PRODUCER PRICE INDEX FOR SERVICES Technical testing and analysis (NACE Rev. 712)

1. PRODUCER PRICE INDEX FOR SERVICESTechnical testing and analysis (NACE Rev. 712) Helsinki Nordic SPPI Seminar 03.06.2009 Elina Pääkkö Statistics Finland

2. 712 Technical testing and analysis • The purpose of technical testing and analysis services is usually to meet the demands of the law or otherwise confirm safety and reliability of companies’ products and procedures. • Mainly business to business activities

3. Classification: 712 Technical testing and analysis • Includes the performance of physical, chemical and other analytical testing of all types of materials and products, such as: • testing of composition and purity of minerals • testing activities in the field of food hygiene • testing of physical characteristics of materials; strenght, thickness, durability, radioactivity etc. • qualification and reliability testing • performance testing of complete machinery • failure analysis • testing and measuring of air and water pollution etc.

4. Classification: 712 Technical testing and analysis • Certification of products, including consumer goods, motor vehicles, aircraft, pressurised containers, nuclear plants etc. • Testing with use of models or mock-ups (e.g. of aircraft, ships, dams etc.) • Operation of police laboratories • Periodic road-safety testing of motor vehicles • In TOL 2008 technical testing is divided into • 71201: Periodic road-safety testing of motor vehicles • 71202 Other technical testing and analysis

5. Industry in Finland • According to Business register turnover in year 2007: 350 million EUR, in service sector total <1 % • In Finland technical testing and analysis is divided into periodic road-safety testing of motor vehicles and other testing and analysis services. • Periodic road-safety testing of motor vehicles covers nowadays for about 40 % of the total industry turnover.

6. Industry in Finland • Few major companies and large number of smaller testing and analysis services providers in the industry • Many of the major companies are subsidiaries of multinational companies • Small companies usually focus on specific areas of testing and analysis, while major companies have a wider range of services.

7. Industry turnover 2001-2007

8. Finnish SPPI in technical testing and analysis • Start of development in 2003 • Combination of CPI and SPPI survey • At first prices where collected backwards • Finland publishes 712: Technical testing and analysis on three digit-level • Weight in total SPPI 2 %

9. Sample • The sampling frame consisted of all technical testing and analysis service providers, which are included in the business register • The sampling frame was first divided into inspection of motor vehicles and other testing and analysis services • CPI already covered partly periodic road-safety testing of motor vehicles, so CPI survey was expanded to cover SPPI relevant data • The sample from other testing and analysis services providers was selected using discretion • not all companies classified as technical testing and analysis services providers in the business register are actually in this line of business

11. Pricing method: 71201 Periodic road-safety testing of motor vehicles • Service includes a certain standard set of tests for different kinds of vehicles. • Since the service performed is always the same, companies providing periodic road-safety testing of motor vehicles usually have tariff systems for different kinds of vehicles. • This testing service is targeted to both consumers and companies especially concerning cars, as the inspection is required by law. • The price depends only on the size of a car, so companies and consumer have the same price. Other vehicles are usually for business purposes. • Inspection of motor vehicles is usually a repeated standard service: rather simple, non unique -->Direct use of prices of well-specified services • Existing tariff systems on the most important testing services can be used as price quotations

12. Pricing methods: 71202 Other technical testing and analysis • Wide range of services, because of the large variety of products and characters being tested, testing methods and standards • majority of services one-off, rather complex • Price of a test depends on the product and the character being tested, testing method and standard used, number of samples, quickness of results • Pricing based on time use is a poor price indicator because tests performed during an hour can vary extremely. • Recurring test services can be found: food production control, purity tests, air and water pollution tests etc. -->Pricing based on actual contracts and model prices

13. Pricing methods: 71202 Other technical testing and analysis • Price of a certification consists of the initial testing and annual testing to insure that the characters of a product have not changed • in addition to the first testing payment, a company has to pay an annual fee in order to keep a certificate • required tests depend on the characters of a product, every product needs a different set of tests • Companies providing testing services usually base their pricing on time use • Time used in testing depends on complexity, size etc. of a product --> Model pricing preferred

14. Pricing methods: 71202 Other technical testing and analysis • Pricing based on time use • Alternative method • Particularly concerning certification because this kind of services are often rather complex and unique. • This kind of information could be rather easily available from companies. • Pricing based on time use is however a poor price indicator because tests and analysis performed during an hour can vary extremely. • Because tests need to be carefully defined so that the service remains constant, it is easier to price the test itself rather than hourly rates.

15. Data collection • Periodic road-safety testing of motor vehicles: 20 data providers (CPI), • Other testing and analysis: 4 data providers • Total 132 price quotations • Prices in periodic road-safety testing of motor vehicles are transaction prices (no discounts). Data on inspections of different motor vehicles is provided by CPI. • Other testing and analysis: • mostly list prices (hourly rates, €/certificate, €/test) • some model prices (€/test) • Prices are collected quarterly via email or web

16. Service groups are enterprise-specific • Some examples: • Inspections • Inspection of structure plans (+definition), €/hour • Inspection of pressure chamber (+definition), €/inspection • Testing • EMC testing of an data communications device, €/test • Validation • Tuning of a measuring device (+definition), €/hour • Tuning of a measuring device, Fluke 250, €/tuning • Certificating • XXXX Evaluation, €/evaluation, €/hour • Annual payment, €

18. Micro level weights between main groups

19. Quality issues • Once services selected to price collection are well defined, there should be no problems with quality issues • It is essential to carefully define all the factors that influence pricing and try to select those services that are most representative from that the point of view • Controlling representativeness of services • regular updating of services and weights is important

20. Results: Technical testing and analysis SPPI

21. Challenges • In Finland a large number of laboratories are classified under 72 Research and experimental development on natural sciences and engineering (NACE) in the business register. • This causes difficulties in finding out the share of commercial technical testing and analysis of their turnover. Therefore laboratories are not included in the Finnish PPI. Finland is considering expanding the price collection also to laboratories in the future. • Product level sample frame in 2010 (SBS) • Defining model services difficult

22. Thank you! Contact: Statistics Finland Elina Pääkkö elina.paakko@stat.fi tel. +358 9 1734 3725