1. Speeding up the unit value process Nordic seminar 15-16 May 2014 Lucie Nan and Herbert van Willenswaard Bridging the gap between model prices and unit values

2. The issue –Unit value statistics come last in SPPI publication ‐model price statistics are published at T+45 ‐unit value published at T+90 ‐STS turnover at T+60 ‐national accounts at T+45 flash, T+90 regular –Some 2-digit NACE contain both methods –Can we find a way to speed up the unit value process so we can publish the complete SPPI at T+45? –Thus enhancing the added value for STS and NA. 2

3. The cause of the issue –Bottleneck: moment of survey –Model prices are surveyed after first month of the quarter, companies report prices in middle of the quarter –Unit values are surveyed after completion of the quarter, companies have to report value and units over the entire quarter 3

4. A simple idea for a solution –The time period for which unit values are calculated should be the “longest period which is short enough so that individual variations in price within the period are regarded as unimportant” (Diewert, 1995a). Could this mean that unit values of 1 or 2 month(s) may represent unit values of an entire quarter? Could we start the survey after the first month of the quarter? –For instance, CPI uses 3 weeks of scanner data for monthly unit values 4

5. Example with real data from a major IT consultancy company –Time series from 2012Q1=100 to 2013Q4 –Data of 35 specified jobs (anonymised) –Average price = total revenues/total hours worked –Calculated for 3 types of period ‐first month of quarter ‐first and second months of quarter ‐all three months of quarter –Company index calculated by unweighted arithmetic average 5

6. Examples of indices of 4 distinct jobs (service products) 6

7. Job 1 7

8. Job 2 8

9. Job 3 9

10. Job 4 10

11. Index of company Unweighted arithmetic average of 35 job indices 11

12. The advantages of speeding up –Survey, calculation, analysis and publication in one cycle per quarter –Accelerated publication of STS price statistics –STS turnover statistics have more timely price development as reference –NA can be based on more timely price development data –A more reliable ISP publication becomes possible 12

13. The disadvantages of speeding up –Costs of process changes (investment) –Possibly less accurate statistics –Risk of more volatility –Possibly some costs for respondents to change their reporting (investment) –? 13

14. Some issues that need further research (1) –The service price may not vary too much in a quarter, otherwise price developments could be overestimated or missed –Seasonal patterns are a risk if not restricted to the shorter survey period –Does a shorter reporting period reduce the administrative burden, or could the burden increase? 14

15. Some issues that need further research (2) –Is this idea applicable in all unit value service industries? –Do companies have fixed moments of billing? 15

16. Some thoughts about administrative burden –In the Netherlands we use VAT data as input for our STS of turnover –Companies have to report VAT on a monthly, quarterly or yearly basis –Reporting frequency depends on how much turnover a company generates –In our SPPI sample, we can identify the companies that report VAT on a monthly basis (these are the larger companies) 16

17. Three scenarios I We change nothing –Keep publishing at T+90 –Keep quality constant –Keep hybrid 2-digit CPA categories –Keep two-track production process –Keep being too late to be used as input for other statistical output 17

18. Three scenarios II –We use the larger companies as a panel for the reduced period unit value SPPI –We deliver a good quality early provisional SPPI around T+45 (T-1 becomes definite) –We collect smaller companies after quarter is finished –We deliver a better quality second provisional SPPI at T+90 Issues: smaller companies might feel useless and stop reporting. Production process is still divided. 18

19. Three scenarios III –We opt for the reduced period unit value SPPI and adapt the panel accordingly where necessary (PPS sample) –We deliver a good quality provisional SPPI around T+45 (T-1 becomes definite) Issue: some (smaller) companies might not be able to report monthly data 19

20. Three scenarios matchup ScenariosInitiation costs ProcessTimelinessQualityAdmini- strative burden I++-- ++ II---++/-+ III-++ +/- 20

21. How can you help? –Who has tried - or knows of attempts - to speed up the unit value SPPI in their office? –If this didn’t succeed, could you tell us why? –If this did succeed, could you tell us how? 21

22. Practically the same result at different speeds: it’s mind boggling. 22