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U.S. Producer Price Index for Commercial and Industrial Machinery and Equipment Maintenance and Repair NAICS 811310. Bonnie Murphy Chief, Branch of Industry Pricing Division of Industrial Prices & Price Indexes U.S. Bureau of Labor Statistics 27 th Voorburg Group Meeting Warsaw, Poland - PowerPoint PPT Presentation
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U.S. Producer Price Index for Commercial and Industrial Machinery and Equipment Maintenance and Repair
NAICS 811310
Bonnie MurphyChief, Branch of Industry Pricing
Division of Industrial Prices & Price Indexes
U.S. Bureau of Labor Statistics27th Voorburg Group Meeting
Warsaw, Poland2 October 2012
Agenda Definition of the service being priced Pricing unit of the service Market size Classification structures National accounts concepts Pricing methods Quality adjustment Evaluation of comparability with
turnover/output measures Summary
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Definition of the Service
Primary output is the repair and/or maintenance of commercial and industrial machinery and equipment.
Inspection and testing services when performed in conjunction with repair or maintenance services are also considered primary to this industry.
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Pricing unit of measure
For most service items: per repair or maintenance job
For maintenance contracts: per month or per year
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NAICS 811, Repair and Maintenance
Turnover by NAICS 4-digit codeSource: 2007 Economic Census
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The U.S. PPI currently only produces indexes for NAICS 8113.
NAICS 811, Repair and Maintenance
Employment by NAICS 4-digit codeSource: 2007 Economic Census
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Classification Structures
NAICS 811310, Commercial Machinery Repair and Maintenance, includes repairs classified in all 4-digit classes in ISIC 331, Repair of fabricated metal products, machinery and equipment
NAPCS codes for 8113 are based on the industry where the repaired product is used. For example, NAPCS 1.1.1 is Maintenance and repair
services for agricultural machinery and equipment
CPC classes and subclasses are based on the type machinery being repaired 7
National Accounts Concepts
Commercial and industrial machinery repair and maintenance are considered intermediate services in the U.S. accounts and are not included in estimates of final demand
The U.S. PPI for NAICS 811310 is not used by BEA as these intermediate services are not deflated in the U.S. National Accounts
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Pricing Methods
As most services in this industry are customized, the U.S. PPI uses model pricing to fix the inputs used to produce the service. The model prices incorporate aspects of the
component pricing method as fees are derived based upon labor charges, charges for parts and any surcharges or discounts.
Short term maintenance contracts are priced with the direct use of prices for repeated services method.
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Pricing Methods (continued)
Long term maintenance contracts (those more than two years in duration) typically include escalator clauses as more maintenance is needed as equipment ages. The U.S. PPI sums the yearly prices as the
escalator clauses can produce price increases that are not necessarily inflationary.
The summed price represents prices that are received from both old and new contracts.
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Example - Long term maintenance contract
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Year Monthly Rate
Year 1 $100
Year 2 $150
Year 3 $300Calculated Summed Rate
for Year 3$550
Year Monthly Rate
Year 2 (old contract) $150
Year 3 (old contract) $300
Year 4 (new contract) $125Calculated Summed Rate
for Year 4
$575
Quality Adjustment
When item substitution is necessary, cost data and previous pricing information is often available. This allows the U.S. PPI to use the overlap
method frequently.
When previous pricing information is not available, the items are not compared and the differences in prices are not shown in the index.
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Evaluation of comparability with turnover/output measures
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U.S. Census Bureau publishes a large amount of turnover data for this industry every five years.
The U.S. PPI currently only publishes data at the six-digit NAICS level.
Summary
The U.S. PPI has limited coverage in the Repair and Maintenance sub-sector – only ~19% of turnover.
Classification comparisons between NAICS 811310 and ISIC is not straightforward as this industry contains repair services that are included within all Classes of ISIC group 331.
Long term maintenance contracts present price measurement challenges.
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