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What’s next Peter Patterson, Deputy Chief Economic Adviser Graeme Walker, Head of National Accounts ONS Economic Forum 10 July 2014 1 What’s next • Johnson review of price statistics (autumn) • Re-weighting of LFS estimates using 2011 Census data (October) – historic data in September • Blue Book 2014 2 Improvements to National Accounts in September 2014 Graeme Walker Head of National Accounts ONS Economic Forum: 10 July 2014 3 Outline • What improvements are being made? • Impact on GDP • Current price levels • Real GDP growths • Other impacts • Public Sector Finances • Sector and Financial Accounts • Balance of Payments • International experience 4 Improvements • New international frameworks (ESA 2010, BPM6, MGDD) • Improvements to methods • New data (not relevant for period up to 2009) 5 New International Frameworks • R&D • Weapons • Decommissioning costs • Pensions • BPM6 changes • 10 June articles 6 Improvements to methods • Review of Non-Profit Institution serving Households units (NPISH) • Financial Intermediaries Services Indirectly Measured (FISIM) • Illegal Activities • New Cars • Own-account construction • Exhaustiveness adjustments • Gross Fixed Capital Formation • Inventories • 29 May articles 7 Impact on GDP levels (97 to 09) • Average revision +3.6% (£43 bn) • ESA 2010 +2.0% (£24 bn) • Methods improvement +1.6% (£19 bn) • Biggest impacts (average) • R&D +£17 bn • NPISH review +£9 bn • Illegal activities +£9 bn • Weapons +£3 bn • Pensions +£3 bn 8 Revisions to GDP levels Annual current price level of GDP by Blue Book Vintage (£ billions) 1,600 BB00 BB01 1,400 BB02 BB03 1,200 BB04 BB05 1,000 BB06 BB07 800 BB08 BB09 600 BB10 BB11 400 BB12 BB13 BB14 200 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 9 Revisions to GDP levels Annual current price level of GDP by Blue Book Vintage (£ billions) 1,600 BB00 1,500 BB01 BB02 1,400 BB03 BB04 1,300 BB05 BB06 1,200 BB07 BB08 1,100 BB09 BB10 1,000 BB11 BB12 900 BB13 BB14 800 700 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 10 Real GDP annual growths • Average growth 97-09 still +2.2% • 97-07 still +3.2% • 08-09 stronger than in BB13 but very similar to BB12 • Some changes to path • 99, 01 and 09 are stronger • 00, 04 and 07 are weaker • Final analysis of downturn requires quarterly path (to be published early September) • Length of downturn looks to be the same • Depth of downturn looks to be a bit shallower but similar to BB12 11 Revisions to Real GDP growths Annual Chained Volume Measure growth of GDP by Blue Book Vintage - OFFICIAL SENSITIVE 6.0% BB00 4.0% BB01 BB02 BB03 BB04 2.0% BB05 BB06 BB07 0.0% BB08 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 BB09 BB10 -2.0% BB11 BB12 BB13 BB14 -4.0% -6.0% 12 Annual Real GDP growth rates in various Blue Books percent 6 4 2 0 previous revisions BB 2013 -2 BB 2014 -4 -6 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 13 Public Sector Finances • PSND increased by around £30bn in recent years • all due to the reclassification of network rail to central government • PSF only change at this stage due to timing of advice from Eurostat • PSNB generally increased by £2bn - £4bn in recent years • mainly due to network rail and change in treatment of Local Authority pension schemes • Pension scheme impact on GDP already described; network rail is PSF only • Change to treatment of receipts from 3G/4G mobile phone licence auctions alter the PSNB profile • increase of £22bn in 2000 offset over subsequent years • PSF only change due to timing of advice from Eurostat 14 Public Sector Finances • Change to treatment of the Royal Mail Pension Plan transfer also alters the profile of PSNB • increase of £36bn in 2012 offset over subsequent years • current/capital transfers with no impact on GDP • Weapons/R&D capitalisation switches • spending from current budget to net investment without changing PSNB (GDP impact already described) • Changes announced in December/February with detailed article published in June • PSF bulletin now includes detailed estimates of ESA10 impact on deficit and debt 15 Comparison of PSND measures 1,600 £billion 1,400 Current PSND ex (ESA1995) 1,200 1,000 New PSND ex (ESA2010 and PSF Review) 800 600 400 200 0 1. Figures based on data published in Public Sector Finances on 20 June 2014 16 Comparison of PSNB measures 180 £billion 160 Current PSNB ex (ESA1995) 140 120 Current PSNB ex (excluding RMPP & APF transfers) (ESA1995) 100 80 New PSNB ex banks (ESA2010 & PSF Review) 60 40 20 0 -20 -40 -60 1. Figures based on data published in Public Sector Finances on 20 June 2014 2. RMPP = Royal Mail Pension Plan; APF = Asset Purchase Facility 17 Sector and Financial Accounts • 9 July article • NPISH – uplifts both NPISH and household final consumption expenditure (as HHs consume NPISH goods and services) • Changes to the reference rates, removal of interbank FISIM and adjustments to FISIM imports will impact all sectors, especially HH • Illegal activities will increase HH expenditure, intermediate consumption and mixed income • Car list prices will reduce HH expenditure by less than £1 billion per year • Exhaustiveness adjustments impact HH expenditure both positively (fuel) and negatively (gambling and digital TV) 18 Sector and Financial Accounts (part 2) • Own account construction increases PNFC and HH fixed capital formation • R & D impact on gross fixed capital formation will be seen across the sectors • Weapons systems capitalisation impact will be seen in the government sector • Pensions – new service charge methods and including funded defined benefit schemes for local government and NPISH increases their expenditure and output • Detailed impact and changes which only impact on 2010 and later to follow on 12 August 19 Balance of Payments (BoP) • Biggest change - measurement basis of direct investment profits for monetary financial institutions changes from an all inclusive (AI) to a current operating performance basis (COP) • Other changes include: • Revised treatment of non monetary gold • Introduction of remote gambling • Revised treatment of goods sent abroad for processing • Overall impact of BoP changes: • Before financial crisis – improvement in current account balance • During the financial crisis – deterioration in current account balance 20 International experience • Worldwide implementation of SNA 2008 completed for US, Canada and Australia • Impacts described by ONS for UK GDP are of the same magnitude and direction as those seen across EU member states and worldwide • ONS has already provided more detailed information than most countries • Most impacts expressed in nominal terms 21 International Comparisons (Part 2) International Comparison of ESA 2010 and R & D impacts 1 R&D Nominal GDP UK (2009) Canada (2010) Australia (2008-09) USA (2009) Austria (2011) Denmark (2008) Finland (2011) France (2010) Germany (2011) Luxembourg (2011) Netherlands (2010) Portugal (2011) Slovenia (2011) Spain (2010) Sweden (2011) 0 1 1 Not all countries have declared R & D impacts at this stage 2 3 4 5 per cent 22 Publication Schedule • 9 July– Summary of impact on Sector and Financial Accounts (SFA) and Balance of Payments, International Comparisons, Layout of Blue Book, Pink Book and UKEA publications • 23 July - Impact on GDP components of ESA 2010 and non ESA 2010 changes for 1997 – 2009 • 12 August (prov) – Detailed impact on SFA and Balance of Payments 23 Publication Schedule (part 2) • Mid/End August - 2010 – 2012 real and nominal GDP annual changes • Early September – Reminder of all impacts plus quarterly path of real GDP 1997 2012 • 30 September – Publication of Quarterly National Accounts and Balance of Payments on ESA 2010/BPM6 basis • 31 October – Publication of Blue Book and Pink Book 2014 24