Transcript Slide 1
European Commission
Directorate General Economic and Financial Affairs
The EU Programme of Business and Consumer surveys: scope and relevance for economic analysis
Kristine Vlagsma Reuben Borg International Seminar on Early Warning and Business Cycle Indicators 14-16 December, 2009
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Outline
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The Joint Harmonised EU Programme of Business and – Consumer Surveys Scope – – Methodology Developments 2. Relevance for Economic Analysis – – – Information content Use of survey indicators for economic analysis Focus on the recent economic crisis 2
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The Joint Harmonised EU Programme of Business and Consumer Surveys
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Potential of the EU BCS •
Strengths
– Timely – Representative – Harmonised questionnaire and methodology – No revisions – Historical database – Wide-Coverage: countries, sectors and questions – Reference point to other countries outside the EU BCS programme – Part of Eurostat’s Principal European Economic Indicators (PEEIs) for short-term analysis •
Shortcomings
– Rather inflexible to changes due to harmonisation and logistical issues among many institutes – Interest in soft data decreases as soon as hard data becomes available •
Comparison with other available surveys
– Questions may vary – EU BCS has a larger sample size – EU BCS has a sectoral indicator for all EU countries (currently limited coverage for Ireland) 4
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Scope of the EU BCS • • Six harmonised surveys are conducted on a monthly basis: – Industry since 1962 – Construction 1966 – Consumers 1972 – Retail Trade 1984 – Services 1996 – Financial services (pan-EU) 2006 In addition: – Investment survey twice a year – Additional quarterly questions in Industry, Consumers, Services, Construction, and Financial services surveys • • Covers all 27 EU Member States, Croatia, the Former Yugoslav Republic of Macedonia and Turkey (currently limited coverage in Ireland) More than 125,000 firms and over 40,000 consumers surveyed every month across the EU 5
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Data collection and calculations • • • – – – – Data are collected in the first half of the month, and then sent to DG ECFIN around a week before the end of the month. The BCS results are usually published on the second last working day of each month DG ECFIN publishes: Monthly press release and publically available data on the website: ( http://ec.europa.eu/economy_finance/bcs ) The Economic Sentiment Indicator (ESI) - EU and euro-area aggregates + seasonally adjusted balance series 6 sectoral Confidence Indicators Business Climate Indicator (BCI) for the euro area (factor model based) 6
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Methodology • – – Methodological and practical guidelines published in a EC European Economy - Special Report No 5 Part A: User Manual Part B: International guidelines and recommendations on the conduct of BCS – Part C: Studies related to the EU BCS programme – Website of Special Report: http://ec.europa.eu/economy_finance/publications/publication7568_en.pdf
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Methodology to compute the euro-area ESI
Step 1
: calculation of balances per question (Balance = Positive replies – Negative replies)
Step 2
: calculate euro area (EA) aggregate for individual question. Country weights are taken as shares of each MS in the EA reference series (eg: Industry GVA for industry questions)
Step 3
: seasonal adjustment of raw data for EA individual question
Step 4
: standardise EA individual questions, reference period from 1990 till latest December available data
Step 5
: aggregate EA individual components to get the total weighted average ESI using fixed sectoral weights (Industry 40%, Services 30%, Consumers 20%, Construction 5%, Retail 5%)
Step 6
: ESI is scaled to have a long-term mean of 100 and a standard deviation of 10 (same reference period for moments) 8
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Administration of the programme (I) • Surveys are carried out locally by national institutes according to common principles: – use of the same harmonised questionnaires; – same frequency and timetable; – in compliance with international guidelines on data collection and survey design • Commission supports the institutes with grants (maximum 50% of the costs of the surveys) • Annual budget of appr. €5-6 million
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Administration of the programme (II) • Yearly workshops between DG ECFIN and national survey institutes. • Every two years, joint conference with the OECD • Missions to institutes (to ensure harmonisation and address particular issues) • Launch of call for proposal Current framework agreements with partner institutes cover period May 2008 - April 2011 10
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Developments • – – – Flash Consumer Sentiment Testing phase To be released approx 4/5 working days in advance of the final results Statistical techniques to impute missing values • – Testing of ‘capacity utilisation’ question in the services survey Intention to be included in 2011 • – – NACE Revision – changeover in May 2010 Follows a wide collaboration with partner institutes Back-casting process in line with NACE 2 classification, going back to – – 2000 - 2-digit level of detail 1985 - Totals and Main Industrial Groupings
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NACE 2 Revision • •
Practical implications
Institutes: – – – – Re-adjustment of activity-related codes Increased codes (mainly in services) and coverage Re-adjustment of samples and update of metadata Need to back-cast historical series in NACE 1 into NACE 2 nomenclature Users: – – New historical series, potentially different for a number of codes Perhaps not that much change for the aggregate figures
Back-casting
exercise priorities – Smooth and seamless changeover in May 2010: Contingency plans to limit risks – Minimise margin of error in published series especially for country and sector Totals 12
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Relevance for Economic Analysis
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Use of sentiment surveys for economic analysis
Advantages
– timely, good correlation, harmonised, wide-coverage, no revisions, • • •
Application and methodologies
Forecasting (mainly short-term) – – Bridge or indicator models Dynamic Factor Models Business cycle analysis – – – Regime-switching Models (Turning-Point Indicator) Climate Indicators (by sector and by country) Climate Tracer (cyclical analysis using quadrants) Other ad hoc studies eg: price expectations, investment expectations 14
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The information content of BCS – euro-area ESI Euro-area ESI shows good correlation (0.94) with real GDP growth (year-on-year) y-o-y % change 1 0 -1 -2 -3 -4 -5 4 3 2 2001 ρ 98-08 = 0.94
2002 2003 2004 Real GDP grow th Economic Sentiment (RHS) 2005 2006 2007 2008 % balance 120 2009 Note1 : in rhs 100 = average 98 to date Source: European Commission services Note2: both series are plotted at monthly frequency. GDP monthly data are obtained through a linear inerpolation of quarterly data.
110 100 90 80 70 60 15
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The information content of BCS – Industry The euro area Industrial Confidence Indicator shows good correlation (0.89) with industrial production growth (year-on-year) y-o-y % change 10 5 0 -5 -10 -15 -20 -25 2001 Industrial production growth ρ 98-08 = 0.89
2002 2003 2004 2005 Industrial Confidence (RHS) 2006 2007 2008 % balance 10 2009 Note: in rhs 100 = average 98 to date Source: European Commission services 0 -10 -20 -30 -40 -50 16
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The information content of BCS – Services 1 0 -1 -2 -3 y-o-y % change 5 4 3 2 ρ 98-08 = 0.88
Services value added growth Service Confidence(RHS) % balance 2001 2002 2003 2004 2005 2006 2007 2008 2009 Source: European Commission services 30 20 10 0 -10 -20 -30 17
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The information content of BCS – Consumers y-o-y % change 6 4 2 0 -2 ρ 98-08 = 0.77
Cons umption growth Cons umer Confidence (RHS) % balance 10 0 -10 -20 -30 -40 2001 2002 2003 2004 2005 2006 2007 2008 2009 Source: European Commission services 18
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The information content of BCS – Construction y-o-y % change 6 4 2 0 -2 -4 -6 -8 -10 ρ 98-08 = 0.45
Cons truction production growth Cons truction Confidence (RHS) % balance 10 2001 2002 2003 2004 2005 2006 2007 2008 2009 Source: European Commission services 0 -10 -20 -30 -40 19
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The information content of BCS – Retail y-o-y % change 4 3 ρ 98-08 = 0.46
2 % balance 1 0 -1 Cons um ption growth Retail Confidence (RHS) -2 2001 2002 2003 2004 2005 2006 2007 2008 2009 Source: European Commission services 5 0 -5 -10 -15 -20 -25 20
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The information content of BCS – Investment survey on expectations
Investment expectations
-20 -40 -60 40 y-o -y % 20 0 Estimated 2009 Provisional 2010 -80 EU EA BE BG CZ DK DE EE IE EL ES FR IT CY LV LT LU HU NL AT PL PT RO SI SK FI SE UK 21
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The information content of BCS – Capacity utilisation
Capacity utilisation in euro area
90.00
% 85.00
80.00
75.00
70.00
65.00
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 22
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The information content of BCS – Tracking the Business cycle
Economic Climate Tracer
– counter-clockwise movement along phases of business cycle
2-step procedure
• weighted average of five principal-components based sector climate indicators • all climate indicators smoothed using the HP filter
Climate Tracer
0 -1 2 1 downswing -2 -3 -4 -5 -0.6
contraction -0.3
0 m-o-m change expansion Jan-00 Nov-09 upswing 0.3
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Use of sentiment surveys during the economic crisis
• • • • Provided a good economic anchor for policy analysis months before hard data Timely release (full quarter results at least 2 months ahead of first GDP release of the same quarter) Indicated turning points in the current cycle very well Non-linearities were observed (possible response behaviour changes during the crisis) 24
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Use of sentiment surveys during the economic crisis • Indicated start of the downturn phase of the cycle in mid-2007 • Signalled the scale of decline in activity in 2008: Q4 • Trough in March • Subsequent recovery correctly predicted by the ESI so far 120.0
110.0
100.0
90.0
80.0
70.0
60.0
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-6.0
Economic Sentiment (RHS) Real GDP growth
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Thank you for your attention!
For further information about the EU Programme of Business and Consumer Surveys, please consult our website: http://ec.europa.eu/economy_finance/bcs Contact: DG ECFIN Unit A3 – Economic Studies and Business Cycle Surveys E-mail addresses: Kristine Vlagsma: [email protected]
Reuben Borg: [email protected]
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