ONS have identified an error in the Service Producer Price Index (SPPI) for the Business telecoms sector. The error stems from incorrectly labelled data received from suppliers and will result in data being revised back to 2005 for the business telecoms SPPI. There is no significant impact on the SPPI aggregates and so historic SPPI aggregates will not be revised as a result of this correction.
This note is to alert users to the error and the impact of the error on the historic data in advance of the next SPPI release, for the 1st quarter of 2013, which will be published on 22 May 2013.
Figure 1, shows the difference between the index levels since 2005. There is a small difference in the index values between 2005 and 2011, with no real bias. That is to say the corrected values move from being higher to lower over the period. Since 2011, the corrected index declines more quickly, leading to a difference of around 6 index points by the end of 2012. Both series show a slow downward trend over the period.
Figure 2, shows the impact for the correction on the annual growth rates for the business telecoms SPPI. Again, the general trend is similar. The corrected data suggest that prices did not fall as rapidly from the start of 2006 than previously estimated. Towards the end of 2008 price falls increased, rather than slowed as the published data suggested. More recently, deflation as slowed at a slower pace than initially thought. In general though, the growth rates between the published and corrected data show a similar picture of declining prices in the business telecoms sector.
Impact on the SPPI aggregate
The business telecommunications SPPI has a weight of just over 6% in the gross sector SPPI aggregate and just over 3% in the net sector aggregate. The correction to the business telecoms SPPI will have a minimal impact on the SPPI aggregates. It will increase the latest gross sector SPPI estimates by at most 0.4 index points and increase the net sector SPPI by at most 0.2 index points. There is no significant impact to the published growth rates for the aggregates and so historic SPPI aggregates will not be revised as a result of the revision to the business telecoms SPPI.
Impact on National Accounts deflators
The business telecoms SPPI is the main deflator in the telecoms sector used by ONS National Accountants when compiling Output based estimates of Gross Domestic Product, GDP(O). Telecoms is around 2% of the GDP(O) estimate and so the impact on estimates of GDP(O) from this correction will be minimal. The revisions will be taken on for the next quarterly National Accounts release, published on 27 June 2013, which will be consistent with the 2013 Blue Book.
The SPPI Statistical bulletin for Q1 2013 will be published on 22 May 2013. This will include the revised data for the business telecoms SPPI going back to Q1 2005. The SPPI revisions policy states that estimates for the latest 2 quarters are provisional, but that ONS will revised data up to 4 quarters back where necessary. Given the size of the impact to the SPPI aggregates, SPPI aggregates beyond the latest 4 quarters will not be revised. As noted in the background notes of the recent SPPI Statistical Bulletin, the advertising placement SPPI will not be published from this release. To allow users to have a year of consistent growth rates, we will revised the SPPI aggregates 1 year so that the latest annual growth rate will be calculated on a consistent basis.
ONS apologises for any inconvenience caused
Source: Office for National Statistics
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