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Revision Analysis for General Economic Statistics. Henning Ahnert European Central Bank. OECD Short-term Economic Statistics Working Party 26-28 June 2006, Paris. 2. Motivation. ECB discussion February 2006:

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Revision Analysis for General Economic Statistics

Henning Ahnert

European Central Bank

OECD Short-term Economic StatisticsWorking Party 26-28 June 2006, Paris


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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


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Basic features of the analysis (I)

  • Selected key indicators:

    • GDP & expenditurecomponents & 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


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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

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Timeliness and coverage

Euro area: timeliness and country coverage rates

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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

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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

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Current data minus first release

First release

Current data

1.3

1.3

1.1

1.1

0.9

0.9

0.7

0.7

0.5

0.5

0.3

0.3

0.1

0.1

-0.1

-0.1

-0.3

-0.3

-0.5

-0.5

99Q1

02Q3

03Q1

03Q3

04Q1

04Q3

05Q1

05Q3

99Q3

00Q1

00Q3

01Q1

01Q3

02Q1

GDP

Euro area GDP volume growth

(seasonally adjusted; quarter-on-quarter growth rate)

 (Recently) stable results and no bias(t+45)

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Euro area and country GDP revisions

Euro area revisions smoother

than country revisions

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HICP

Euro area annual HICP

(non-adjusted; annual growth rate)

 Very reliable flash estimate (t+0)

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Unemployment

Euro area unemployment rate

(seasonally adjusted)

 Revisions due to conceptual changes (t+30)

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Industrial production (I)

Euro area (s.a.; month-on-month growth)

 Relatively volatile on a monthly basis ... (t+35)

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Industrial production (II)

Euro area (s. a. 3 months moving average; month-on-month growth)

 ...less volatile 3 months moving average

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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

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Industrial production (IV)

Revision indicators - euro area and selected countries

  • 3 groups; broadly corresponding to country size ?

  • Significant successive revisions in euro area

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Retail trade turnover (I)

Euro area (s.a.; month-on-month growth) (t+35)

 No bias, but very unstable (improving in 2005?)

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Retail trade turnover (III)

Revision indicators - euro area and selected countries

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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 policiesmay further stabilise euro area statistics

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