Price and volume measurement in services Current Eurostat recommendations for NSIs Paul Konijn, Eurostat – C1 National Accounts OECD Workshop on Services 15-16 November 2004, Paris Outline Introduction General recommendations Retail trade Finance and insurance Telecommunications, software and business services Developing new services price indices Paris, 15-16 November 2004 Introduction December 2001: Eurostat Handbook on Price and Volume Measures in National Accounts Handbook = culmination of several years of work with EU Member States on all topics related to volume measurement Starting point: GDP growth rates sometimes difficult to compare due to different methodologies Paris, 15-16 November 2004 Introduction (cont.) Handbook is elaboration of ESA95 (and SNA93) and gives detailed guidance on deflation of products Main issues also laid down in two legal acts (from 1998 and 2002) Since 2001: implementation of handbook in Member States All Member States have provided Inventory of sources and methods Paris, 15-16 November 2004 Notes on productivity measurement Note: handbook is about national accounts -> focus is on macro picture of the economy Deflation of inputs equally important (and equally difficult) for productivity analysis!! Paris, 15-16 November 2004 A/B/C classification Classification of methods: A methods: ideal B methods: acceptable alternative C methods: unacceptable Move gradually over time from C to B to A C methods “outlawed” by 2006 Generally, input methods are C methods Paris, 15-16 November 2004 General classification of deflation methods of market output A method: deflation by appropriate producer price indices (adjusted for quality change) B methods: less appropriate PPIs, CPIs, volume indicators C methods: input methods, secondary indicators, inappropriate price indices To be applied to specific products first Paris, 15-16 November 2004 Retail trade Output in NA = trade margin A methods Margin price indices (adjusted for changes in quality of trade service) Deflate sales and purchases separately with appropriate price indices (cf double deflation) However, generally available price indices do not allow this in practice (CPIs make no adjustment for change in quality of trade services, except for outlet substitution) Paris, 15-16 November 2004 Retail trade (cont.) B method fixed trade margins in constant prices, equivalent to using volume of sales as indicator for volume of margin -> no quality change taken into account Has to be applied on detailed product level C method deflation of margin output by sales price index Paris, 15-16 November 2004 Finance and insurance Again, indirect measures of output : FISIM Insurance service charge No A methods exist, except for part of banking output for which direct charges are paid B methods for FISIM: Detailed output indicators Apply base year interest margins (analogous to retail trade) -> no quality changes taken into account Paris, 15-16 November 2004 Finance and insurance (cont.) B methods for insurance service charge: Detailed output indicators Index of “real” provisions Deflation by index of gross premiums not recommended Paris, 15-16 November 2004 Telecommunications, software and business services More proper PPIs urgently required In some cases CPIs can be used as proxy (eg telecommunications, packaged software (?)) For standard services (eg some legal or accounting services): Actual prices or tariffs (A) Volume indicators (B) For specialised (unique) services: “Model” pricing (potentially A) Charge-out rates or hourly fees (B) Paris, 15-16 November 2004 Developing new services price indices Short-term Statistics Regulation in amendment. Current proposal includes inter alia price indices for: Telecommunication services Computer services (three-digit level of NACE 72) Legal, accounting, market research and business consultancy (together) Architectural services and technical testing (together) Advertisement, labour recruitment, investigation, cleaning (all separately) Business-to-business services only First reference period: Q1 2006 Paris, 15-16 November 2004.