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Low Level Industry Aggregation
The output approach to measuring gross domestic product (GDP(O)) is a measure of gross value added (GVA).
GVA measures the contribution to the economy of each individual producer, industry or sector in the United
Kingdom. It is the sum of all output minus intermediate consumption. Data on intermediate consumption is not
available in the short term, so the percentage change in output is used as a proxy to estimate intermediate
consumption by industry.
GVA is used in the estimation of GDP. GDP is the key indicator of the state of the whole economy and can be
summarised as GVA plus taxes on products minus subsidies on products. There is further information on the
relationship between GVA and GDP available on the National Accounts methodology pages.
GVA is calculated through Supply and Use Table balancing, which balances output with income and
expenditure, for the 112 industries, which make up the whole economy. Each industry at this level has a weight
proportionate to total GVA in each year. The 112 industries can be broken down broadly into four industrial
groups - agriculture, production, construction and services. Within National Accounts, these industries are
classified using the 2007 Standard Industrial Classification (SIC 2007). Further information on SIC 2007 can be
found on the ONS website. A breakdown of the industries used in the output approach can be found in the
GDP(O) source catalogue.
It is not always possible to collect output at the industry level, as data available may not be fully representative of
the industry or the data sources only cover part of that industry. In order to ensure the most representative
coverage of industries ONS often has to collect data at a lower disaggregated level and/or from a number of
different sources or time series. ONS then aggregate the output up to industry level using aggregation weights
(previously known as fixed based weights) to create a weighted index for that industry.
There are generally three scenarios where ONS has to apply weights to an industry in order to get the best
coverage. These are:
1.
Where ONS collect data from one source but require different time series in order to get the most
representative coverage.
2.
Where ONS collect data from a number of sources and these are often different data types, such as
current price and volume data.
3.
Where an industry operates in both the market sector (private) and non-market sector (public); therefore
data are collected from at least two different sources.
An example for each of these scenarios is described below.
Example 1: Data collected from one source but requires a number of different datasets
The air transport industry uses data from one source; the Civil Aviation Authority. The output required to cover
the whole air transport industry is not available as one figure, so data are collected on four different parts of the
industry to ensure the most representative coverage possible. The volume data collected on these four parts are
then aggregated together using a weighted mean based on the 2010 aggregation weights to give a weighted
index for air transport.
Author: Samantha Roe
This is demonstrated in table 1.1.
Last updated: October 2014
Table 1.1 – Air Transport
SIC 2007 FOR
WEIGHTS
Description
51
Air transport
51.01
Scheduled international
seat-km
Scheduled domestic seatkm
Scheduled freight and mail
tonne-km
Non-scheduled freight and
mail tonne-km
51.02
51.03
51.04
Industry
weight
2011
2010
Low-level
Aggregation
weight
Percentage of
each industry
aggregated
4.0299
92.2436
0.1458
3.3375
0.1526
3.4933
0.0404
0.9256
4.3688
Example 2: Data collected from more than one source.
In cases where we have to combine different types of data for one industry, such as turnover and number of jobs.
The number of jobs is used as a proxy for the industry because information on volume or turnover is not
available. An example of this can be seen in table 1.2 - the activities of head offices and management
consultancy activities. Activities of head offices are measured using the number of jobs in this activity and the
management of consultancy activities is measured using turnover from the Monthly Business Survey (MBS). In
order to aggregate these two components together, ONS has to put them on a consistent current price basis.
The turnover data supplied by the MBS is a current price series. In order to create a consistent series for jobs,
the jobs volume series is reflated by price to give a current price series. This can be seen in the formula below:
Turnover = Current price = Volume * Price
All volume components are required to be reflated in the same way to ensure consistency across all industries.
Further information on reflation can be found in the paper ‘Deflation’ on the GDP(O) methods page.
Table 1.2 - Activities of head offices and management consultancy activities
SIC 2007 FOR
WEIGHTS
70
70.1
70.2
Author: Samantha Roe
Description
Activities of head offices;
management consultancy
activities
Activities of head offices
Management consultancy
activities
Industry
weight
2011
Low-level
Aggregation
weight
2010
Percentage of
each industry
aggregated
11.3159
1.0750
10.2409
9.5
90.5
Last updated: October 2014
Example 3: Industry has both market and non-market output.
In cases where an industry has both a market (mainly corporations) and non-market output (mainly government
and non-profit organisations), data are not available from the same source. Therefore, ONS has to collect data on
market and non-market output separately and aggregates them up to industry level. An example of this can be
seen in table 1.3.
Table 1.3 – Waste Collection
SIC 2007 FOR
WEIGHTS
Description
38
Waste collection, treatment
and disposal activities;
materials recovery
Waste collection, treatment
and disposal activities;
materials recovery | Market
Waste collection, treatment
and disposal activities;
materials recovery | Nonmarket
38M
38NM
Industry
weight
2011
2010
Low-level
Aggregation
weight
Percentage of
each industry
aggregated
3.2900
68.0280
1.5463
31.9720
4.8363
Applying Industry Aggregation Weights
The aggregation weights, below industry level are calculated every five years and are normally applied across a
five-year period; the year they relate to and the two years before and after. The latest aggregation weights (at
present 2010) will then be applied to all years going forward until the next update when they will be replaced with
2015 weights.
Table 1.4: Application of industry aggregation weights
Aggregation weight year
Year where weight is applied
1995*
1995 , 1996 , 1997
2000
1998, 1999, 2000, 2001, 2002
2005
2003, 2004, 2005, 2006, 2007
2010
2008, 2009, 2010, 2011, 2012, 2013, 2014
1
1
*The earliest date which the GDP(O), IoS and IoP systems can be revised. Data prior to this point is revised
1
outside of the live systems. 1995 and 1996 are used for the purpose of chain-linking only and are not published
as part of the live dataset.
Author: Samantha Roe
Last updated: October 2014
The aggregation weights are calculated in most cases using the data available from the Annual Business Survey
(ABS); an annual survey of businesses covering production, construction, distribution and most service
industries. Where the ABS does not provide the required level of detail, other sources have been used. These
includes annual Supply and Use tables, Balance of Payments, the Inter-Departmental Business Register and
external data sourced from other government departments such as Department for Transport, Department for
Environment, Food & Rural Affairs and Department for Energy & Climate Change.
As part of Blue Book 2013, the aggregation weights for Agriculture (SIC 01), Fishing (SIC 02) and Iron & Steel
(SIC 24.1-3) were updated to the new base year of 2010. The remaining industries in the Index of Production,
Index of Services and subsequently the output approach to measuring GDP have all been updated to the new
base year of 2010 as part of Blue Book 2014. Further details on these updates can be found in the ‘GDP output
improvement report June 2013’ and ‘GDP output improvement report September 2014’.
Author: Samantha Roe
Last updated: October 2014