS and proportions GDP(O) Deflation Total output from The products Supply and Use within an industry Tables are used Annually proportionally GDP(O) GVA GDP(O) weights Aggregation and Total GVA for the chain-linking whole economy 1000 Annually 1000 Annually 1000 Annually from Supply and Use Tables IoS GVA weights IoS Aggregation and Total GVA for the chain-linking service sector from Supply and Use Tables IoP GVA weights IoP Aggregation and Total GVA for the chain-linking manufacturing and production industries from Supply and Use Tables Author: Samantha Roe Last updated: October 2014