1. 1 Calculation of unit value indices at Eurostat Training course on Trade Indices Beirut, 14-16 December 2009 European Commission, DG Eurostat Unit G3 International Trade Statistics - Production

2. 2 Eurostat approach to calculation of unit value indices (1) Eurostat is responsible for the calculation of UVIs for the EU and euro area: –There are no legal requirements for the EU Member States to calculate UVIs or to transmit them to Eurostat –There are, however, legal requirements to transmit detailed intra- and extra-EU trade data to Eurostat on monthly basis –=> Eurostat approach is to compile the UVIs by using the detailed trade data rather than requesting Member States to transmit their UVIs

3. 3 The EU approach to calculation of unit value indices (2) Why such an approach is chosen and its benefits: –To fulfil various Community needs: the main users are the Commission and ECB whose interest is for the EU aggregates (EU and euro area) –To harmonise the methodology: the use of harmonised compilation method and data ensures consistency of the EU aggregates and comparability over the Member States –To minimise burden: Member States are requested to transmit only detailed data, not to implement an index calculation system according to a harmonised methodology –To ensure flexibility: new indices can be calculated easily in the case of EU or euro areas enlargement –To ensure completeness: all relevant classifications and breakdowns (product or geographical) can be used The main problems: –Possible differences between the UVIs calculated by an EU Member State and by Eurostat –Data transmitted to Eurostat is aggregated at CN8/partner country level: “the composition problem” and the impact of outliers can be stronger

4. 4 Eurostat UVI compilation procedure Current methodology and application in use since 2000 Fully automatic system, no manual intervention during the calculation procedure The procedure has six phases: 1.Extraction of basic data 2.Calculation of the unit value changes 3.Data validation and correction 4.Aggregation and weighting 5.Chaining 6.Dissemination Duration of the procedure: 2 to 3 working days

5. 5 Phase 1: Extraction of basic data Indices are based on detailed data extracted from Comext –Monthly detailed data sent by the EU Member States –Deadlines for the Member States to deliver basic data to Eurostat: 40 days after the reference period for extra-EU data 70 days after the reference period for intra EU data Once a month basic data is extracted from Comext –Compilation of the indices takes place at the same time as production of press release Revisions of basic data are frequent –Every month new indices are calculated not only for the most recent month but also for previous months of the same year –Indices are also calculated for the previous years, depending on the revisions of basic data and other reasons

6. 6 Phase 2: Calculation of the unit value changes Calculation of the unit value changes (elementary UVIs) –Unit value = trade value / quantity –Net mass is used as quantify except if supplementary units exists –Unit values of the current month are divided by the average unit values of the previous year in order to obtain elementary unit value indices –Calculated at the most detailed level of data : all flow/reporter/partner/product combinations are calculated Flow: Imports and Exports Reporter: each EU 27 Member State Partner: all detailed intra- and extra-EU partner countries Product: all CN8-codes

7. 7 Phase 3: Data validation (1) After the calculation of elementary UVIs, unsuitable product codes and records with outliers need to be excluded from the calculation of final UVIs Unsuitable product codes –Each year, a list of the CN-codes is created for each EU Member State, to exclude unsuitable CN8-codes –Codes excluded if there is no significant correlation between value and weight/supplementary unit

8. 8 Phase 3: Data validation (2) Records with outliers –All records are validated by checking the change of unit values from the previous year and previous month –Validation is based on the assumption that although the levels of unit values may differ between the product codes and reporting EU Member States, the changes in the unit values are nevertheless similar within a specified group of products, for instance unit values of all energy products develop in a similar way –All records are allocated to “blocks” (groups of observations by flow - reporter – partner – product SITC at 3-digit level) –All records within the block are tested against the median unit value change of the block –Accepted if the unit value change belongs to [0.5;2.0] interval –Coverage rate (= share of accepted items with respect to total trade) on average 70-75 %, in terms of trade value

9. 9 Phase 4: Aggregation and weighting Elementary UVIs aggregated over reporter and partner aggregates and by several product classifications Both base-weighted (Laspeyres) and current-weighted (Paasche) non-chained indices are calculated Only records which have been accepted in the validation process are used for weighting of UVIs All records are nevertheless used in the weighting of value index, in order to obtain consistent volume indices

10. 10 Phase 5: Chaining Fisher indices are calculated from Laspeyres and Paasche non-chaned indices and chained back to the reference year Reference year: 2000 (2000 = 100) Volume indices are derived by dividing the value indices with corresponding unit value indices Quarterly and annual indices are derived from the monthly indices

11. 11 Phase 6: Dissemination Lot of possible reporter/partner/product combinations are calculated but not all of them are suitable for dissemination due to qualitative reasons (low coverage rates, breaks in the series, volatility) Two groups of indices are disseminated: 1.Detailed partner countries and aggregated products 2.Aggregated partner countries and detailed products Partner countries –Aggregated partners: Total, Intra/Extra EU, Intra/Extra euro zone –Detailed partners: Large number of individual partner countries and partner aggregates Products –Aggregated product classifications SITC at 1-digit level CPA at 2-character codes level –Detailed product classifications SITC at 2-digit level BEC CPA at 2- and 3-digit level

12. 12 Thank you for your attention ! Questions ?