ICP Expenditure Classification PROPOSED CHANGES 3nd Regional Coordinating Agencies meeting Oct 28-30, 2015 Washington DC

PROBLEM Participating economies are required to provide a detailed breakdown of their final expenditure on GDP in line with the ICP expenditure classification: the 2005/2011 classification Important to have reliable estimates of expenditure on GDP at the BH level: aggregation of PPPs; converted to real expenditures Participating economies find it difficult to break down their expenditure on GDP into the 155 BHs of the 2005/2011 classification: too detailed; questionable reliability Review the 2005/2011 classification: simplify (less detail); improve (fit for purpose); update (expenditure definitions)

OBJECTIVES To reduce the number of BHs: combining BHs with comparable products To improve the homogeneity of the BHs: splitting BHs found to be too heterogeneous To improve/retain the transparency of the classification by making certain expenditures explicit: either by splitting BHs or by not combining BHs To be coherent with the expenditure classifications of regions with their own comparison programmes (Eurostat-OECD, CIS)

POINTS OF REFERENCE BH coefficients of variations by region: indicator of a BH’s homogeneity (33% critical value) BH weights (share of expenditure on GDP) by region: large weight (possible split), small weight (possible merge) Reference PPPs: could BHs with common reference PPP be combined Required for verification purposes The revised Eurostat expenditure classification (258 BHs) Derek Blades proposals (120 BHs)

Proposed classification BHs OVERVIEW Main aggregate Proposed classification BHs 2005/2009 classification BHs Individual consumption expenditure by households 78 110 Individual consumption expenditure by NPISHs 3 1 Individual consumption expenditure by government 20 21 Collective consumption expenditure by government 5 Gross capital formation 8 16 Balance of exports and imports 2 GDP 115 155

SPLIT BHs Actual rentals for housing 1104111 Actual and Imputed rentals for housing Imputed rentals for housing Expenditure on health 1201111 Individual consumption expenditure by NPISHs Expenditure on education Expenditure on other services

MERGED AGGREGATES 150000 Gross fixed capital formation 150000 Gross Capital formation -.01 Gross fixed capital formation -.02 Changes of inventories -.03 Acquisitions less disposals of valuables 160000 Changes in inventories and acquisitions less disposals of valuables

MERGED BHs: FOOD AND BEVERAGES 1101113 Bread 1101114 Other bakery products 1101171 Fresh or chilled vegetables other than potatoes 1101172 Fresh or chilled potatoes 1101173 Frozen vegetables. preserved vegetables. vegetable-based products 1101122 Pork 1101123 Lamb. mutton & goat 1101131 Fresh. chilled or frozen fish & seafood 1101132 Preserved or processed fish & seafood 1101181 Sugar 1101182 Jams. marmalades & honey 1101183 Confectionery. chocolate & ice cream 1101141 Fresh milk 1101142 Preserved milk & other milk products 1102111 Spirits 1102121 Wine 1102131 Beer 1101151 Butter & margarine 1101153 Other edible oils & fats 1101161 Fresh or chilled fruit 1101162 Frozen fruit. preserved fruit. fruit-based products

MERGED BHs: REPAIRS 1103121 Garments 1103141 Cleaning. repair & hire of clothing 1109111 Audio-visual. photographic & information processing equipment 1109141 Recording media 1109151 Repair of audio-visual. photographic & information processing equip. 1103211 Shoes & other footwear 1103221 Repair & hire of footwear 1109211 Major durables for outdoor & indoor recreation 1109231 Maintenance & repair of other major durables for recreation & culture 1105111 Furniture & furnishings 1105121 Carpets & other floor coverings 1105131 Repair of furniture. furnishings & floor coverings 1105311 Major household appliances whether electric or not 1105321 Small electric household appliances 1105331 Repair of household appliances 1104311 Maintenance & repair of the dwelling 1107231 Maintenance & repair of personal transport equipment

MERGED BHs: MISCELLANEOUS 1104411 Water supply 1104421 Miscellaneous services relating to the dwelling 1107131 Bicycles 1107141 Animal drawn vehicles 1107341 Passenger transport by sea & inland waterway 1107351 Combined passenger transport 1107361 Other purchased transport services 1104521 Gas 1104531 Other fuels 1105511 Major tools & equipment 1105521 Small tools & miscellaneous accessories 1108211 Telephone & telefax equipment 1108311 Telephone & telefax services 1105621 Domestic services 1105622 Household services 1109331 Garden & pets 1109351 Veterinary & other services for pets 1106121 Other medical products 1106131 Therapeutic appliances & equipment 1302112 Other medical products 1302113 Therapeutic appliances & equipment 1109421 Cultural services 1109431 Games of chance

MERGED BHs: GROSS CAPITAL FORMATION 1501111 Fabricated metal products 1501121 General purpose machinery 1501131 Special purpose machinery 1501141 Electrical & optical equipment 1501151 Other manufactured goods nec 1501211 Motor vehicles. trailers & semi-trailers 1501212 Other road transport 1501221 Other transport equipment

MERGED BHs: BALANCING ITEMS 1113111 Purchases of resident households in the rest of the world 1113112 Purchases of non-resident households in the economic territory 1601111 Opening value of inventories 1601112 Closing value of inventories 1602111 Acquisitions of valuables 1602112 Disposals of valuables 1701111 Exports of goods & services 1701112 Imports of goods & services

NEXT STEPS Recalculate 2011 regional and global results using the proposed classification and compare them with the 2011 regional and global results obtained with the 2005/2011 classification Establish whether the proposed classification makes it easier for participating economies to estimate reliable BH expenditures (Can you do this every year?) Determine the impact that the proposed classification will have on product selection and price collection Finalise the proposed classification Adoption and implementation (codes, core lists, regional lists, 2008 SNA)

Thank you for listening Your comments please