GDP - construction Flashcards
1
Q
Data?
A
- Huge and diverse sources of data
- Tax – HMRC income tax, VAT, excise duties (tariffs)
- Surveys – general and also for specific sectors – Monthly business survey (production and services) (32k per month, v detailed) – Monthly Business Survey (retail sales index) (5.5k per month) – Monthly Business survey (construction and allied trades) (8k per month)
- Producer Price Index – monthly survey measuring price changes of goods bought and sold by UK manufacturers – statutory survey of firms, info from various bodies e.g., Fish – Marine Management organisation , Exchange Rates – Financial Times
- Services Producer Price Index provides a measure of inflation for the UK services sector – statutory quarterly survey measuring changes in price received for selected services provided by UK businesses to other UK businesses and gov
- Lots more – needs to be compiled to derive 3 estimates of GDP, output, and expenditure – need to be balanced
2
Q
Construction timings?
A
- Huge and diverse sources of data
- Tax – HMRC income tax, VAT, excise duties (tariffs)
- Surveys – general and also for specific sectors – Monthly business survey (production and services) (32k per month, v detailed) – Monthly Business Survey (retail sales index) (5.5k per month) – Monthly Business survey (construction and allied trades) (8k per month)
- Producer Price Index – monthly survey measuring price changes of goods bought and sold by UK manufacturers – statutory survey of firms, info from various bodies e.g., Fish – Marine Management organisation , Exchange Rates – Financial Times
- Services Producer Price Index provides a measure of inflation for the UK services sector – statutory quarterly survey measuring changes in price received for selected services provided by UK businesses to other UK businesses and gov
- Lots more – needs to be compiled to derive 3 estimates of GDP, output, and expenditure – need to be balanced
3
Q
Output estimates?
A
- Uses framework of Standard Industrial Classification 2007 – Linked to European NACE and UN
- Has 4 digit (some 5) breakdown
- Sections denoted by letter A, B, C…
- Divisions 01, 02.. 99
- Group 01.1, 01.2 … 98.2
- Classes 01.11
- Some classes divided into sub classes
- ONS currently uses about 112 industries which are at 2 and 3 digit levels – dep on what is relevant for UK and what detail is feasible
4
Q
Estimating GVA at CVM?
A
For each industry we have estimate of GVA at CVM
- Main source is Monthly business survey measuring turnover and some volume data for industries (e.g., steel, electricity, gas where volume easy to measure)
- Turnover is not GVA – ignores intermediate production
- To move from changes in turnover to real changes, need deflator (price cost index)
- Deflators usually come from PPI or SSPI index or CPI
- Need to use SUT tables
5
Q
SUT tables?
A
Check notes for examples
- Bottom total consumption shows how much of each column use of all other products
- Supply table 1 gives total supply
- Basic prices Domestic output + imports + traders margins + taxes/subs = total supply purchasers prices
- Table 2 – intermediate consumption at basic prices
- Breaks down by 10 industries
- Table 3 – allocate to expenditure at market prices
- The supply and use table enable ONS to strip out intermediate consumption of total output for each industry to give GVA industry by industry
- Our income data will give wages and operating surplus – measuring how GVA divided between the 2 types of income
- Lastly need to allocate net output (output less intermediate consumption) for each industry across the expenditure classes
6
Q
UK input-output analytical tables?
A
- 128 industries – 128 by 128 matrix – very detailed
- 3 methods – initial estimates based on output method
- After 3 yrs, the annual GDP estimates are balances and SUTS constructed – show the data with all 3 methods giving the same answer
7
Q
Leontief’s input-output method?
A
Input-output coefficients - the quantity of j needed to produce one unit of i
The equation (notes) tells the total output of good i equal the amount available for final use and the sum used up in producing each of the n outputs - the total output of each product j is multiplied by the total output of that good
8
Q
Publication cycle?
A
- Info using for markets (stock markets react to it), the treasury in terms of relating to the budget outcome and planning
- BoE monetary policy decisions
- But takes 2-3 years to get really accurate figure
- Tension – markets and BoE want ONS to predict what its final figure will be – ONS instead gives value based on its current info – these are different
- Trade off between speed of delivery and accuracy of data
- On average revisions tended to be upwards – except for recession after financial crisis
- Central banks and others try to predict eventual GDP
- Signal to noise ratio – size of revisions relative to final value – nearer to 1 means
- more reliable – manufacturing, imports, services and construction most reliable
9
Q
Chained volume measure of GDP and nominal GDP?
A
- nominal GDP called current prices by ONS – all measures of GDP based on prices at the time – thus 1980 GDP in current prices means value of GDP in terms of 1980 prices etc.
- Uses CVM to take into account inflation in its estimate of real GDP
- For some industries, there is a direct output measure e.g., electricity (gigawatts) – however for most industries we observe nominal revenues, thus need a price index
- GVA (CP) = Nominal revenue (CP) – intermediate costs (CP)
- Method 1 – single deflation – use a price deflator PD for that industry
- Thus use same PD for outputs as for intermediaries – but intermediate input prices might be very different
- Method 2 – double deflation
- Use different deflator for output and each input – PD(O), PD(I)
- Only makes a difference if behaviour of input prices differs from output prices so that relative price changes
- ONS aiming to implement double deflation
10
Q
Chained volume measure of GDP and nominal GDP - methods?
A
- Method 1 – single deflation – use a price deflator PD for that industry
- Thus use same PD for outputs as for intermediaries – but intermediate input prices might be very different
- Method 2 – double deflation
- Use different deflator for output and each input – PD(O), PD(I)
- Only makes a difference if behaviour of input prices differs from output prices so that relative price changes
- ONS aiming to implement double deflation
11
Q
CVM?
A
- These time series have the effects of inflation removed by considering changes in quantity between consecutive periods, holding prices from previous periods constant
Chained Volume Measures
12
Q
Blue book?
A
Published every year in October. Gives figures for previous year (2018). Also, gives fully balanced figuresfor older data. However, in BB2019, 2016 is last fully balanced data.
13
Q
GDP deflators?
A
- Gives you a real
output measure for each industry – combined using weights - Thus from 2016 we construct a real GDP using price deflators for each industry and combining using GVA weights
- GDP deflator – not built up like CPIH – is a derived price index
- GDP deflator published by the treasury
The GDP deflator is derived from the ratio of the current price (nominal) GDP and constant price (real or CVM) GDP
14
Q
Conclusions?
A
- Lots of data, Builds up data from 112 “industries” at SIC 2 and 3 digit levels.
- Combines data on income, expenditure and output.
- “Balances” the three estimates, 18-24 months after (data lags). Uses SUTs
- SUTS: go from supply by industry to final use as household or Government consumption and investment etc. Uses Leontief input-output method to determine intermediate production.
- GVA also equated to wages and operating surplus, allows for taxes (moving form basic, to producer and market prices).
- Big revisions for 3 years plus. Changes in methodology can continue indefinitely (e.g. Narcotics).
- Reporting cycle more complicated: reports latest GDP figures AND revisions to past data. Since 2017, has monthly GDP estimates in addition to Quarterly (QNA) and Annual (BB) reports.
- GDP deflator is derived from ratio of current price GDP and real GDP (CVM)
