Download Overview of Weights

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