METHODOLOGICAL EXPLANATION PURCHASING POWER PARITIES AND GROSS DOMESTIC PRODUCT IN PURCHASING POWER STANDARDS

Transcription

1 METHODOLOGICAL EXPLANATION PURCHASING POWER PARITIES AND GROSS DOMESTIC PRODUCT IN PURCHASING POWER STANDARDS This methodological explanation relates to the data releases: - Purchasing power parities and gross domestic product per capita in purchasing power standards, European countries, now-cast (First Release) - Comparative price levels for consumer goods and services, European countries (First Release) - Purchasing power parities and gross domestic product per capita in purchasing power standards, European countries (First Release) Content: 1. PURPOSE 2. LEGAL BASIS 3. UNIT DESCRIBED BY THE PUBLISHED DATA 4. SELECTION OF OBSERVATION UNIT 5. SOURCES AND METHODS OF DATA COLLECTION 6. DEFINITIONS 7. EXPLANATIONS 8. PUBLISHING 9. REVISION OF THE DATA 10. OTHER METHODOLOGICAL MATERIALS Prepared by: Simona Krže Last updated: 19 June 2018

2 1 PURPOSE The main purpose of the data release about gross domestic product (GDP) per capita in Purchasing Power Standards (PPS) and price levels is a review of internationally comparable GDP per capita, actual individual consumption per capita, international price level comparison and price convergence. Key statistics are GDP per capita in PPS, price level indices and actual individual consumption per capita. 2 LEGAL BASIS - Annual Programme of Statistical Surveys (LPSR) (only in Slovene) - National Statistics Act (OJ RS, No. 45/95 and 9/01) - Regulation of the European Parliament and of the Council No. 1445/2007 of 11 December 2007 establishing common rules for the provision of basic information on Purchasing Power Parities and for their calculation and dissemination (CELEX: 32007R1445) - Commission Regulation No. 2015/1163 of 15 July 2015 on implementing Regulation (EC) No. 1445/2007 as regards the list of basic headings used for Purchasing Power Parities (CELEX: 32015R1163) The results on GDP in PPS are used for different analytical and statistical purposes. 3 UNIT DESCRIBED BY THE PUBLISHED DATA Units described by the published data are: - GDP in PPS (GDP in PPS is usually obtained per capita, for Slovenia and European countries) - Price level indices of sub-groups for consumer goods and services for household final expenditures (Food and non-alcoholic beverages, Alcoholic beverages and tobacco, Clothing, Consumer electronics, Personal transport equipment, Restaurants and hotels) - Actual individual consumption per capita in PPS 4 SELECTION OF OBSERVATION UNIT It is a sample survey, which means that only part of the target population is included in the survey. Eurostat, together with its contractors, prepares and coordinates the survey and calculates the results for the 37 European countries. Each participating country collects a sufficient number of prices for each of the selected products and services, so as to ensure a reliable average price per product and service, taking into account the market structure in the country. Prices are collected in stores which are representative for a specific group of products. Preparing the sample, we also use the data on market shares and on this basis we can calculate the average price representative for Slovenia for a specific product or service. 1/6

3 5 SOURCES AND METHODS OF DATA COLLECTION The input data for the calculation of PPP and GDP in PPS are provided by the national statistical institutes of participating countries. Annually they have to provide: - Prices for more than a thousand different kinds of products and services, which are chosen to represent the whole GDP consumption expenditure basket of products and services (products and services of household consumption, investment products, government services); - GDP in the national currency, with detailed expenditure breakdown; - Some other data: population data, temporal and spatial price indices, etc. Prices for products and services consumed by households are collected throughout following price surveys: - Consumer goods price surveys The surveys conducted under the following chapter are: House and Garden, Food, Drinks and Tobacco, Personal Appearance, Furniture and Health, Services and Transport, Restaurants and Hotels. All countries in the comparison carry out the consumer price surveys annually for approximately a third of all products and services (annually two of total six consumer price surveys are carried out). For the two uncovered thirds, the prices are estimated by updating the most recently collected prices by the consumer price indices. In a 3-year survey cycle all six surveys are carried out and the survey cycle starts again. The participating countries are responsible for price collection. They are required to collect prices at a sample of outlets chosen to reflect consumer purchasing patterns for the types of products being surveyed. They are expected to price (gather prices on the field, via telephone, via , from the Internet) as many products on the list as possible to provide international comparability. Prices are to be collected from a range of outlets that includes markets, department stores, supermarkets, specialised shops, discount stores, corner shops, kiosks, mobile shops, mail order houses and the Internet. Since 2018 the source of prices for food, beverages and tobacco are databases of biggest retailers on the Slovene market, which cover 75% of the market share of sales for food and nonalcoholic beverages and almost 70% of the market share of sales for alcoholic beverages and tobacco. SURS is receiving data from the biggest retailers weekly for the purposes of computing inflation by the new methodology. - Capital goods price surveys There are two price surveys covering the capital goods field of research: Equipment Goods Survey and Construction Survey. The Equipment Goods Survey is carried out every two years and for intermediate, uncovered years, the prices are estimated as in the case of consumer price surveys. The Construction Survey is carried out every year. The main sources of information on prices in for the Construction Survey are construction companies. The main sources of information on prices for the Equipment Goods Survey are specialised outlets selling mechanical equipment, car dealerships, and public and private service providers. - The Rent Survey and GDP in national currency (broken down into more detailed data on GDP expenditure categories) are provided annually. 2/6

4 The data source is SURS s survey called Expenditure Structure of GDP for Calculation of GDP by Purchasing Power Parities. - The Salary Survey is conducted every year. The data source is the Agency of the Republic of Slovenia for Public Legal Records and Related Services (information system for analysis of salaries in the public sector-ispap). - The Hospitals Survey is conducted every year. Data sources are the Health Insurance Institute of Slovenia and the National Institute of Public Health (data on general actions in public and private hospitals). 6 DEFINITIONS Purchasing Power Parities (PPPs) PPPs are generally defined as spatial deflators and currency converters, which eliminate the effects of the differences in price levels between countries. PPPs have two functions: the function of spatial price deflators and the function of currency converters into some common currency. When countries have a common currency, PPPs have only the first function, i.e. the function of spatial price deflators. In their simplest form, PPPs are price relatives of individual products and services expressed in national currencies of different countries. At the level of GDP, PPPs are aggregated price relatives for the whole range of products and services of GDP. Price level indices (PLI) The ratio of PPP and the exchange rate (multiplied by 100) is the price level index (PLI). PLI for the level of GDP is the indicator of the general price level. The price level indices are calculated on the basis of the comparison of price levels between countries and exchange rates against the euro. They enable a comparison of price levels in EU Member States compared to the selected base. In most cases they are expressed regarding the average price level in the EU-28 (EU-28 = 100). If the value of the index for a country is higher than 100, it means that the price level in the country is higher than the average price level in the EU-28, i.e. the country is more expensive. If the value of the index for a country is below 100, the price level in the country is lower than the EU- 28 average, i.e. the country is cheaper. Purchasing Power Standard (PPS) The selection of the currency in which the PPP results are expressed is conventional. In the Eurostat comparison the results are expressed in a currency called PPS. PPS is an artificial, fictive currency which at the level of the EU equals one euro. Currently 1 PPS equals 1 euro at the level of the EU-28. PPS or EU-28 euro is a currency which reflects the average price level in the EU-28. GDP in PPS and GDP per capita in PPS GDP in PPS is GDP in the national currency converted into a common currency with PPP, expressed as the number of national currency units per 1 PPS. GDP per capita in PPS is GDP in PPS divided by the respective country s total population. More general expressions for GDP in PPS are also real GDP, GDP in PPP or GDP at purchasing power. 3/6

5 Actual Individual Consumption (AIC) per capita in PPS Actual Individual Consumption (AIC) per capita in PPS is the most important component of GDP and is made up of goods and services actually consumed by individuals. It involves goods and services which are bought and paid for consumption of individuals by households, government or non-profit institutions serving households. Actual individual consumption consists of household final consumption expenditure and of expenditure for those services which are consumed by households individually but are produced and financed by the government and non-profit institutions (health and education services). Volume indices Volume indices show GDP in PPS of each individual country relative to a chosen comparison base. Volume indices are most commonly expressed on the EU as a base, currently on the EU-28 (EU-28 = 100). GDP in PPS volume indices show economic sizes of the countries. Volume indices per capita Volume indices per capita are a standardized way of expressing the results on GDP per capita in PPS between countries. Volume indices per capita show the volume of GDP per capita in PPS relative to the average of a chosen base country or a group of countries. Volume indices are most commonly expressed in relation to the EU average, currently on the EU-28 (EU-28 = 100). Volume indices per capita are treated as the indicator of economic development and economic well-being of the population. 7 EXPLANATIONS 7.1 OTHER EXPLANATIONS Purchasing Power Parities (PPPs) and gross domestic products in purchasing power standards (GDP in PPS) are the results of the international statistical survey carried out jointly by the statistical institutions of the participating countries, Eurostat and OECD. The majority of the European countries participate in the statistical survey coordinated and guided by Eurostat. Eurostat, together with its contractors, at the moment, prepares and coordinates the survey and calculates the results for the 37 European countries. European countries included in the Eurostat survey are EU Member States (EU-28), member states of EFTA (Norway, Switzerland, Iceland), candidate countries for the EU (Turkey, Montenegro, Serbia, Macedonia, Albania) and potential candidate country for the EU (Bosnia and Herzegovina). The statistical survey coordinated by Eurostat is called the European Comparison Programme ECP. PPP and GDP in PPS are the results of a multilateral statistical exercise. Its specific feature compared to other statistical surveys is that the results are calculated by the international coordinator; namely, none of the participating countries can produce the results independently. The second specific feature is inter-dependency of the results among countries. A change in the data of one country does not influence only the results of this country but influences, more or less, the results of the other countries as well. 4/6

6 The results on GDP in PPS are primarily intended for the comparison among countries within one year. For temporal comparisons, i.e. for comparisons between years, they are less appropriate. The results on GDP per capita in PPS should not be used for strict, precise ranking of countries and for establishing the GDP growth rates between the years. Also, PPP results should not be used for establishing the currency depreciation/appreciation or equilibrium exchange rate. The results on GDP in PPS are used for different analytical and statistical purposes. The European Commission uses the results on GDP per capita volume indices also for administrative purposes, as criteria for EU structural funds entitlement. PPPs and derived price level indices are used for following price convergence in the EU Member States. 8 PUBLISHING Data are published in line with Eurostat data releases. Data on PPS are as well available in the Eurostat dissemination database where PPPs for Japan and the United States are included for the reference as well, although these are computed by the OECD. Annually: - First Release (Prices and inflation, Purchasing power):»purchasing power parities and gross domestic product per capita in purchasing power standards, European countries, now-cast«. - First Release (Prices and inflation, Purchasing power):»comparative price levels for consumer goods and services, European countries«. - First Release (Prices and inflation, Purchasing power):»purchasing power parities and gross domestic product per capita in purchasing power standards, European countries«. - Eurostat dissemination database (Tables by themes, Prices, Purchasing power parities) o Comparative price levels o Price convergence between EU Member States o GDP per capita in PPS The data on PPP, GDP in PPS, volume indices and population figures are published also under the domain National Accounts (including GDP), collection Annual national accounts. - Eurostat database (Tables by themes, Economy and finance, National accounts (including GDP), Annual national accounts, GDP per capita in PPPs). Eurostat publishes PPPs and derived indicators also on the website: - Statistics Explained (Economy and finance, Comparative price levels (PPPs)) Statistics Explained is an official Eurostat website presenting statistical topics in an easily understandable way. Together, the articles make up an encyclopedia of European statistics for everyone, completed by a statistical glossary clarifying all terms used and by numerous links to further information and the latest data and metadata, a portal for occasional and regular users. 5/6

7 9 REVISION OF THE DATA 9.1 PUBLISHING OF PRELIMINARY AND FINAL DATA Eurostat publishes the results on PPP and GDP in PPS annually. For the same reference year both sets of the results are regularly produced and published four times: 1. Now-cast (projection): 6 months after the end of the reference period 2. First estimate: 12 months after the end of the reference period 3. Second estimate: 24 months after the end of the reference period 4. Final results: 36 months after the end of the reference period Published final PPPs are generally not revised. However, in the event of mistakes corrected results are published in accordance with the procedure laid down in Regulation (EC) No 1445/2007. Exceptional general revisions are carried out if, owing to changes to the concepts underlying the European System of Accounts 2010 that affect PPP results, the volume index of GDP for any Member State changes by more than one percentage point. Exceptionally, in case of bigger national accounts revisions, which are usually made by all countries, both kinds of results (PPP and GDP in PPS) can be revised later than 36 months after the reference period. Additionally, the results on GDP in PPS can be updated within and outside the above mentioned timespan in the cases when one or several countries revised their GDP figure in national currencies (or population figures). In these cases PPPs are not recalculated and thus not changed. 10 OTHER METHODOLOGICAL MATERIALS - More detailed methodological explanations on Purchasing Power Parities can be found on Eurostat PPP dedicated web page - Eurostat-OECD Methodological Manual on Purchasing Power Parities RA /6