Transcript United Nations Economic Commission for Europe Statistical Division PPI and XMPI Compilation Seminar on challenges in economic Statistics Tehran, Iran November 2008 Presentation by Carsten Boldsen.

United Nations Economic Commission for Europe
Statistical Division
PPI and XMPI Compilation
Seminar on challenges in economic Statistics
Tehran, Iran
November 2008
Presentation by Carsten Boldsen Hansen, UNECE
([email protected])
Overview
1. The PPI family
2. PPI in an open market economy
3. Export and import price indices (XMPI)
4. International recommendations
5. Future challenges
November 2008
UNECE Statistical Division
Slide 2
1. The PPI family
Producer price indices
Output PPIs
Input PPIs
PPI – Production for the
domestic market
PPI – Input from the
domestic market
PPI – Production for
export
PPI – Input from imports
PPI – Total production
PPI – Total input
November 2008
UNECE Statistical Division
Slide 3
2. PPI in an open market economy
Coverage of production and establishments:
The statistical unit for the PPI should be the
“output generating entity”, the establishment, as
outlined in the SNA
Traditionally, one would like the PPI to cover the
production on the economic territory
Economic globalization makes the identification
of the statistical unit and the scope of the PPI
still more difficult in practice!
November 2008
UNECE Statistical Division
Slide 4
2. PPI in an open market economy
The situation today:
Most PPIs limited to the industrial sector, including
manufacturing, mining and energy
Agriculture and services are excluded
Services - .i.e. transport, communication, medical care, trade,
business services - grow in importance.
It becomes still more problematic to leave services out
Many countries are progressively developing PPIs for services
EU member countries are required to compile PPIs for the
services producing industries.
The non-observed economy – often excluded but may be
important
November 2008
UNECE Statistical Division
Slide 5
2. PPI in an open market economy
Challenges of economic globalization:
Outsourcing
Goods for processing
Merchanting
Virtual corporations
Multinational enterprises (MNEs)
E-commerce
Makes the production of statistics, also the PPI,
more difficult – and more challenging!
November 2008
UNECE Statistical Division
Slide 6
2. PPI in an open market economy
Goods for processing – current treatment
Country X
Company A
Country Y
Goods for processing
Company B
Finished Goods
Service included in Finished Goods
Cash = value of service
Goods for processing – new SNA/BOP convention
Country X
Company A
Country Y
Goods for processing
Company B
Finished Goods
Processing Service
Cash = value of service
November 2008
UNECE Statistical Division
Slide 7
2. PPI in an open market economy
Merchanting
Country A
Merchanting
(International Wholesaler)
Inventories
Country B
Country C
Supplier
Customer
An enterprise in country A buys goods in country B
The goods never enter country A but are sold to country C
The ownership moves from B to A and from A to C
NA will look for values of flows according to change in ownership
What will the PPI compilers do?
November 2008
UNECE Statistical Division
Slide 8
2. PPI in an open market economy
The challenges of globalization
The traditional coverage and relevance of PPI is questioned
How to decide which production activities to include
- in principle
- in practice
The treatment of “globalized” production may also depends on
the different purposes of PPI
If such activities are included, how should they be price
followed?
There are no easy or general answers to these questions
November 2008
UNECE Statistical Division
Slide 9
2. PPI in an open market economy
The prices:
For the PPI it should be the prices received by the producer,
i.e. basic prices (SNA) excluding taxes plus subsidies
Input PPIs: The price actually paid by the purchaser, including
taxes net of subsidies, i.e. purchasers‘ prices
Transfer prices
Becomes more common as (international) trade is growing and
posses serious measurement problems
Often they do not reflect real market prices. In such cases:
☞ Use estimated or imputed prices, or
☞ Exclude the transfer prices from the index
November 2008
UNECE Statistical Division
Slide 10
2. PPI in an open market economy
Some recommendations
Decide on the target of the PPI – what should in principle
be covered, and ensure a clear delineation
Try in practice to be as close to the target as possible
The relationship and coherence with other statistics,
notably the national accounts, should also be considered.
Cooperate with national accounts, and other areas:
- may provide weighting data
- may use PPI for deflation
November 2008
UNECE Statistical Division
Slide 11
3. Import and export price indices
Ten basic steps to develop XMPIs:
1. Defining the objective, scope and conceptual basis
2. Deciding on the coverage and classification
3. Deriving the weighting patterns of the indices
4. Designing the samples for the indices
5. Collecting and editing the prices
6. Adjusting for changes in quality
7. Calculating the indices
8. Disseminating the indices
9. Maintaining samples of reporters and commodities
10. Reviewing and reweighting the indices
November 2008
UNECE Statistical Division
Slide 12
3. Import and export price indices
1) Defining objective, scope and conceptual basis of
the index
Consult with stakeholders and users
Consider coherence with other data (national accounts and
BOP)
2) Deciding on the coverage and classification
structures of the indices
Examine data sources for weights and prices (trade statistics,
customs data)
Decide on the actual coverage of goods and services.
Select classification
November 2008
UNECE Statistical Division
Slide 13
3. Import and export price indices
The most commonly used classifications are:
Harmonized System of Commodity Description and
Coding (HS)
Standard International Trade Classification (SITC)
Central Commodity Classification (CPC])
International Standard Industrial Classification of All
Economic Activities (ISIC)
The European classification of economic activities
(NACE)
November 2008
UNECE Statistical Division
Slide 14
3. Import and export price indices
3) Deriving the weighting patterns of the indices
Select the level at which to form the elementary aggregates
A relatively high level of aggregation - e.g. 4-digit product or
industry group – gives better discretion to select replacements,
introduce new products and maintain the sample
Weights aims to be representative for the period in which they
are used
Some normalizing or smoothing over more years may be
appropriate to avoid irregular or extreme weights
November 2008
UNECE Statistical Division
Slide 15
3. Import and export price indices
4) Designing the samples for the indices
Identify the sample frame - a listing of the population of units
from which to select. Data sources for a frame include:
- Customs data,
- Statistical business registers,
- trade organizations,
- commercially maintained lists,
- Registers (company registers, taxation records
- Telephone directory “yellow pages,”
Select the establishments from the frame by
- Purposive/judgmental sampling
- Probability sampling

Take market conditions/concentration into account
November 2008
UNECE Statistical Division
Slide 16
3. Import and export price indices
5) Collecting and editing the prices
Initialize collection from a company through a personal visit, by
telephone, Internet, fax or mail contact, or some combination
Select the products to be price-followed
- should be representative of the whole elementary aggregate
Decide on the time of price recording
- point-in-time: a specific day
- period-in-time: a period of days
Use specification pricing
- require well-specified product descriptions
- should include all price determining characteristics
- when characteristics change, adjustment should be made
Follow actual market transaction prices
Conversion into domestic currency
November 2008
UNECE Statistical Division
Slide 17
3. Import and export price indices
6) Adjusting for quality changes
Use well-specified & detailed product descriptions
Select products expected to remain on the market for some
time
Apply quality adjustment when replacements take place
7) Calculating the index
Decide on index calculation formulas for elementary and
higher-level indices
Unit value indices should be used only for strictly homogenous
groups of products
November 2008
UNECE Statistical Division
Slide 18
3. Import and export price indices
8) Disseminating the index
Disseminate long-term fixed base indices and 12-months rates
of changes
Consult with user needs
Problems with confidentiality for detailed levels in XMPIs
9) Maintaining the sample of companies and products
Ensure procedures are in place to monitor and update the
sample on a regular basis
Some sectors are more dynamic and needs more careful and
regular monitoring
Weights within elementary indices needs also be updated
November 2008
UNECE Statistical Division
Slide 19
3. Import and export price indices
10) Reviewing and reweighting the index
Decide on the frequency of re-weighting
Every 3 or 5 years may adequate under stable market
conditions
The more dynamic markets, the greater need for frequent
update of the weights
The greater variation in price changes, the greater need for
frequent update of the weights
November 2008
UNECE Statistical Division
Slide 20
5. Future Challenges for PPI and XMPI
Exercise 3:
Discuss the following questions and list your
answers
a)
What will be the main challenges in the calculation
of CPI and PPl in your country the next 5-10 years?
b)
What will be the likely obstacles – and can you
propose any way in which to overcome these?
November 2008
UNECE Statistical Division
Slide 21
4. International recommendations
Producer Price Index Manual. Theory and Practice (2004).
www.imf.org/external/np/sta/tegppi/index.htm

Export and Import Price index Manual – forthcoming. Draft
available on www.imf.org/external/np/sta/tegeipi/index.htm

Methodology of short-term business statistics. Interpretation and
guidelines. Available online from Eurostat’s webpage

The Voorburg Group on Services Statistics. Webpage:
http://www4.statcan.ca/english/voorburg/

Methodological Guide for Developing Producer Price Indices for
Services. Eurostat, 2005. Available from Eurostat and OECD web

Handbook on price and volume measures in national accounts.
Available from Eurostat website
November 2008
UNECE Statistical Division
Slide 22
5. Future Challenges for PPI and XMPI
Organisation of the statistical production
process
Application of international comparable
classifications (COICOP, NACE, ISIC, HS)
Index calculation methods
Integration of CPI, PPI and XMPI calculation,
administrative and IT-systems?
Optimization of samples
Dissemination of data and metadata
November 2008
UNECE Statistical Division
Slide 23