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Impact of changes in Blue Book and Pink Books 2013 Andrew Walton, Phillip Davies, Marilyn Thomas 27 June 2013 Summary • Introduction • Main changes to methods • Impact on GDP • Expenditure components • Sector and Financial Accounts • Balance of Payments Introduction • Published today • QNA • UKEA • Quarterly BoP • Slimline Business Investment • Several supporting articles • Tomorrow • Index of Services • Productivity Introduction • 31 July • Blue Book • Pink Book • Supply and Use Tables • Full Business Investment • BoP geography Changes in Blue Book 2013 • Reference year 2010 • Quality improvements to Supply and Use Tables • Private Non-Financial Corporation’s (PNFC’s) profits • Rental estimates, and • Imputed rental • Gross Operating Surplus (GoS) for own account software • Investment in artistic originals Changes in Blue Book 2013 • Alignment of the National Accounts with Public Sector Finances • Measurement of bonds liabilities, and • Measurement of UK Private Non-Financial Corporations’ (PNFCs) overseas deposits and loans • Gross Fixed Capital Formation, and • Changes in inventories systems • Improved estimation of some industries • Seasonal adjustment of construction output 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 Impact on GDP - nominal % 8 6 4 2 0 BB13 -2 Previously published -4 Impact on GDP - nominal • Levels raised by a little over 1% on average by methods changes • This amounts to £20.8 billion in 2012 • Switch between 2008 and 2009 – new quarterly profits • 2008 growth revised up 0.4 pp • 2009 growth revised down 0.4 pp 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 -4 2000 1999 1998 Impact on GDP – real % 6 4 2 0 -2 BB13 Previously published -6 Impact on GDP – real • Average growth since 1997 revised down by 0.1% a year • Bigger changes in individual years • 2001 and 2009 down • 2004 and 2005 up • GFCF is biggest impact • But profile of HMRC profits also important in 2008 and 2009 Impact on real GDP – downturn • Peak to trough is now 7.2% • Previously published as 6.4%, 7.1% and 6.3% • Duration of downturn is now 5-6 quarters • Initially 6 quarters, revised to 5 quarters in BB2011 • Q2 and Q3 2009 flat (actually down £16 mn) Impact on real GDP – downturn 102 QNA 2011 Q1M3 BB11 100 BB12 98 BB13 96 94 92 Q1 Q2 Q3 2008 Q4 Q1 Q2 Q3 2009 Q4 Impact on real GDP – recovery • 46% of loss in output during recession has been recovered • Previously estimated as 59% • Revision largely due to increased ‘peak to trough’ • But slight downward revision to path of recovery (3.5% above trough revised from 3.9%) • No longer two consecutives quarters of negative growth in 2011/12 (to 1 dp) • Q1 2012 revised from -0.1% to zero (a fall of £250mn to a fall of £26mn) Q1 2013 Q4 2012 Q3 2012 Q2 2012 98.0 Q1 2012 100.0 Q4 2011 Q3 2011 Q2 2011 Q1 2011 Q4 2010 Q3 2010 Q2 2010 Q1 2010 Q4 2009 Q3 2009 Q2 2009 Q1 2009 Q4 2008 Q3 2008 Q2 2008 Q1 2008 Impact on real GDP – recovery 110.0 108.0 106.0 104.0 102.0 Q1 2013 2nd est BB13 96.0 Household expenditure • Separate article published today • Number of improved methods and data sources • • • • • • Imputed rental (+£30 bn in 2011) Repairs and maintenance (-£13bn) Supply and use balancing (+£3bn) Financial services (-£3bn) Internet subscriptions (-£1bn) Smuggling (+ less than half a billion) • Total revision in 2011 is +£17bn Gross Fixed Capital Formation • Key improvements to deflation and seasonal adjustment • improved construction of the asset, sector and industry series: • asset, industry and sector series constructed directly • improved deflation and chain linking methodology: • at more detailed asset, sector and industry level • full set of Producer Price Indices (PPI) deflators used • Business Spending on Capital Items Survey is now used, for weights • improved seasonal adjustment: • seasonal adjustment on acquisitions and disposals separately Gross Fixed Capital Formation • Artistic originals (+£2bn in 2012) • Own account software mark-up (+£2bn) • Overall impact • Growth revised from +1.5% to +0.5% in 2012 • Not a consistent pattern but reduces growth on average Change in Inventories • More detailed chain linking and seasonal adjustment • Acquisitions and disposals • Lower level industry and asset • New deflators still being quality assured Sector and Financial Accounts • Financial Account impacted by methods improvements • Alignment with Public Sector Finances • Bonds • PNFCs overseas loans and deposits • Further details in articles • Saving Ratio • 4.2% in latest quarter, lowest quarterly saving ratio since 2009q1 (3.4%) • 6.7% in 2012 and 2011 • Real household disposable income (RHDI) • Fall of 1.7% in latest quarter, largest fall since 1990 q2 (1.7%) • Rise of 1.4% in 2012 (Fell 1.2% in 2011) Any Questions? Sector & Financial Accounts 2013 Q1 Phillip Davies Summary • Financial Account methods changes • Sector Financial Accounts Key Indicators • Links to Methods Papers & Publications (to follow!) Financial Account • Methodological Changes o Bonds o Overseas deposits and loans o Public Sector Finance alignment Bonds ONS undertook a review of the Bonds liability methodology which recommended: • Converting bond liabilities estimates from nominal to market values, using a weighted index of bond prices, so that they move into line with international (SNA2003/ESA 95) requirements • Using aggregate data from the Bank of England Balance Sheet Survey of Banks and Building Societies to measure MFIs bond liabilities • Improving the processing and sectorising of data on quoted UK bonds collected from the London Stock Exchange • Using data from the London Stock Exchange as a source for measuring the bond liabilities of insurance companies and pension funds • Treating the Rest of the World bond assets as the residual difference between total bond liabilities and assets, due to a lack of data coverage for the sector In addition to these actions, the bond review recommended a change in the way bond estimates are presented in the financial account • Now presented in a combined F.3325-6 Bonds continued • 2003 onwards but presentation back to 1997 • Financial account (flows) and balance sheet (levels) • Impacted PNFCs bond liabilities Old New PNFCs Bonds Liabilities Flows F.3325-6 50000 40000 30000 PNFC Pre 20000 PNFC Post 10000 0 1997 -10000 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 PNFCs Bonds Liabilities Levels F.3325-6 500000 450000 400000 PNFCs Pre 350000 PNFCs Post 300000 250000 200000 150000 100000 50000 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 MFIs Bonds Liabilities Flows F.3325-6 200000 150000 MFIs Pre MFI Post 100000 50000 0 1997 -50000 -100000 -150000 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 MFIs Bonds Liabilities Levels F.3325-6 900000 800000 MFI Pre MFI Post 700000 600000 500000 400000 300000 200000 100000 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 OFIs Bonds Liabilities Flows F.3325-6 250000 200000 OFIs Pre 150000 100000 50000 0 1997 -50000 -100000 -150000 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 OFIs Bonds Liabilities Levels F.3325-6 1000000 900000 OFIs Pre 800000 700000 600000 500000 400000 300000 200000 100000 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Overseas deposits and loans • Changes to estimates of UK deposits with and loans from overseas banks • Previously overstating overseas deposits for PNFCs and understating for OFIs • Split moved from 80% PNFCs & 10% OFI to growth in line with the sectors UK bank deposits and loans • Affects F.229 & F.419 across all sectors • 2003 onwards • Impacts mainly to liabilities of PNFCs & OFIs • Financial account and balance sheet PNFCs OSD Asset Flows F.229 100000 80000 PNFCs Pre 60000 40000 20000 0 1997 -20000 -40000 -60000 -80000 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 PNFCs OSD Assets Levels F.229 450000 400000 PNFCs Pre 350000 300000 250000 200000 150000 100000 50000 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 OFIs OSD Flows Assets F.229 300000 200000 OFIs Pre 100000 0 1997 -100000 -200000 -300000 -400000 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 OFIs OSD Assets Levels F.229 900000 800000 OFIs Pre 700000 600000 500000 400000 300000 200000 100000 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 SFA Key Indicators • Saving Ratio 4.2% in latest quarter Lowest quarterly saving ratio since 2009q1 (3.4%) 6.7% in 2012 and 2011 • Real household disposable income (RHDI) Fall of 1.7% in latest quarter Largest fall since 1990 q2 (1.7%) Rise of 1.4% in 2012 (Fell 1.2% in 2011) 2012 Net Lending-Borrowing non-financial 80000 60000 40000 20000 0 Central Gov -20000 -40000 -60000 -80000 -100000 -120000 Local Gov Public Corps Financial Corps PNFCs Households & NPISH ROW 2012 2013 Q1 Net Lending-Borrowing non-financial 20000 15000 10000 5000 0 Central Gov -5000 -10000 -15000 -20000 -25000 Local Gov Public Corps Financial Corps PNFCs Households & NPISH ROW 2013 Q1 Publications & Articles • Bonds • Overseas deposits and loans • PSH Further details? • Bonds & Overseas deposits: Harry Duff [email protected] • Public Sector David Mathewson [email protected] • UKEA Phillip Davies or Michael Rizzo [email protected] [email protected] Balance of Payments • Also impacted by changes to Financial Account • Improvements to debt securities (bonds) liabilities • Improvements to PNFCs overseas loans and deposits (and OFIs overseas loans and deposits) • Further details in articles Questions?