Seminar on the implementation of theSystem of National Accounts 2008 for

Caribbean countries

Antigua, Antigua and Barbuda, 14-16 June 2010

Herman SmithUNSD/DESA

The financial crisis – The need for high frequency indicators

Introduction

Consultations on the Financial and Economic Crisis

The G20 Summit of April, 2009

International seminars organised by United Nations Statistics Division and Eurostat

Consultations on the crisis

High Level Forum the Long-term Development the SNA, Washington D.C. , 17-18 November

Official Statistics and the Impact of the Global Financial Crisis, New York, 22 February

High Level Forum on Globalization and Global Crisis: the role of Official Statistics, New York, 23 February

40th Session of the Statistical Commission

Outcome of the consultations on the crisis

2008 SNA the overarching framework for economic statistics, able to incorporates measurement issues arising from the financial crises

There was not a lack of information

Policy makers need the early detection of turning points of financial and economic trends

Remedy data gaps that the crisis has revealed

Improve the availability, periodicity and timeliness of high frequency statistics in accessible and analytically useful formats

International coordinated response The G20 Summit of April, 2009 called for:

the UN, working with other global institutions, to establish an effective mechanism to monitor the impact of the crisis on the poorest and most vulnerable

the IMF and FSB to explore information gaps and provide appropriate proposals for strengthening data collection.

International coordinated response the United Nations System Chief Executives

Board for Coordination (CEB) at its April 2009 meeting in Paris decided to “… urgently establish an United Nations system-wide vulnerability monitoring and alert mechanism to track developments, and report on the political, economic, social and environmental dimensions of the crisis”.

the Secretary-General initiated activities to establish an UN system-wide Global Impact and Vulnerability Alert System (GIVAS) - consisting of a Global Impact and Vulnerability Data Platform and a series of Global Alert Products.

Inter Agency Group on Economic and Financial Statistics

◦ IMF (Chair), BIS, ECB, Eurostat, OECD, UN, IMF (Chair), BIS, ECB, Eurostat, OECD, UN, WB established the IAG to coordinate work WB established the IAG to coordinate work to explore data gaps and strengthen data to explore data gaps and strengthen data collectioncollection

◦The IAG Group addresses key issues related to information gaps on risks

in the financial sector, data on international financial networks vulnerabilities of domestic economies to

shocks and the development of the website on Principle

Global Indicators (PGI)

International seminars on High Frequency Indicators

UNSD and Eurostat in February 2009 initiated a series of three international seminars.

The purpose of the seminars is to formulate an international statistical response to the economic and financial crisis for improved monitoring of the rapid and systemic changes in the global real economy and the financial markets and the impacts on vulnerable countries and population groups.

It is expected that the series of seminars will recommend an agreed data template for high frequency statistics, related metadata and related communication and dissemination methods and techniques

International seminars on High Frequency Indicators

The first meeting took place in Ottawa, May 2009, which discussed the development of a data template of high frequency indicators;

Outcome of the Ottawa seminar

Support for an international data template for high frequency statistics to monitor economic activity and detecting changes

determine its relevance and feasibility in terms of availability, periodicity, timeliness and dissemination through global baseline assessment

re-arrange the data template in different tiers based on analysis of global assessment

the high frequency statistics for individual countries should be complemented by analytical indicators and time series of world and regional aggregates for those high frequency statistics which are sufficiently comparable.

Outcome of the Ottawa seminar (cont)

develop a glossary of terms and definitions around high frequency statistics (covering terms like nowcast, forecast, flash, rapid and first estimate, etc.)

clarify the need to develop new manuals or update existing handbooks and guidelines on GDP flash estimates, and economic sentiment surveys and composite indicators

determine how to better communicate and disseminate data on the movement of the business cycles and trend developments

Ottawa seminar identified a data template with 12 categories

National accounts, production and turnover indicators, prices, labour market indicators, sectoral indicators for the external, financial, government, non-financial and household sector, financial and real estate market indicators, and economic sentiment indicators

Global assessment to determine the availability, timeliness, periodicity and dissemination of high frequency indicators

Global assessment of Ottawa template

Overview of response

GroupingNumber of responses

Number in group

Percentage of 2008 GDP

Percentage of 2008

population Response rate

World 101 211 87.8 80.2 47.9

High income

24 29 89.5 90.2 82.8

Middle income

53 103 89.4 91.4 51.5

Other 24 79 55.2 21.5 30.4

CARICOM 7 20 66.2 28.8 35.0

1 2 3 4 5 6 7 8 10 12

Set Number

Pe

rce

nt

02

04

06

08

01

00

Percentage of countries compiling

Response by question

Response by question

1 2 3 4 5 6 7 8 9 10 11 12

AnnuallyQuarterlyMonthlyWeeklyDaily

Set Number

Pe

rce

nta

ge

of C

ou

ntr

ies

02

06

01

00

Periodicity

1 2 3 4 5 6 7 8 9 10 11 12

More than 180180 or less90 or less60 or less30 or less7 or less

Set Number

Pe

rce

nta

ge

of C

ou

ntr

ies

02

06

01

00

Timeliness

National Accounts mainly annual Production and turnover – only 2 quarterly, another

has retail trade monthly CPI monthly – PPI and I&E indices weak Employment data – mainly annual CB and Monetary stats – quarterly and monthly mix Monthly GG data Almost no HH and Non-Fin corps Weak financial market data No residential property Only has confidence indicators

Response by CARICOM Countries

Ottawa data template of a core set of indicators by categories with regional and world totals is feasible

The template is recognized as appropriate for monitoring rapid and systemic changes in the real economy and the financial markets

Three levels or tiers were recognized

Outcome of the assessment

Tier 1 - includes indicators that are compiled infra annually by more than 60 per cent of counties.

Tier 2 - includes indicators that are compiled infra annually by between 30 to 60 per cent of high and middle income countries and is supplemented by strategically important indicators.

Tier 3 - includes indicators below a 30 per cent response rate that can be included in national templates.

Three Tier Approach

Tier 1Indicator description Periodicity

Set 1 National accounts

1.1 Quarterly national accounts: Flash GDP estimate Quarterly

1.2.1 GDP full release by expenditure Quarterly

1.2.2 GDP full release by production Quarterly

Set 2 Production and turnover

2.1 Production index for industry, by major division (mining, manufacturing, electricity, water, etc.)

Monthly

Set 3: Price Indicators 

3.1 Consumer price index Monthly

3.2 Producer price index Monthly

3.3 Import price index Monthly

3.4 Export price index Monthly

Set 4: Labour market indicators 

4.1 Unemployment Quarterly

4.2 Unemployment rate Quarterly

4.3 Employment total and by economic activity Quarterly

Set 5: External sector indicators 

5.1 Exports and imports (of goods and services) Monthly

5.3 Official reserve assets Monthly

5.4 External debt (by sector, maturity and foreign currency) Quarterly

Tier 1Indicator description Periodicity

Set 6: Financial sector indicators 

6.1 Central Bank net foreign assets Monthly

6.2 Central Bank domestic lending Monthly

6.3 Central Bank reserve money Monthly

6.4 Depository corporations net foreign assets Monthly

6.5 Depository corporations domestic lending Monthly

6.6 Depository corporations broad money liabilities Monthly

Set 7: General government sector indicators

7.1 Revenue Monthly

7.2 Expense Monthly

7.3 Net operating balance (= Revenue – Expense) Monthly

Set 10: Financial market indicators

10.1 Interest rates, as relevant short and long term money and bond market rates

Monthly

10.2 Exchange rates, as relevant spot and forward markets Monthly

10.3 Nominal and real effective exchange rate Monthly

10.4 Stock market indicators Monthly

Tier 2Indicator description Periodicity

Set 1 National accounts

1.2.3 GDP full release by income Quarterly

Set 2 Production and turnover

2.2 Production index for construction Monthly

2.3 Turnover index for retail trade by major division Monthly

2.4 Turnover index for industry by major division Monthly

2.5 Turnover index for other services by major division (excluding financial services and non-commercial services)

Monthly

2.7 New orders index for construction (building permits or housing starts)

Monthly

Set 4: Labour market indicators 

4.4 Hourly wage rate Quarterly

4.5 Hours of work Quarterly

Set 5: External sector indicators 

5.2 International investment position (IIP), specify balances and components

Quarterly

Tier 2Indicator description Periodicity

Set 6: Financial sector indicators 

6.7 Other financial corporations balance sheet, assets and liabilities by sector.

Monthly

6.8 Financial corporate profits Quarterly

6.9 Financial corporate debt Monthly

Set 7: General government sector indicators

7.4 Net acquisition of non-financial assets Quarterly

7.5 Expenditure Quarterly

7.6 Net lending/net borrowing (= Revenue - Expenditure) Quarterly

7.7 Gross debt Quarterly

Set 8: Household sector indicators

8.1 Household disposable income Quarterly

8.2 Household saving Quarterly

8.3 Household debt Quarterly

Set 11: Real estate market indicators

11.1 Residential property price index Quarterly

Set 12: Economic sentiment

12.1 Consumer confidence Monthly

12.2 Business confidence Monthly

Tier 3

Indicator descriptionCompilation

per cent Periodicity

Set 2 Production and turnover

2.6 New orders index for industry by major ISIC division (for those that work on order)

Monthly

2.8 Commodity production (as relevant at country level data on commodity productions and other indicators of economic activity)

Monthly

Set 9: Non-financial corporations sector indicators

9.1 Non-financial corporate profits Quarterly

9.2 Non-financial corporate debt Quarterly

Set 11: Real estate market indicators

11.2 New house sales Monthly

11.3 Existing house sales Monthly

Set 12: Economic sentiment

12.3 Composite Business Cycle Indicators

12.3.1 Leading Indicator Monthly

12.3.2 Coincident Indicator Monthly

12.3.3 Lagging Indicator Monthly

Analytical indicators Some work was done on the type and

availability of a comparable set analytical indicator to facilitate economic analysis

The availability of analytical indicators at country level at agreed periodicity would significantly enrich the analysis of the regional and global aggregates, because of its supplementary and more detailed information content

Examples of analytical indicators

◦ Inventory over sales ratio◦ Household debt to household disposable income◦ Growth in equity prices relative to GDP growth◦ Financial Conditions Index◦ Etc

International seminars on High Frequency Indicators

The second meeting took place in Scheveningen, December 2009, which discussed a global assessment of the Ottawa data template and the development of methodology and guidance on high frequency indicators.

Scheveningen seminar

Five themes: ◦ the role of sentiment indicators in tracking

economic trends; ◦ the role of composite indicators in tracking

business cycles; ◦ flash estimates of gross domestic product; ◦ the analytical framework for assessing rapid

economic changes; and ◦ communication and dissemination of indicators

Outcome: ◦ To facilitate the work on the outcome of the

seminar five work groups were formed

Work groups

The Working Group on Economic Sentiment Indicators will conduct a global survey on sentiment indicators and analyse existing practices. Moreover, UNSD will establish a knowledge platform on economic sentiment indicators.

The Working Group on Composite Indicators will undertake the review of existing guidelines on the collection, compilation and application of composite indicators. ◦ Colloquium – Sept 2010. ◦ CIRET – Oct 2010

Work groups

The Working Group on Flash GDP will advance the work on terminology, conceptualisation and purpose of flash GDP estimates.

The Working Group on the Data Template and Analytical Indicators will finalise the data template, meta data and related analytical indicators.

The Working Group on Communication and Dissemination will create a knowledge base and review the availability of existing visualisation tools and methodological guidance.

Third International Seminar on High Frequency Statistics

November 2010 in Russia

Purpose◦ Discuss the work of the working groups◦ To prepare a report to the UNSC on

an agreed statistical framework of HFI international comparability of HFI, the related analytical framework for monitoring

early warning and business cycle indicators the communication and dissemination of HFI

Conclusion

The financial crisis revealed the need for HFI for the early detection of changes in economic trends

The availability of structural and annual data tell us about the past

The need is for information about the present

This will facilitate more timely policy responses

Data collection practises need to be adapted to facilitate the dissemination of HFI

HFI are also relevant for expanding the scope and detail of the national accounts

Useful links

Reports of the previous meetings:

Ottawa

http://unstats.un.org/unsd/nationalaccount/workshops/2009/ottawa/ac188-2.asp

Scheveningen

http://unstats.un.org/unsd/nationalaccount/workshops/2009/netherlands/ac202-2.asp

SNA News and Notes Issue 29

http://unstats.un.org/unsd/nationalaccount/sna/nn29-en.pdf

Thank You