Download 1-3a - United Nations Statistics Division

An overview of the process identifying and
assessing data sources for compiling quarterly
expenditure-based GDP estimates
Gathering and presentation of issues by:
Feraidoon Rasteh
 Equations and identities which exist in all of the economies
and this reality that different relationship exist between the
factors and variables of an economy generates a potentiality
that makes many estimations posible.
 Many sophisticated handbooks and manuals are introduced
and recommended by international organizations. National
accountants, while using these recommendations, should be
aware of the status of their country and the kinds of available
data in their country.
 Considering the statistical and economic status of an economy,
the factor of art becomes important in estimation works.
So we can say for the estimation works in an economy
including quarterly national accounts, what an accountant
needs, is: Knowledge, experience, and art.
 One of the basic identities of an economy is that the total
supply would be equal the total demand.
Or:
Total supply of goods and services = Total uses of goods and services.
So, the compilation of supply and use tables in an economy
will provide a set of useful information at the outset of many
estimations, including QNA.
 Referring the supply and use tables, the goods and services
account as introduced in Eurostat handbook and system of
National Accounts, is just a very basic frame work
representing supply and uses in an economy. This account is
recommended to be made before the compilation of QNA.
A pedagogical FRAME WORK OF THE GOODS AND SERVICES
ACCOUNT, IS shown here:
Uses
Resources
Intermediate consumption
1883
Output
Final consumption expenditure
1399
Imports of goods and services
Gross capital formation
Gross fixed capital formation
414
Taxes on products
376
Subsidies on products(-)
Changes in inventories
28
Acquisitions less disposals of valuables
10
Exports of goods and services
Total uses
3604
499
141
-8
540
4236
Total resources
4236
According to the goods and services accounts:
 Total supply = Total uses
 Output + Import = Intermediate consumption + Final consumption + Gross
capital formation + Exports
 Output – Intermediate consumption = Final consumption + Gross capital
formation + Exports – Imports
 Production based GDP = expenditure based GDP
 Compilation of QNA requires a lot of statistical information,
referred to as "basic statistics" or "basic data".
These statistics vary considerably in different countries.
This is due to, availability of suitable administrative data, the
resources available to collect statistics, institutional
differences, geographical differences and the composition and
size of the economy.
 At the goods and services account, presented above, the final
consumption expenditure constitutes the households,
Nonprofit institutions serving households and government
final expenditures. In respect of Gross fixed capital formation,
some changes and improvements are introduced in the
Eurostat handbook 2013 and SNA 2008.
 Considering the Eurostat handbook 2013, SNA2008, and IMF
manual 2001, there are no differences in concepts between the
Annual National Accounts and Quarterly National Accounts.
There are lots of changes and improvements in SNA1993
compared to SNA1968, but SNA2008 has only moderate
improvements in some parts, compared to SNA1993.
 One of the most important improvements in Eurostat
handbook 2013 and SNA 2008 is in the field of assets. In this
part, some of the concepts of gross capital formation and
specially fixed assets have changed. It seems that the countries
should consider also the new concepts where estimating their
QNA.
 One of the main improvements in respect of the fixed assets is
the introduction of the concept of “intellectual property
products” and substituting this concept for the “intangible
fixed assets”. There are other new changes in some concepts
related to gross capital formation which should be considered
where compiling quarterly expenditure-based GDP estimates.
 Intellectual property products are considered in both eurostat
handbook and SNA 2008 as a third kind of products mainly
instead of the intangible fixed assets.
They are products over which owner ship right can be
established. The value of these products should also be
estimated in QNA. They should be presented under the
headline of gross fixed capital formation, on the left side of
goods and services accounts. More information about the
intellectual property products in the following slide.
Intellectual property products
 Examples of intellectual property products are the results of research
and development, mineral exploration and evaluation,
software
and
databases,
computer
and entertainment, literary or artistic
originals. They are characterized by the fact that most of their value
is attributable to intellectual endeavor.
They can be described in general terms in the following way.
Intellectual property products are the result of research,
development, investigation or innovation leading to knowledge
that the developers can market or use to their own benefit in
production because use of the knowledge is restricted by means of
legal or other protection.
 Other components of gross fixed capital formation that have
been revised in the upgraded handbooks, are land
improvements, ICT equipment, and weapons systems.
For the estimation of fixed assets where compiling QNA, these
components should also be considered.
The following there slides make the above fixed assets more
clarified.
Land improvements
 Land improvements are the result of actions that lead to major
improvements in the quantity, quality or productivity of land, or
prevent its deterioration. Activities such as land clearance, land
contouring, creation of wells and watering holes that are integral to
the land in question are to be treated as resulting in land
improvements. Activities such as the creation of seawalls, dykes,
dams and major irrigation systems which are in the vicinity of the
land but not integral to it, which often affect land belonging to
several owners and which are often carried out by government,
result in assets that are to be classified as structures.
ICT equipment
 Information, computer and telecommunications (ICT)
equipment consists of devices using electronic controls and
also the electronic components forming part of these devices.
In practice, this narrows the coverage of ICT equipment
mostly to computer hardware and telecommunications
equipment.
Weapons systems
 Weapons systems include vehicles and other equipment such
as warships, submarines, military aircraft, tanks, missile
carriers and launchers, etc. Most single-use weapons they
deliver, such as ammunition, missiles, rockets, bombs, etc., are
treated as military inventories.
However, some single-use items, such as certain types of
ballistic missile with a highly destructive capability, may
provide an ongoing service of deterrence against aggressors
and therefore meet the general criteria for classification as
fixed assets.
 Considering the account of inventory changes, some
clarifications have been done in upgraded handbooks. These
are mainly about the work-in-progress and military
inventories.
Work-in-progress is treated as inventory change except in
situations that should be recorded as fixed capital formation.
These are discussed below.
Work-in-progress
 Work-in-progress consists of output produced by an enterprise
that is not yet sufficiently processed to be in a state in which it is
normally supplied to other institutional units. Work-in-progress
occurs in all industries, but is especially important in those in which
some time is needed to produce a unit of finished output, for
example, in agriculture, or in industries producing complex fixed
assets such as ships, dwellings, software or films. Work-in- progress
can therefore take a wide variety of different forms ranging
from growing crops to partially completed film productions or
computer programs.
 Work-in-progress must be recorded for any output that is not complete at
the end of the accounting period. This is a particular problem for output
taking a long time to complete, such as construction. The shorter the
accounting period, the more important work-in-progress is likely to be
relatively to finished output. In particular, it is likely to be more significant
for quarterly accounts than annual accounts, if only because the production
of many agricultural crops is completed within a year but not necessarily
within a quarter. The only exceptions to recording incomplete work as
work-in-progress are for partially completed projects for which the ultimate
owner is deemed to have taken ownership, either because the production is
for own use or as evidenced by the existence of a contract of sale or
purchase. In this case, it will be considered as fixed capital formation.
Work-in-progress on cultivated biological resources
 Work-in-progress on cultivated biological resources consists of
output that is not yet sufficiently mature to be in a state in which it
is normally supplied to other institutional units. In the present
context it is necessary to distinguish single-use plants, trees and
livestock that produce an output once only (when the plants or trees
are cut down or uprooted or the livestock slaughtered) from trees
(including vines and shrubs) and livestock that are used repeatedly
or continuously for more than one year to produce outputs such as
fruit, nuts, rubber, milk, wool, power, transportation and
entertainment.
Next
Work-in-progress should be recorded for single use resources. For
repeat yield resources, being cultivated on own account, or under an
agreed contract with another unit, the growth is counted as fixed
capital formation and so excluded from inventories. Any remaining
cultivation of resources with repeat yields should be included in workin-progress. This may be the case for nurseries and breeders of race
horses or other special animals, for example.
Military inventories
 Military inventories consist of single-use items, such as
ammunition, missiles, rockets, bombs, etc., delivered by
weapons or weapons systems. As noted above in the
discussion of weapons systems as fixed capital, most
single-use items are treated as inventories but some types of
missiles with highly destructive capability may be treated
as fixed capital because of their ability to provide an ongoing
deterrence service against aggressors.
 Considering the basic concepts is necessary for both ANA and
QNA estimations.
The above concepts are related to some aspects of final
demand. GDP by type of expenditure shows the final demand
for goods and services and so, is particularly useful for
economic analysis.
 Among the components of final demand, the portion of
households is more important. Household final consumption
expenditure is usually the largest component of GDP by
expenditure. For this account, the main sources of data, are
household surveys, and surveys of retailers, service providers,
and value added tax (VAT) systems.
Also, data on the production and foreign trade in consumer
products can be used to derive estimates by commodity flow
methods.
 Business surveys of retailers and providers of consumer
services are a common data source for household consumption
at current prices. Many types of retailers and almost all
services are fairly specialized.
 Supermarkets and department stores sell a wide range of
goods, so that collecting product breakdowns for these stores
is desirable.
If product mixes are stable, satisfactory quarterly data by
product can be estimated by using total sales of a retail
industry as an indicator for the benchmark values of sales by
product.
 A value added tax (VAT) or sales tax system may be able to
provide data on sales by type of enterprise. Such a tax system
may also divide sales into different product categories if
different tax rates are applied.
 It is necessary to identify which sales are indicators of
household consumption, among the different sales by retailers
and consumer services. The systems used to collect other
taxes, such as taxes on car repair, window cleaning, special sea
foods or tobacco, may also be a potential source of
information.
 Some countries conduct continuous household expenditure
surveys. If the results are processed on a timely basis by
quarter, they could be useful indicators for QNA. In this case
the problem of some small or sensitive items and some durable
products should be considered.
The expenditure data in such cases may not be clear in
household expenditures. Behavior of respondents is important.
 On the other hand, household surveys ensure good coverage of
purchases from informal, small-scale retailers and service
providers. These are difficult to cover in business surveys, but
the purchaser has no reason to understate this expenditure.
This is favored in developing and transition economies
because they cover purchases from informal activities. In
countries with small informal sectors, business surveys may be
preferred. In this case there will be a decrease in collection
cost and delay.
 We can have some other useful indicators for some of the
components of household consumption for QNA.
This situation happens, where there are a small number of
large suppliers in an economy. Good information can
sometimes be collected from these suppliers, specifically for
QNA. Some examples are supply or sales to residences of
households of electricity and gas, sales of some kinds of
transportation services, sales of communication services,
gambling services, sales of water and etc.
 We can conduct continuous household expenditure surveys in
our country, but use the above indicators as complementary
information also.
In this case, we can lower the number of consumer products
investigated in the surveys and lower the investigation cost.
 Let’s pay attention to a situation: estimation by indicators from
retailers and service providers’ may contain expenditure by
residents when abroad, and expenditure by nonresidents while
in the country. In this case an adjustment is needed. Balance of
payments statistics, if available on a quarterly basis can help us
in this respect.
 Retailing investigation for the quarterly estimation of
household expenditure will be fine when the informal retailing
is not important in the country. When a significant part of
retailing is informal, surveys of retailers will not have
complete coverage, so household expenditure surveys, or the
commodity flow method can provide better quarterly
estimation of consumer products.
 For the consumption of dwelling services, volume indicators
can be used. Using a volume index on the basis of the number
of dwellings, or a proxy index based on the population change,
will be fine. Separate calculations by the area of location and
types of dwellings will improve the estimations.
 For some services such as insurance, education and health, the
relevant indicators may be obtained from government
regulation.
Motor vehicle regulation on the other hand may provide
indicators for the volume of vehicle purchases. Purchases of
cars and other light vehicles, from businesses and government
can be included.
 Other administrative data can be used as indirect indicators.
For example, number of divorces as a potential indicator for
legal services, total numbers of cars and road accidents for
vehicle repairs.
Considering the government final consumption expenditure
 Government accounting data are often available on a monthly
or quarterly basis. The most important need for QNA is to
have expenditures classified by economic type. That is:
consumption of goods and services, capital formation, other
expenditures, and data on offsetting sales. Even if not
published, the data may be available on request.
 Government accounts are traditionally prepared on a cash
basis. Their timing can be determined by political or
administrative concerns.
Accrual accounting has already been introduced by some
governments, and the IMF manual of Government Finance
statistics recommends accrual accounting.
 The scope of government consumption and general
government output differ in that government consumption is
equal to:
general government nonmarket output;
less own account capital formation included in output;
less any sales and fees recovered;
plus purchases that government provides free to households;
without processing.
Final consumption expenditures by Nonprofit Institutions
Serving Household
 Data for some larger institutions may be published or available
on request. Governments may be a good source of statistical
indicators if they monitor or support these institutions.
Balance of payments data may be an important indicator in
countries where foreign aid is a major source for these
institutions.
Gross fixed capital formation
 Annual and quarterly surveys of capital expenditures by
businesses are preferred sources of capital formation data, but
this can be very expensive on a quarterly basis.
Where a VAT system requires capital and intermediate
purchases to be split, a useful indicator of capital formation
can be obtained.
 Own account production of capital can be important in some
cases, including construction, computer software and
entertainment works. These can be hard to include other than
directly in surveys.
 In many countries, construction requires permits, or
construction licenses from local or regional governments. The
permit system can be used as a source for estimates of
construction in the national accounts.
 Speculative construction raises special issues regarding
valuation and timing. Speculative construction is regarded as
inventories of work in progress.
Surveys of builders or building permits, or construction
licenses can be designed. Extra information would also need to
be collected to separate speculative constructions.
 Construction in rural areas in developing countries is often
carried out by households on their own account, and made
with their own labor, outside the scope of official permits.
A household survey may provide information on the numbers
of households involved and the cost of materials. Labor cost
can be estimated according to wages for similar work in the
local market.
 Measures of the total supply of building materials to domestic
market may be helpful in some respects.
It will be equal to: Output + Imports – Exports.
A lag factor may be included. From factory and customs
frontier, until they are incorporated in construction.
 The advantages of the building materials method are the ready
availability, and data inclusion of informal and unapproved
work. Here the limitation is that it assumes a stable
relationship between building materials and output. Preferably
this method would only be used quarterly.
Equipment
 Four sources for measuring equipment.
1. Survey data on supply of capital goods.
2. Survey data reported by the purchasing businesses.
3. VAT data on purchases of capital goods, where
indentified from intermediate goods.
4. Registration data from government.
 Supply = value of domestically produced capital goods +
Imported capital goods – Exported capital goods.
Deductions should also be made for those used for
intermediate consumption (for repairs), final consumption,
added to inventories, and company cars sold secondhand to
households.
 Like construction, government finance data could be used to
obtain government capital formation of equipment, and then a
private total could be calculated as a residual.
Other fixed capital formation
 The estimation of computer software is easier by supply data.
Demand data are complicated because all businesses are
involved in using software.
Supply = Domestically software developing + Imports –
exports.
Need to be aware that the above data, have a limitation,
because softwares are mostly for household consumption.
Where own account developments are important, data should
be collected in surveys.
 Indicators for other intellectual property products are less
commonly available. If significant a survey could be
considered. In some cases, administrative requirements for
copyright registration or mining exploration permits can be
used as an indicator. Even in those cases, the timing of
registration or license can differ substantially from the time of
activity.
 For the gross fixed capital formation on cultivated fixed assets
or biological resources, the data are less commonly available.
It seems that one suitable indicator can be determined from the
agricultural surveys, and considering the past experiences to
get a ratio of this part of fixed capital formation to the rest of
it. Then using the ratio for the estimation of quarterly value of
referred fixed capital.
Acquisitions less disposals of valuables
 Valuables are mainly purchased by households.
Households may not express their purchases in this respect.
A suitable VAT system can provide a fine indicator for the
estimation of household purchases.
Only sale of valuables by households to units except
households may be included and asked in the household
expenditure surveys.
Changes in inventories
 Inventories consist of finished goods, work in progress, goods
for resale, raw materials, and auxiliary materials.
Work in progress is also part of output, but is harder to
quantify than finished goods, because the product is
incomplete.
A ratio of the costs performed in the quarter to the total cost of
the work can be estimated.
 Inventory change represents the difference between the total
demand, which is the sum of other components of GDP
expenditure, and total supply.
Without inventory change, the expenditure estimates would
show demand, not production.
 So, one way for the estimation of inventory change is the
residual approach. This will be possible if there is a complete
measure of GDP from the production approach and estimates
are available for all other expenditure categories.
 In practice, attention can be confined to those components of
inventories that are important. For instance, quarterly surveys
could be limited to miners, manufacturers, wholesalers, and
retailers.
 Value of inventory changes can generally be better calculated
with higher frequency data.
Higher frequency data reduce the possibility of uneven price
and volume movements within the period.
 If monthly data are available, the calculation should generally
be done on a monthly basis for use in quarterly estimates.
These factors all need to be assessed in light of each country’s
condition.
 Work in progress becomes more important in QNA.
If the work in progress is own account or the owner of the
work is determined by contract, it will be considered part of
the gross fixed capital formation, otherwise it will be inventory
change. It may be possible to introduce a ratio from past
experiences in this case and specify the categories.
Exports and Imports of goods and services
 Countries that compile QNA data, typically have a well
developed system of trade and balance of payments statistics
that produce quarterly data on trade of goods and services.
 Merchandise data are derived from customs records, surveys
of trading enterprises, or both. Services data are typically
derived from specific surveys, administrative systems, and
international transaction reporting systems.
Thank you
Good luck with you.
Peace and progress with you country.