why is gdp revised? andrew walton assistant deputy director
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Why is GDP revised? Andrew Walton Assistant Deputy Director National Accounts Coordination Division 2 October 2013. Outline. Revisions in general How GDP is compiled GDP revisions Some numbers Levels Growths Nominal GDP revisions Conclusions What’s next?. - PowerPoint PPT PresentationTRANSCRIPT
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Why is GDP revised?
Andrew WaltonAssistant Deputy DirectorNational Accounts Coordination Division
2 October 2013
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Outline
• Revisions in general• How GDP is compiled• GDP revisions • Some numbers
• Levels• Growths
• Nominal GDP revisions• Conclusions• What’s next?
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Revisions to economic series
• Revisions are a fact of life for most economic series
• Or else:• The first estimate is delayed• Later information is ignored even when
it tells a different story
• Balance between accuracy and timeliness
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How GDP is compiled (1)
• Three approaches• Output, Expenditure and Income• Perfect statistical world – all equal
• Many sources• Monthly, Quarterly, Annual• Various timings• Monthly turnover (IoP around 6 weeks)• Annual tax returns (15 months)
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How GDP is compiled (2)
• Preliminary estimate (25 days)• Accuracy and timeliness trade-off• One of the fastest in the world• Based exclusively on output, 44% data
• Second estimate (8 weeks)• Growth based on output, 83% data• Publish all 3 approaches• Some provisional expenditure sources• Limited direct income information• Use of quarterly alignment adjustments
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How GDP is compiled (3)
• Quarterly National Accounts • 13 weeks• Based on output, 92% data• Similar to second estimate• Expenditure components more firm • Revisions to previous periods but not for
SU balanced years
• When 4 quarters are published• Seasonally adjusted annual constrained
to equal unadjusted annual
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How GDP is compiled (4)
• Balanced supply and use• Framework for confronting differences• Levels not growths• 112 industries and products
• First balance after around 18 months• BB13 balanced 2011• Not all benchmarks always received
• Second balance is usually “final” except for methodological changes
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Why is GDP revised?
• Output source data revised• Expenditure and income• Revised seasonal factors• Annual chain-linking changes weights• Supply and use balancing• New methods• New international frameworks
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Some numbers: Revisions to GDP levels
• Balancing supply and use fixes annual level not quarterly growth
• Use quarterly path from output anchored to SUT levels
• Generally small apart from methods changes
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The Recession: Q1 2008 to Q3 2009
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The Recession: Q1 2008 to Q3 2009
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Revisions to Growth
• Preliminary to QNA growth• Last 26 periods• Average -0.01 p.p: not biased• Absolute average 0.12 p.p• 7 times unchanged;12 times by +/-0.1
p.p, 4 times by +/-0.2 p.p• Q4 2009 revised by 0.3 p.p• Q1 2009 revised by -0.5 p.p (Blue Book)
• No benefit in delaying preliminary estimate from 25 days to 13 weeks
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QNA to Latest
• Evidence from the recession incomplete• No evidence of bias yet• Actual revisions now negative
• +0.2 p.p for period 1998 to 2007• -0.2 p.p for period 2008 to 2010
• Absolute average revisions higher• 0.4 p.p for period 1998 to 2007• 0.5 p.p for period 2008 to 2010
• Impact of methodological changes• Continue to monitor closely
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Nominal GDP
• The poor relative in the media• Possible MPC spotlight• ONS setting up a review of methodology• Revisions performance key• Work in early stages
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Nominal Revisions at 2nd estimate
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CVM revisions on the same basis
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CVM revisions at 1st balanced BB
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Nominal GDP at 1st balanced BB
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CVM GDP revisions across vintages
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Nominal GDP revs across vintages
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Total updates - CVM
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Total updates – Nominal GDP
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Conclusions
• Revisions between Preliminary and QNA for real GDP continue to be small and unbiased
• Subsequent revisions have been higher since 2008 but still unbiased
• Partly explained by BB11 methods changes• Impact of Supply and Use• ONS monitoring methods through the
recession and recovery• Nominal quarterly GDP revisions being used
as a guide to possible improvements
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What’s next?
• BB 2014 – New National Accounts framework (ESA10)
• Also a range of Gross National Income (GNI) reservations to clear
• Analyse revisions by reason rather than over time
• Displaying uncertainty in estimates• Splitting data revisions from methodological
revisions• Continue to monitor revisions
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References
Revisions policy
http://www.ons.gov.uk/ons/guide-method/method-quality/specific/economy/revisions/economic-statistics/national-accounts-revisions-policy.pdf
Detail of Supply and Use tables structure
http://www.ons.gov.uk/ons/guide-method/method-quality/specific/economy/input-output/input-output-supply-and-use-tables-structure-overview.pdf
Revisions triangles
http://www.ons.gov.uk/ons/publications/re-reference-tables.html?edition=tcm%3A77-240821
Improvements to the measurement of Insurance Services
http://www.ons.gov.uk/ons/guide-method/method-quality/specific/economy/national-accounts/methodology-and-articles/2011-present/blue-book-2012-insurance-services/index.html
Various National Accounts articles, including "National Accounts: A short guide"
http://www.ons.gov.uk/ons/guide-method/method-quality/specific/economy/national-accounts/methodology-and-articles/2011-present/index.html
Why is GDP revised article from June 2013
http://www.ons.gov.uk/ons/guide-method/method-quality/specific/economy/national-accounts/articles/2011-present/why-is-gdp-revised-/updated-analysis--why-is-gdp-revised-.pdf