2. Gathering and presentation of issues by: Feraidoon Rasteh An overview of the process identifying and assessing data sources for compiling quarterly expenditure-based GDP estimates An overview of the process identifying and assessing data sources for compiling quarterly expenditure-based GDP estimates

3.  Equations and identities which exist in all of the economies and this reality that different relationship exist between the factors and variables of an economy generates a potentiality that makes many estimations posible.

4.  Many sophisticated handbooks and manuals are introduced and recommended by international organizations. National accountants, while using these recommendations, should be aware of the status of their country and the kinds of available data in their country.

5.  Considering the statistical and economic status of an economy, the factor of art becomes important in estimation works. So we can say for the estimation works in an economy including quarterly national accounts, what an accountant needs, is: Knowledge, experience, and art.

6.  One of the basic identities of an economy is that the total supply would be equal the total demand. Or: Total supply of goods and services = Total uses of goods and services. So, the compilation of supply and use tables in an economy will provide a set of useful information at the outset of many estimations, including QNA.

7.  Referring the supply and use tables, the goods and services account as introduced in Eurostat handbook and system of National Accounts, is just a very basic frame work representing supply and uses in an economy. This account is recommended to be made before the compilation of QNA.

8. A pedagogical FRAME WORK OF THE GOODS AND SERVICES ACCOUNT, IS shown here: Intermediate consumption 1883 Output 3604 Final consumption expenditure 1399 Imports of goods and services 499 Gross capital formation 414 Taxes on products 141 Gross fixed capital formation 376 Subsidies on products(-) -8 Changes in inventories 28 Acquisitions less disposals of valuables 10 Exports of goods and services 540 Total uses 4236 Total resources 4236 Uses Resources

9. According to the goods and services accounts:  Total supply = Total uses  Output + Import = Intermediate consumption + Final consumption + Gross capital formation + Exports  Output – Intermediate consumption = Final consumption + Gross capital formation + Exports – Imports  Production based GDP = expenditure based GDP

10.  Compilation of QNA requires a lot of statistical information, referred to as "basic statistics" or "basic data". These statistics vary considerably in different countries. This is due to, availability of suitable administrative data, the resources available to collect statistics, institutional differences, geographical differences and the composition and size of the economy.

11.  At the goods and services account, presented above, the final consumption expenditure constitutes the households, Nonprofit institutions serving households and government final expenditures. In respect of Gross fixed capital formation, some changes and improvements are introduced in the Eurostat handbook 2013 and SNA 2008.

12.  Considering the Eurostat handbook 2013, SNA2008, and IMF manual 2001, there are no differences in concepts between the Annual National Accounts and Quarterly National Accounts. There are lots of changes and improvements in SNA1993 compared to SNA1968, but SNA2008 has only moderate improvements in some parts, compared to SNA1993.

13.  One of the most important improvements in Eurostat handbook 2013 and SNA 2008 is in the field of assets. In this part, some of the concepts of gross capital formation and specially fixed assets have changed. It seems that the countries should consider also the new concepts where estimating their QNA.

14.  One of the main improvements in respect of the fixed assets is the introduction of the concept of “intellectual property products” and substituting this concept for the “intangible fixed assets”. There are other new changes in some concepts related to gross capital formation which should be considered where compiling quarterly expenditure-based GDP estimates.

15.  Intellectual property products are considered in both eurostat handbook and SNA 2008 as a third kind of products mainly instead of the intangible fixed assets. They are products over which owner ship right can be established. The value of these products should also be estimated in QNA. They should be presented under the headline of gross fixed capital formation, on the left side of goods and services accounts. More information about the intellectual property products in the following slide.

16. Intellectual property products  Examples of intellectual property products are the results of research and development, mineral exploration and evaluation, computer software and databases, and entertainment, literary or artistic originals. They are characterized by the fact that most of their value is attributable to intellectual endeavor. They can be described in general terms in the following way. Intellectual property products are the result of research, development, investigation or innovation leading to knowledge that the developers can market or use to their own benefit in production because use of the knowledge is restricted by means of legal or other protection.

17.  Other components of gross fixed capital formation that have been revised in the upgraded handbooks, are land improvements, ICT equipment, and weapons systems. For the estimation of fixed assets where compiling QNA, these components should also be considered. The following there slides make the above fixed assets more clarified.

18. Land improvements  Land improvements are the result of actions that lead to major improvements in the quantity, quality or productivity of land, or prevent its deterioration. Activities such as land clearance, land contouring, creation of wells and watering holes that are integral to the land in question are to be treated as resulting in land improvements. Activities such as the creation of seawalls, dykes, dams and major irrigation systems which are in the vicinity of the land but not integral to it, which often affect land belonging to several owners and which are often carried out by government, result in assets that are to be classified as structures.

19. ICT equipment  Information, computer and telecommunications (ICT) equipment consists of devices using electronic controls and also the electronic components forming part of these devices. In practice, this narrows the coverage of ICT equipment mostly to computer hardware and telecommunications equipment.

20. Weapons systems  Weapons systems include vehicles and other equipment such as warships, submarines, military aircraft, tanks, missile carriers and launchers, etc. Most single-use weapons they deliver, such as ammunition, missiles, rockets, bombs, etc., are treated as military inventories. However, some single-use items, such as certain types of ballistic missile with a highly destructive capability, may provide an ongoing service of deterrence against aggressors and therefore meet the general criteria for classification as fixed assets.

21.  Considering the account of inventory changes, some clarifications have been done in upgraded handbooks. These are mainly about the work-in-progress and military inventories. Work-in-progress is treated as inventory change except in situations that should be recorded as fixed capital formation. These are discussed below.

22. Work-in-progress  Work-in-progress consists of output produced by an enterprise that is not yet sufficiently processed to be in a state in which it is normally supplied to other institutional units. Work-in-progress occurs in all industries, but is especially important in those in which some time is needed to produce a unit of finished output, for example, in agriculture, or in industries producing complex fixed assets such as ships, dwellings, software or films. Work-in- progress can therefore take a wide variety of different forms ranging from growing crops to partially completed film productions or computer programs.

23.  Work-in-progress must be recorded for any output that is not complete at the end of the accounting period. This is a particular problem for output taking a long time to complete, such as construction. The shorter the accounting period, the more important work-in-progress is likely to be relatively to finished output. In particular, it is likely to be more significant for quarterly accounts than annual accounts, if only because the production of many agricultural crops is completed within a year but not necessarily within a quarter. The only exceptions to recording incomplete work as work-in-progress are for partially completed projects for which the ultimate owner is deemed to have taken ownership, either because the production is for own use or as evidenced by the existence of a contract of sale or purchase. In this case, it will be considered as fixed capital formation.

24. Work-in-progress on cultivated biological resources  Work-in-progress on cultivated biological resources consists of output that is not yet sufficiently mature to be in a state in which it is normally supplied to other institutional units. In the present context it is necessary to distinguish single-use plants, trees and livestock that produce an output once only (when the plants or trees are cut down or uprooted or the livestock slaughtered) from trees (including vines and shrubs) and livestock that are used repeatedly or continuously for more than one year to produce outputs such as fruit, nuts, rubber, milk, wool, power, transportation and entertainment. Next

25. Work-in-progress should be recorded for single use resources. For repeat yield resources, being cultivated on own account, or under an agreed contract with another unit, the growth is counted as fixed capital formation and so excluded from inventories. Any remaining cultivation of resources with repeat yields should be included in work- in-progress. This may be the case for nurseries and breeders of race horses or other special animals, for example.

26. Military inventories  Military inventories consist of single-use items, such as ammunition, missiles, rockets, bombs, etc., delivered by weapons or weapons systems. As noted above in the discussion of weapons systems as fixed capital, most single-use items are treated as inventories but some types of missiles with highly destructive capability may be treated as fixed capital because of their ability to provide an ongoing deterrence service against aggressors.

27.  Considering the basic concepts is necessary for both ANA and QNA estimations. The above concepts are related to some aspects of final demand. GDP by type of expenditure shows the final demand for goods and services and so, is particularly useful for economic analysis.

28.  Among the components of final demand, the portion of households is more important. Household final consumption expenditure is usually the largest component of GDP by expenditure. For this account, the main sources of data, are household surveys, and surveys of retailers, service providers, and value added tax (VAT) systems. Also, data on the production and foreign trade in consumer products can be used to derive estimates by commodity flow methods.

29.  Business surveys of retailers and providers of consumer services are a common data source for household consumption at current prices. Many types of retailers and almost all services are fairly specialized.

30.  Supermarkets and department stores sell a wide range of goods, so that collecting product breakdowns for these stores is desirable. If product mixes are stable, satisfactory quarterly data by product can be estimated by using total sales of a retail industry as an indicator for the benchmark values of sales by product.

31.  A value added tax (VAT) or sales tax system may be able to provide data on sales by type of enterprise. Such a tax system may also divide sales into different product categories if different tax rates are applied.

32.  It is necessary to identify which sales are indicators of household consumption, among the different sales by retailers and consumer services. The systems used to collect other taxes, such as taxes on car repair, window cleaning, special sea foods or tobacco, may also be a potential source of information.

33.  Some countries conduct continuous household expenditure surveys. If the results are processed on a timely basis by quarter, they could be useful indicators for QNA. In this case the problem of some small or sensitive items and some durable products should be considered. The expenditure data in such cases may not be clear in household expenditures. Behavior of respondents is important.

34.  On the other hand, household surveys ensure good coverage of purchases from informal, small-scale retailers and service providers. These are difficult to cover in business surveys, but the purchaser has no reason to understate this expenditure. This is favored in developing and transition economies because they cover purchases from informal activities. In countries with small informal sectors, business surveys may be preferred. In this case there will be a decrease in collection cost and delay.

35.  We can have some other useful indicators for some of the components of household consumption for QNA. This situation happens, where there are a small number of large suppliers in an economy. Good information can sometimes be collected from these suppliers, specifically for QNA. Some examples are supply or sales to residences of households of electricity and gas, sales of some kinds of transportation services, sales of communication services, gambling services, sales of water and etc.

36.  We can conduct continuous household expenditure surveys in our country, but use the above indicators as complementary information also. In this case, we can lower the number of consumer products investigated in the surveys and lower the investigation cost.

37.  Let’s pay attention to a situation: estimation by indicators from retailers and service providers’ may contain expenditure by residents when abroad, and expenditure by nonresidents while in the country. In this case an adjustment is needed. Balance of payments statistics, if available on a quarterly basis can help us in this respect.

38.  Retailing investigation for the quarterly estimation of household expenditure will be fine when the informal retailing is not important in the country. When a significant part of retailing is informal, surveys of retailers will not have complete coverage, so household expenditure surveys, or the commodity flow method can provide better quarterly estimation of consumer products.

39.  For the consumption of dwelling services, volume indicators can be used. Using a volume index on the basis of the number of dwellings, or a proxy index based on the population change, will be fine. Separate calculations by the area of location and types of dwellings will improve the estimations.

40.  For some services such as insurance, education and health, the relevant indicators may be obtained from government regulation. Motor vehicle regulation on the other hand may provide indicators for the volume of vehicle purchases. Purchases of cars and other light vehicles, from businesses and government can be included.

41.  Other administrative data can be used as indirect indicators. For example, number of divorces as a potential indicator for legal services, total numbers of cars and road accidents for vehicle repairs.

42. Considering the government final consumption expenditure  Government accounting data are often available on a monthly or quarterly basis. The most important need for QNA is to have expenditures classified by economic type. That is: consumption of goods and services, capital formation, other expenditures, and data on offsetting sales. Even if not published, the data may be available on request.

43.  Government accounts are traditionally prepared on a cash basis. Their timing can be determined by political or administrative concerns. Accrual accounting has already been introduced by some governments, and the IMF manual of Government Finance statistics recommends accrual accounting.

44.  The scope of government consumption and general government output differ in that government consumption is equal to: general government nonmarket output; less own account capital formation included in output; less any sales and fees recovered; plus purchases that government provides free to households; without processing.

45. Final consumption expenditures by Nonprofit Institutions Serving Household  Data for some larger institutions may be published or available on request. Governments may be a good source of statistical indicators if they monitor or support these institutions. Balance of payments data may be an important indicator in countries where foreign aid is a major source for these institutions.

46. Gross fixed capital formation  Annual and quarterly surveys of capital expenditures by businesses are preferred sources of capital formation data, but this can be very expensive on a quarterly basis. Where a VAT system requires capital and intermediate purchases to be split, a useful indicator of capital formation can be obtained.

47.  Own account production of capital can be important in some cases, including construction, computer software and entertainment works. These can be hard to include other than directly in surveys.

48.  In many countries, construction requires permits, or construction licenses from local or regional governments. The permit system can be used as a source for estimates of construction in the national accounts.

49.  Speculative construction raises special issues regarding valuation and timing. Speculative construction is regarded as inventories of work in progress. Surveys of builders or building permits, or construction licenses can be designed. Extra information would also need to be collected to separate speculative constructions.

50.  Construction in rural areas in developing countries is often carried out by households on their own account, and made with their own labor, outside the scope of official permits. A household survey may provide information on the numbers of households involved and the cost of materials. Labor cost can be estimated according to wages for similar work in the local market.

51.  Measures of the total supply of building materials to domestic market may be helpful in some respects. It will be equal to: Output + Imports – Exports. A lag factor may be included. From factory and customs frontier, until they are incorporated in construction.

52.  The advantages of the building materials method are the ready availability, and data inclusion of informal and unapproved work. Here the limitation is that it assumes a stable relationship between building materials and output. Preferably this method would only be used quarterly.

53. Equipment  Four sources for measuring equipment. 1.Survey data on supply of capital goods. 2.Survey data reported by the purchasing businesses. 3.VAT data on purchases of capital goods, where indentified from intermediate goods. 4.Registration data from government.

54.  Supply = value of domestically produced capital goods + Imported capital goods – Exported capital goods. Deductions should also be made for those used for intermediate consumption (for repairs), final consumption, added to inventories, and company cars sold secondhand to households.

55.  Like construction, government finance data could be used to obtain government capital formation of equipment, and then a private total could be calculated as a residual.

56. Other fixed capital formation  The estimation of computer software is easier by supply data. Demand data are complicated because all businesses are involved in using software. Supply = Domestically software developing + Imports – exports. Need to be aware that the above data, have a limitation, because softwares are mostly for household consumption. Where own account developments are important, data should be collected in surveys.

57.  Indicators for other intellectual property products are less commonly available. If significant a survey could be considered. In some cases, administrative requirements for copyright registration or mining exploration permits can be used as an indicator. Even in those cases, the timing of registration or license can differ substantially from the time of activity.

58.  For the gross fixed capital formation on cultivated fixed assets or biological resources, the data are less commonly available. It seems that one suitable indicator can be determined from the agricultural surveys, and considering the past experiences to get a ratio of this part of fixed capital formation to the rest of it. Then using the ratio for the estimation of quarterly value of referred fixed capital.

59. Acquisitions less disposals of valuables  Valuables are mainly purchased by households. Households may not express their purchases in this respect. A suitable VAT system can provide a fine indicator for the estimation of household purchases. Only sale of valuables by households to units except households may be included and asked in the household expenditure surveys.

60. Changes in inventories  Inventories consist of finished goods, work in progress, goods for resale, raw materials, and auxiliary materials. Work in progress is also part of output, but is harder to quantify than finished goods, because the product is incomplete. A ratio of the costs performed in the quarter to the total cost of the work can be estimated.

61.  Inventory change represents the difference between the total demand, which is the sum of other components of GDP expenditure, and total supply. Without inventory change, the expenditure estimates would show demand, not production.

62.  So, one way for the estimation of inventory change is the residual approach. This will be possible if there is a complete measure of GDP from the production approach and estimates are available for all other expenditure categories.

63.  In practice, attention can be confined to those components of inventories that are important. For instance, quarterly surveys could be limited to miners, manufacturers, wholesalers, and retailers.

64.  Value of inventory changes can generally be better calculated with higher frequency data. Higher frequency data reduce the possibility of uneven price and volume movements within the period.

65.  If monthly data are available, the calculation should generally be done on a monthly basis for use in quarterly estimates. These factors all need to be assessed in light of each country’s condition.

66.  Work in progress becomes more important in QNA. If the work in progress is own account or the owner of the work is determined by contract, it will be considered part of the gross fixed capital formation, otherwise it will be inventory change. It may be possible to introduce a ratio from past experiences in this case and specify the categories.

67. Exports and Imports of goods and services  Countries that compile QNA data, typically have a well developed system of trade and balance of payments statistics that produce quarterly data on trade of goods and services.

68.  Merchandise data are derived from customs records, surveys of trading enterprises, or both. Services data are typically derived from specific surveys, administrative systems, and international transaction reporting systems.

69. Peace and progress with you country. Thank you Good luck with you.