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European CommissionDirectorate General Economic and Financial Affairs
Harmonisation of BCS: Aggregation methods
Roberta FrizBusiness and consumer surveys and
short-term forecast (ECFIN A4.2)
EC workshop on recent developments in business and consumers surveysBrussels,15-16 November 2012
2
• Introduction
• Pros and cons of the different methods
• Conclusions and EC aggregation method choice
• Some examples on "old" and "new" series
Outline
3
Introduction
• Survey among partner institutes carried out in 2010 highlighted possible harmonisation problems in aggregation methods used
• In 2011 a Task Force was created with the aim to make recommendations on the best aggregation method of the replies at country level in order (1) to calculate meaningful EU and euro area results that will be easy to interpret and (2) to allow comparison between countries
4
Introduction (2)
Members of the Task Force: BNB (Belgium),
INSEE (France), IOBE (Greece), NIS (Romania),
Statistical Institute of Poland, WIFO (Austria),
NIER and SCB (Sweden), and CBS (UK)
Give contributions on pros and cons of each
aggregation method
Recalculate back series in order to check the
impact of a different aggregation method
5
Questions concerned by the aggregation methods:
Quarterly questions on factors limiting production in
the industry, services and construction surveys
Question on the structure of investment in the
Oct/Nov Investment survey
6
Quarterly question on factors limiting production
What main factors are currently limiting your production (business in the service survey, building activity in the construction survey):NoneInsufficient demandShortage of labour forceShortage of material (space) and/or equipmentFinancial constraints Weather conditionsOther factors
7
Question on the structure of investment in the Oct/Nov Investment survey
Investment carried out this year and planned investment for next year is, or will be, of the following kind (choose appropriate category or categories):
Replacement of worn-out plant or equipmentExtension of production capacityInvestment designed to streamline productionOther investment objectives (pollution control, safety, etc.)
8
Aim of the questions
Objective of the quarterly questions:
to know which are the factors limiting production
and which percentage of firms have any given
problem
Objective of the investment survey:
to have an idea of the shares of investment by
categories (i.e. structure of investment)
9
Pros and cons of the different methods
10
1- Possibility to tick only one factor
Pros:Simple and unambiguous
Straightforward EU and euro-area aggregates
Cons:Loss of information on other factors that may also play a roleNot in line with the original harmonised questionnaire
11
2 - Possibility to tick more than one factor and each "tick" counts as 1
Three possible ways to send the data:
A - Institutes send the data without adjusting: i.e.
the factor add up to more than 100%
B - Institutes send the results rescaling the factors –
including the "none" - in order to sum to 100
C - Institutes send the results rescaling the factors –
excluding the "none" - in order to sum to 100
12
2 - Possibility to tick more than one factor and each "tick" counts as 1
Generally, this method gives a more granular
view of which limiting factors are playing a role
each month
13
2A - Institutes send the data without adjusting
This interpretation seems correct, it reflects the
answers received from the managers
SUM 1+2weight: weight:
100 100 100 300 100 100 100 300 600Factor: Firm A Firm B Firm C Tot Firm A Firm B Firm C TotNone 0 1 0 33% 0 1 0 33% 33%Demand 1 0 1 67% 1 0 0 33% 50%Labour force 1 0 0 33% 0 0 1 33% 33%Material 1 0 0 33% 0 0 0 0% 17%Financial 1 0 1 67% 0 0 1 33% 50%Sum 4 1 2 233% 1 1 2 133% 183%
Country 1: Country 2:
14
2B – Results, incl. "none", are rebased to sum up to 100%
Interpretation could be misleading
Share of "none" is undervalued
SUM 1+2weight: REBASED weight: REBASED REBASED
100 100 100 300 100 100 100 300 600Factor: Firm A Firm B Firm C Tot Firm A Firm B Firm C TotNone 0 1 0 14% 0 1 0 25% 20%Demand 1 0 1 29% 1 0 0 25% 27%Labour force 1 0 0 14% 0 0 1 25% 20%Material 1 0 0 14% 0 0 0 0% 7%Financial 1 0 1 29% 0 0 1 25% 27%Sum 4 1 2 100% 1 1 2 100% 100%
Country 1: Country 2:
15
2C – Results are rebased to sum up to 100% after having fixed the "none" percentage
Interpretation could be misleadingMore pronounced underestimation of the % of the factors limiting production than in B
SUM 1+2
weight:REBASED with "fix"
noneweight:
REBASED with "fix"
none
Other method
100 100 100 300 100 100 100 300 600Factor: Firm A Firm B Firm C Tot Firm A Firm B Firm C TotNone 0 1 0 33% 0 1 0 33% 33%Demand 1 0 1 22% 1 0 0 22% 22%Labour force 1 0 0 22% 0 0 1 22% 17%Material 1 0 0 0% 0 0 0 0% 6%Financial 1 0 1 22% 0 0 1 22% 22%Sum 4 1 2 100% 1 1 2 100% 100%
Country 1: Country 2:
16
3 - Possibility to tick more than one factor and each "tick" is divided by the number of "ticks" that firm gave ("fractional")
Pros: Straightforward EU and euro-area aggregatesCons: Don't match the aim of the question on factors limiting productionSeems to be the most suitable for the investment survey
SUM 1+2weight: Fractional weight: Fractional Fractional
100 100 100 300 100 100 100 300 600Factor: Firm A Firm B Firm C Tot Firm A Firm B Firm C TotNone 0 1 0 33% 0 1 0 33% 33%Demand 0.25 0 0.5 25% 1 0 0 33% 29%Labour force 0.25 0 0 8% 0 0 0.5 17% 13%Material 0.25 0 0 8% 0 0 0 0% 4%Financial 0.25 0 0.5 25% 0 0 0.5 17% 21%Sum 1 1 1 100% 1 1 1 100% 100%
Country 1: Country 2:
17
4 - Other method: the sum of the enterprises which stated one factor divided by the total enterprises that declared any limitative factor
Main problem: to find a way to aggregate the results at EU and euro-area level without creating distortions and/or loosing information.
SUM 1+2
weight:Other
methodweight:
Other method
Other method
100 100 100 300 100 100 100 300 600Factor: Firm A Firm B Firm C Tot Firm A Firm B Firm C TotNone 0 1 0 33% 0 1 0 33% 33%Demand 1 0 1 100% 1 0 0 50% 75%Labour force 1 0 0 50% 0 0 1 50% 50%Material 1 0 0 50% 0 0 0 0% 25%Financial 1 0 1 100% 0 0 1 50% 75%Sum 4 1 2 333% 1 1 2 183% 258%
Country 1: Country 2:
18
Conclusions
19
Conclusions For quarterly questions on factors limiting
production/business/building activity: method 2A, namely the institutes send the results without adjusting: i.e. the factors can add up to more than 100%. o Institutes that allow for only one factor: not serious
aggregation issue but should reconsider their approach for harmonisation purposes
For the investment survey in the manufacturing sector: the 3, namely managers can tick more than one category and each "tick" is divided by the number of "ticks" that firm gave. o Institutes asking directly for the percentages are
in line with that method
20
Conclusions
Institutes are asked to send the results aggregated with method 2A for the quarterly question from January 2013! and with method 3 for the Oct/Nov investment survey from next year.
We would ask to recalculate the back series as far as possible and at least from 2000 for the total and sub-sector level. Back data from May 2010 should be available before the next publication (end-January 2013)!
21
NB: in case the institute allows for more factors than foreseen in the harmonised questionnaire, the institute has to pay attention not to count twice the answers of the sub-categories when aggregating them for DG ECFIN
National Institute factors
Firm A Firm B Firm C Total DG ECFIN factors
Total
None 1 1 None 1
Insufficient domestic demand
1 1 2
Insufficient demand
2
(Not 3!)Insufficient foreign demand
1 1
22
Some examples
23
Some examples
0
20
40
60
80
100
Jan-90
Dec-90
Nov-91
Oct-92
Sep-93
Aug-94
Jul-95
Jun-96
May-97
Apr-98
Mar-99
Feb-00
Jan-01
Dec-01
Nov-02
Oct-03
Sep-04
Aug-05
Jul-06
Jun-07
May-08
Apr-09
Mar-10
Feb-11
Jan-12
UK - Industry surveyInsufficient demand
newold
24
Some examples
25
Some examples