1. Gross Domestic Product estimates
Lunchtime presentation 25 May 2016 Unit C.2 National accounts production
Lunchtime presentation - 25/5/16

2. Content lunchtime presentation
What is GDP and why is it important?
Advancing the GDP flash estimate for EU and EA
Further information on GDP estimations and related data
Lunchtime presentation - 25/5/16

3. A. What is GDP and why is it important?
A1. The System of National Accounts A2. Gross Domestic Product (GDP) (1) A3. Gross Domestic Product (GDP) (2) A4. Why is GDP important ?
Lunchtime presentation - 25/5/16

4. A1. The System of National Accounts
Describes all economic flows (transactions) and changes in stocks in the economy
is an accounting system ( financial position of institutional sectors) with links to the basic theory of economics ( supply and demand, prices, labour input…)
enables comparisons between countries and years
does not aim at describing well-being (e.g. GDP  domestic economic activity)
-System of national accounts is an accounting system  concentrates on tracing the economic flows and changes in stocks of institutional sector like non-financial corporations, households and General Government.
- GDP is one variable in the System of National Accounts
-SNA2008 para 1.75: "GDP is often taken as a measure of welfare, but the SNA makes no claim that this is so and indeed there are several conventions in the SNA that argue against the welfare
interpretation of the accounts."
-SNA1993 para 1.2: "Certain key aggregate statistics, such as gross domestic product (GDP), that are widely used as indicators of
economic activity at the level of the total economy, are defined within the System, but the
calculation of such aggregates has long ceased to be the primary purpose for compiling the accounts."

5. A2. Gross domestic product (GDP) (1)
is perhaps the most important economic activity indicator and widely used in comparisons (GDP/capita)
describes the value added (VA) created in production and selling of products (= national value added chain)
summarises the development on transactions concerning products: - domestic production/selling of final products - the use (buying) of final products - incomes generated in producing and selling
GDP:
On the national level: describes the value added chain from first to last producer until a final product is sold to final user
…is counted both at current price and in volumes
…should also include hidden economy (transactions paid)
…should also include illegal activities (transactions paid)
…does not include household 'homework' production (no transactions paid)

6. A3. Gross domestic product (GDP) (2)
Three methods for GDP estimation
P: production approach = output (P.1) - intermediate consumption (P.2) (+ taxes less subsidies on products (State, e.g. VAT))
E: expenditure approach
= final consumption expenditure (P.3)+ gross capital formation (P.5) + exports (P.6) – imports (P.7)
I: income approach
= compensation of employees (D.1) + gross operating surplus (GOS) (+ taxes less subsidies on imports & production (State))
-P: Basically, GDP derives from the value added. In the production approach GDP is compiled with producers' data as the difference between output and intermediate consumption. To get to GDP at market prices one has to take into accounts state's intervention and add taxes less subsidies on products.
-E: Next, GDP is also equal to the sum of the final uses of goods and services, i.e. the sum of the final consumption exp + gross capital formation + net exports
-I: Finally, one can also get to the same GDP by the incomes generated in the production/selling process. Producer units distribute such incomes to Labour (D.1) and to the entrepreneur (GOS). GOS is often interpreted as the compensation for the Kapital used in the production

7. A4. Why is GDP important ?
The development of domestic economic activity is crucial for the development of employment and hence for households'/citizens' income flows
In a long economic recession time
- first income flows may drop dramatically - later the asset values may drop dramatically
May be followed by unrest, extreme movements (NB 1930s depression with a prior stock market crash)
In the good times the companies' stock values aim at anticipating the development of profits ( GOS)
-A lot of the measures for avoiding the bank crisis in the EU and for aiming to get economy healthy again is connected to 190s Great Depression.
At that time, there was a stock market crash, bank crisis (people withdrawing there money from banks in mistrust for the banks) and a long deep depression. Some historians have connected the Great depression as a background reason for the rise of totalitarian leaders and to the burst of the WWII.

8. B. Advancing the GDP flash estimate for EU and EA
Why introduce GDP t+30 estimates for EU and EA?
Content of the GDP t+30 project
Quality acceptance criteria
Test estimates
First GDP t+30 release
Further communication and information
Lunchtime presentation - 25/5/16

9. B1. Why introduce GDP t+30 estimates for EU and EA?
User needs
Key users – European Commission, ECB
Policy making
Monitoring economic situation
Forecasting
Other users
Logical next step after GDP t+45 estimates
Fits in release pattern Principal European Economic Indicators
Releases at 30 – 60 – 90 days
Lunchtime presentation - 25/5/16

10. B2. Content of the GDP t+30 project
Preparation of test estimates (with TF members)
Development of quality acceptance criteria
Development methodology for Eurostat and country estimates
Development of a communication plan
Lunchtime presentation - 25/5/16

11. B3. Quality acceptance criteria (1)
Purpose
Assessment of test estimates
Quality criteria
Unbiased GDP t+30 estimate
Average revision between and ppt
Max 67% revision in the same direction
Lunchtime presentation - 25/5/16

12. B3. Quality acceptance criteria (2)
Quality criteria (continued)
Limited average absolute revision
Max 0.10 ppt at t+45
Max 0.13 ppt at t+60
Sufficient coverage
70% GDP for 2015 test quarters
Availability communication plan
Lunchtime presentation - 25/5/16

13. Lunchtime presentation - 25/5/16
B4. Test estimates (1)
Purpose
To assess expected quality of future GDP t+30 estimates
Test quarters
Real time estimations for 2014Q1-2015Q4
Retrospective estimations for 2012Q1-2013Q4
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14. Lunchtime presentation - 25/5/16
B4. Test estimates (2)
Results EU test estimates
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15. Lunchtime presentation - 25/5/16
B4. Test estimates (3)
Conclusions
Successfully passing all a priori quality criteria
Better than market forecasts at t+30 (tested for real-time quarters)
Smaller revisions than the published GDP t+30 for the US
But: revisions t+30  t+45 will be larger than revisions t+45  t+60
Lunchtime presentation - 25/5/16

16. B5. First GDP t+30 release (1)
Introduction
Introduction GDP t+30 on 29 April 2016, next publication dates: 29/7, 31/10
Name: preliminary GDP flash estimate
GDP t+45 estimates will remain
Pre-announcement by two videos and one page methodology document
Commissioner's video
Lunchtime presentation - 25/5/16

17. B5. First GDP t+30 release (2)
Results
Revisions and coverage in line with results test estimates
Lunchtime presentation - 25/5/16

18. B5. First GDP t+30 release (3)
Lunchtime presentation - 25/5/16

19. B5. First GDP t+30 release (4)
Media attention
Throughout the day e.g. Guardian, business – live:
Lunchtime presentation - 25/5/16

20. B6. Further communication and information
Publication of statistical working papers on website
Overview of GDP flash estimation methods (guidance for countries)
EA and EU GDP flash estimates at 30 days (Eurostat methodology)
Summary EA/EU GDP flash estimation methodology (all languages)
Publication and conferences
Article in June issue Eurona
Paper and presentation for IARIW conference
Conference new statistical techniques
Lunchtime presentation - 25/5/16

21. C. Further information on GDP estimations and related data
ESA 2010 transmission programme
ESA 2010 derogations up to 2020
Sequence of quaraterly GDP estimations
Deatailed annual breakdowns
Where to find additional information
Lunchtime presentation - 25/5/16

22. C1. Member States GDP related data
ESA Transmission programme of data
Lunchtime presentation - 25/5/16

23. C2. Member States derogations
Commission Implementing Decision
Lunchtime presentation - 25/5/16

24. C3. Sequence of GDP estimations
Flash estimates (only last Q, CDA data)
T+30: Preliminary GDP Flash estimates (EU/EA)
T+45: GDP Flash estimates (including MS data)
Regular estimates QNA and ANA (all series)
T+65: GDP and main aggregates (output, exp)
T+75: Employment and further aggregates (inc.)
Considered: Reintroduction of T+90 update
Database release (discontinued since ESA 2010)
Lunchtime presentation - 25/5/16

25. Lunchtime presentation - 25/5/16
C3. Where to find QNA data
Lunchtime presentation - 25/5/16

26. C4. Detailed annual breakdowns
Main aggregates by industries
Gross value added, employment
compensation of employees, loans and wages
Household consumption by purpose (COICOP)
Estimation of European aggregates in Oct/Nov
Asset by industry (Stocks, flows)
Balance sheets by assets and sector
Lunchtime presentation - 25/5/16

27. Lunchtime presentation - 25/5/16
C4. Where to find ANA data
Lunchtime presentation - 25/5/16

28. C5. Additional information
Website: National accounts (including GDP)
QNA Release calendar
ESA 2010 and SNA 2008 and Main methodological references
Estimation European main aggregates
Key legal documents (including links to Previous Legislation):
Lunchtime presentation - 25/5/16

29. Gross Domestic Product estimates
Lunchtime presentation 25 May 2016 Unit C.2 National accounts production