1. African Centre for Statistics United Nations Economic Commission for Africa Expert Group Meeting Handbook on SUT: Compilation, Application, and Good Practices Economic Statistics and National Accounts Section African Centre for Statistics 24-28 October 2011 Kaleb Hotel, Addis Ababa, Ethiopia

2. African Centre for Statistics Outline of Presentation Chapter 2: “The Use of Commodity Flow Approach: Consistency and Missing Values” Commodity flow: Concepts and Formula Application and examples of commodity flow: –Filling missing value: Household consumption expenditure of poultry meat –Consistency check: Household consumption expenditure of tobacco

3. African Centre for Statistics Commodity Flow: Basic SUT Equation DP + IMP = IC + GFCE + HFCE + NPISH + GFCF + Δ INV + EXP »DP: Domestic production »IMP: Imports of goods and services »IC: Intermediate consumption »GFCE: Government final consumption expenditure »HFCE: Household final consumption expenditure »NPISH: Final consumption expenditure of non-profit institutions serving households »GFCF: Gross fixed capital formation »Δ INV: Change in inventories »EXP: Exports of goods and services

4. African Centre for Statistics Commodity Flow: Modified Equation DP + IMP + TM + TC + TAX – SUB = IC + GFCE + HFCE + NPISH + GFCF + Δ INV + EXP »TM: Trade margins; »TC: Transport costs; »TAX: Taxes on products; and »SUB: Subsidies on products (minus).

5. African Centre for Statistics Commodity Flow: Functions Commodity flow: When the equation is used for an individual good or service it is usually described as “commodity flow.” Functions of commodity flow: –Ensuring consistency between the supply and uses side –For estimating a missing values, either on the supply or uses side

6. African Centre for Statistics Commodity Flow: Application Application and examples of commodity flow: –Filling missing value: Household consumption expenditure of poultry meat –Consistency check: Household consumption expenditure of tobacco

7. African Centre for Statistics Filling Missing Value: Information Poultry meat: missing value for household consumption expenditure Information: All poultry is domestically produced. –The total numbers of poultry in the country, take-off (slaughter) rates and average prices per bird obtained from various sources such as the Ministry of Agriculture and the Veterinary Department. –Pet food manufacturers have reported purchases of 1,000 and –Exports of poultry meat come to 45.

8. African Centre for Statistics Filling Missing Value: Assumptions Poultry meat: missing value for household consumption expenditure Assumptions : –Transport charges = 1% of the value of domestic production –Retail margins on poultry for domestic consumption are estimated at just over 2%. –“Other trade margins” to represent the margin on sales of poultry meat to the pet food manufacturers = 10 –Inventories are always very small because of the problems of storing the slaughtered poultry for any length of time so it is reasonable to assume zero change in inventories.

9. African Centre for Statistics Box 1. CF Calculation for Poultry

10. African Centre for Statistics Filling Missing Value: Conclusions Conclusions from the Commodity Flow Framework: –HFCE on poultry (5660) = the estimated TS at purchasers’ prices (6,705) – total known uses at purchasers prices (1,045) Three firm pieces of information: –Domestic production of poultry –Purchases by pet-food manufacturers for intermediate consumption, and –Exports of poultry Estimates: –Trade margins –Transport costs –Changes in inventories

11. African Centre for Statistics Consistency Check: Information Consistency check: Household consumption expenditure of tobacco Last HES reported expenditure on tobacco at 7,000. Updating this value by the CPI gives 8,000 for the current year. The latest industrial census shows domestic production at basic prices came to 8,200. Imports (c.i.f.) are 1,200. MoF reports that sales taxes and import duties on tobacco, which are each levied at a rate of 5%, amounted to 940 for the year. The tobacco companies reported a fall in inventories of tobacco of 10. Exports of 350 were recorded in the merchandise trade statistics.

12. African Centre for Statistics Consistency Check: Assumptions Consistency check: Household consumption expenditure of tobacco There is no firm information on trade margins or transport costs. Some assumptions will be needed: –A trade survey some years showed that wholesale and retail margins added about 10% to the basic prices plus excise taxes so trade margins are set at 10% or 1,340. –A neighboring country made a transport survey recently and found that for all consumer goods, transport margins were about 3% of values at basic prices plus product taxes. Transport charges are estimated at 3% or, roughly 300.

13. African Centre for Statistics Box 2. CF Calculation for Tobacco

14. African Centre for Statistics Consistency Check: Conclusions The commodity flow method is used to check the consistency of our estimates. The problem is that our estimate of total supply is bigger than our estimate of total uses by 3,640. Now what? All the supply components are based on reliable sources and the taxes received are consistent with the value of domestic production and imports. Similarly, the change in inventories and the value of exports are considered to be fairly firm estimates. HESs are renowned for underestimating the true value of tobacco consumption and so the estimate of 8,000 from the household expenditure survey is replaced by 11,640, which is the balance between the total supply (11,980) and the uses other than household final consumption expenditure (340).

15. African Centre for Statistics Comments and Suggestions Through two examples, Chapter 2 clearly demonstrates how to apply of the commodity flow approach in (a) filling the data gaps and (b) consistency check. As in Chapter 1, there are some other uses of SUT in addition to the above two, it would be very helpful if similar examples are also provided to those uses.

16. African Centre for Statistics Points for Discussion How useful is the “commodity flow approach” according to your experience? What are the other uses of the “commodity flow approach” besides filling the data gaps and consistency check? What data sources do you normally use for applying the “commodity flow approach”? What estimating methods do you often use in your countries when the data are not available?

17. African Centre for Statistics United Nations Economic Commission for Africa Thank you Please visit us at Website: http://ecastats.uneca.org/http://ecastats.uneca.org/