Changes stemming from the Review of Public Finance Statistics
In February 2014, ONS announced changes to Public Sector Finance Statistics following consultations on proposals from the 2013 review of this area. The proposals which were welcomed by users covered both presentational changes and methodological changes. The key methodological changes are:
new ‘ex-measures’ that only exclude the debt and borrowing of the public sector banks
the shares in Lloyds Banking Group and Royal Bank of Scotland will no longer be treated as liquid assets, in line with the treatment of all other shares held by Government
These changes are to be introduced in September 2014 (alongside the ESA10 changes) with statistics available on both the new and old basis during the period June 2014 to April 2015. Full details of the changes and the impacts on the Public Sector Finance Statistics can be found here (link)
Changes to Inventories
As previously announced in June 2013 Blue Book 2013, in line with Eurostat recommendations, saw a number of improvements to the compilation of changes in inventories. However, for Blue Book 2013 it was not possible to implement the revised inventories deflators and so Blue Book 2013 continued to use implied deflators. For Blue Book 2014 the new deflators will be implemented. In addition to this there will also be two further changes for Blue Book 2014:
the inventories current price data series will be derived from the change between the closing stock reported position minus the open stock reported position; instead of the end reporting period to end reporting period that had been used since Blue Book 2011.
inventories will not have supply and use adjustments applied.
Changes to Gross Fixed Capital Formation
As previously announced Blue Book 2013 introduced a number of changes to the compilation of Gross Fixed Capital Formation (GFCF). For Blue Book 2014 the same methods will be used with the exception of:
reverting back to the previous method for maintaining the asset composition post supply and use; this should reduce the volatility in the quarterly series.
some revisions to the SIC03 to SIC07 converted GFCF data
In addition to these changes there will be ESA10 impacts from, for example: the capitalisation of: research and development; weapons; and decommissioning (terminal) costs.
As part of the ONS commitment to continuous improvement a programme of industry reviews were launched to consider the concepts, methods and data sources which support the short-term estimates of the Output Approach to GDP. Subject to user consultation, the reviews of real estate (Standard Industrial Classification 2007, division 68), public administration (division 84) and health (division 86) will conclude in time for recommendations to be included in Blue Book 2014 where appropriate.
In November 2013, the Producer Price Index (PPI) was rebased to a 2010=100 basis, updating the reference period and the weighting pattern of indices which is carried out every five years. As well as measuring domestic prices, the index also covers export and import prices. PPIs are widely used as deflators in National Accounts and are predominately used in the leading short-term indicators of GDP: GDP(O), Index of Production, Trade in Goods, GFCF and Inventories.
In addition, the Services Producer Price Index (SPPI) was rebased to a 2010=100 basis in February 2014. SPPIs are also used as deflators in National Accounts and are used in GDP(O), Index of Services and Trade in Services. Both the rebased PPI and SPPI will be incorporated in the National Accounts as part of Blue Book 2014 and Pink Book 2014.
In order for estimates to better reflect the changing industrial structures and prices in the economy, the last base year and reference year for chained volume estimates will be moved forward by one year, from 2010 to 2011, in Blue Book 2014 and Pink Book 2014. This process is carried out every year as part of the Blue Book process. Re-referencing on its own does not cause revisions to real growth rates, but the rebasing process taking on new gross value added and product weights from the supply and use balancing process may cause revisions to the growth rates of chained volume components.