Revision Analysis for General Economic Statistics Henning Ahnert European Central Bank OECD Short-term Economic Statistics Working Party 26-28 June 2006, Paris

Motivation ECB discussion February 2006: Revision of initial (low) GDP growth estimate for 2005Q4 cannot be excluded; volatility of short-term data Recent press quotes : Initial estimate may underestimate 2005Q4 GDP growth (JP Morgan) Europe’s statisticians too gloomy (The Economist)  ECB Revision analysis 2

Basic features of the analysis (I) 3 Basic features of the analysis (I) Selected key indicators: GDP & expenditure components & compensation Employment & Unemployment HICP and Labour Cost Index Industrial production & Retail trade turnover Euro area, six largest euro area countries, UK, US, Japan Data sources: Eurostat, ECB, OECD 3

Basic features of the analysis (II) 4 Basic features of the analysis (II) Revisions are necessary ! Low revisions do not prove accurate measurement Revisions may incorporate new information, conceptual changes, changes in seasonal and working day adjustment factors etc. Euro area statistics: harmonisation, improved timeliness, changes in country coverage have led to welcome changes and revisions 4

Timeliness and coverage 5 Timeliness and coverage Euro area: timeliness and country coverage rates Indicator Timeliness Country coverage rate Early-1999 End-2005 GDP 75 45 77 94 Industrial production 104 47 85 97 Retail trade turnover 90 33-36 70 5

Main results for euro area statistics 6 Main results for euro area statistics more stable than euro area country data  main reason: revisions ‘cancel out’ but: small GDP revisions coincide with low growth monthly indicators (e.g. retail trade) less reliable than quarterly indicators 6

Main results by country 7 Main results by country Six largest euro area countries: revisions in 1999/2000 higher (new statistics) revisions vary from relatively low (for GDP) to rather high (for retail sales) UK: as largest euro area countries US: higher revisions for GDP and employment, comparable revisions for other variables (but typically higher growth rates!) JP: higher revisions for GDP and retail sales, employment and unemployment hardly revised 7

GDP Euro area GDP volume growth 8 GDP Euro area GDP volume growth (seasonally adjusted; quarter-on-quarter growth rate)  (Recently) stable results and no bias (t+45) -0.5 -0.3 -0.1 0.1 0.3 0.5 0.7 0.9 1.1 1.3 99Q1 99Q3 00Q1 00Q3 01Q1 01Q3 02Q1 02Q3 03Q1 03Q3 04Q1 04Q3 05Q1 05Q3 Current data minus first release First release Current data 8

Euro area revisions smoother than country revisions 9 Euro area and country GDP revisions Euro area revisions smoother than country revisions 9

HICP Euro area annual HICP  Very reliable flash estimate (t+0) 10 HICP Euro area annual HICP (non-adjusted; annual growth rate)  Very reliable flash estimate (t+0) 10

Euro area unemployment rate 11 Unemployment Euro area unemployment rate (seasonally adjusted)  Revisions due to conceptual changes (t+30) 11

Industrial production (I) 12 Industrial production (I) Euro area (s.a.; month-on-month growth)  Relatively volatile on a monthly basis ... (t+35) 12

Industrial production (II) 13 Industrial production (II) Euro area (s. a. 3 months moving average; month-on-month growth)  ...less volatile 3 months moving average 13

Euro area and selected countries 14 Industrial production (III) Euro area and selected countries (current data minus first release; seasonally adjusted; month-on-month growth)  Country data more volatile – cancels out at euro area level 14

Revision indicators - euro area and selected countries 15 Industrial production (IV) Revision indicators - euro area and selected countries Percentage points  Total revisions (latest minus first release) Successive revisions Memo item: Jan02 – Dec04 Average Average absolute Range of Average cumulative Average monthly revision revisions absolute revision growth rate Euro area 0.10 0.32 -0.7 to 0.9 2.98 Belgium 0.40 1.28 -2.6 to 5.1 7.46 0.15 Germany 0.21 0.59 -1.2 to 1.9 2.36 0.16 Spain -0.04 0.55 -1.6 to 1.3 1.60 0.13 France 0.00 0.77 -1.9 to 1.7 2.43 0.08 Italy 0.04 0.37 1.65 -0.07 Netherlands 0.26 1.66 -4.6 to 7.9 3.89 0.02 3 groups; broadly corresponding to country size ? Significant successive revisions in euro area 15

Retail trade turnover (I) 16 Retail trade turnover (I) Euro area (s.a.; month-on-month growth) (t+35)  No bias, but very unstable (improving in 2005?) 16

Revision indicators - euro area and selected countries 17 Retail trade turnover (III) Revision indicators - euro area and selected countries Percentage points Total revisions (latest minus first release) Successive revisions Memo item: Jan02 – Dec04 Average Average absolute Range of Average cumulative Average monthly revision revisions absolute revision growth rate Euro area -0.01 0.63 -2.4 to 2.1 9.63 0.05 Belgium -0.10 1.03 -3.4 to 2.6 7.70 0.04 Germany 1.56 -6.5 to 3.6 8.75 Spain -0.08 0.67 -2.3 to 1.6 2.57 0.30 France -0.13 1.11 -3.5 to 2.4 1.83 0.09 Italy -0.06 0.43 -1.0 to 1.0 3.50 -0.11 Netherlands 0.12 0.64 -1.8 to 1.7 7.87 17

18 Final remarks Favourable result for most euro area indicators - more stable than country data (revisions cancel out) Experience too short for analysis of “cyclical” revisions, but can revisions be better anticipated? Monthly data very valuable despite higher revisions (timeliness!)… …but can we better understand the reasons for high revisions ? Synchronised national release and revision policies may further stabilise euro area statistics 18