Introduction to Supply and Use Tables, part 2 Data Sources and Compilation 1

Transcription

1 Introduction to Supply and Use Tables, part 2 Data Sources and Compilation 1 Introduction This paper continues the series dedicated to extending the contents of the Handbook Essential SNA: Building the Basics 2. The aim of this paper is to provide some background to understand the compilation of supply and use tables (SUTs). Since this paper will exceed the intended length of papers in the series, we will distribute its content over three parts, of which the current document is the second 3. In the first part we introduced the basic terminology and structure of the SUT. Here we will review the data sources needed for SUT compilation and look briefly at the balancing process. Also, we will see how to express the use table in basic prices, how to come to SUTs in constant prices and how the SUT is linked to the sector accounts. In the last part we will explore the links between SUT and input-output tables. Supply and Use Tables Structure and Data Sources Let us first review some issues related to structure. A supply and use table (SUT) may be defined as a statistical instrument showing in detailed product and activity breakdown: The supply of goods and services, by domestic production and imports; The use of goods and services, for purposes of intermediate consumption and for final use (consumption, gross capital formation and exports); Value added and its components generated by industries. The aim of having a SUT is to provide a detailed analysis of: The process of production (breakdown of the production account); The use of goods and services produced (breakdown of the goods and services account); The income generated by that production (breakdown of the generation of income account). Schematically, a typical supply table looks as follows: Supplies Industries Rest of the world Total Products Output by product and by industry Imports by product Net taxes by Total supply by product product Total Total output by industry Total imports Total supply Table 1 Supply table (structure) Output from the production account is broken down by industries, according to the ISIC classification 4, and by products, according to the CPC classification, imports and net taxes are broken down by products. Note that imports are classified by CPC as well, and not by a specific trade 1 This paper was developed by DevStat Servicios de Consultoría Estadística in consortium with ICON Institute, under the project Essential SNA: Building the Basics, supported by EUROSTAT, for which information can be found at the following link: 2 Henceforth called the Handbook ; this paper is based on the second (2012) edition; it can be found at the following link: 3 The other parts are: Introduction to Supply and Use Tables, part 1 Structure; Introduction to Supply and Use Tables, part 3 Input-Output Tables 4 For classifications, see Handbook chapter 4, section 1.2 1

2 classification. There is a row for the output by industry and import totals and a column for the product supply totals. A typical use table looks as follows: Uses Industries Final uses Total Products Components of value added Total Table 2 Use table (structure) Intermediate consumption by product and by industry Value Added by component and by industry Total inputs by industry Final consumption Gross capital formation Exports Final uses by product and by categories of final use Total use by product Intermediate consumption is again broken down by industries and products, the final use categories consumption, gross capital formation and exports are broken down vertically by products (the same CPC products as output and intermediate consumption) and the components of value added are broken down horizontally by ISIC industries. There is a row for the inputs by industry (intermediate consumption plus value added) and a column for the product use totals. Hence, to compile a SUT one needs to collect data on: output and intermediate consumption by ISIC industry and CPC product; net taxes (i.e. taxes minus subsidies), imports, exports, final consumption and gross capital formation by CPC product; value added components by ISIC industry. The most demanding task is to collect data on output and intermediate consumption by product. This is not needed for the traditional production approach to GDP, and existing business surveys may have to be modified to accommodate this. The other task is to express net taxes, imports, exports, final consumption and gross capital formation by CPC product, using basic data broken down by other classifications, such as COICOP for household final consumption, COFOG for government consumption and HS for imports and exports data. In part 1 we presented a version of the SNA 2008 example where we aggregated the activities into five industries: Agri(culture), Man(ufacturing), Serv(ices) 1, Serv(ices) 2 and Serv(ices) 3 5. Products have been aggregated similarly. Example SNA 2008 Agri Agriculture, forestry and fishing Man Manufacturing and other industry Construction Serv 1 Trade, transport, accommodation and food Serv 2 Information and communication Finance and insurance Real estate activities 5 The example comes from chapter 14 of SNA The aggregation only serves to keep the tables small and hence easy to inspect. SNA also makes the distinction between market output, non-market output and output for own final use. Again, to keep the tables small, we will not follow SNA in this respect. 2

3 Business services Serv 3 Public Administration Education, human health and social work Other services Table 3 Industries used in the examples The example supply table is as follows: Supply Margins Net Supply Output by industries Output CifFob Imports (pp) Taxes (bp) Agri Man Serv 1 Serv 2 Serv 3 Total (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (1) Agri (2) Man (3) Serv (4) Serv (5) Serv (6) CifFob (7) DP.R (8) Total Table 4 Supply table This table is best read from right to left. Total supply (column 4) consists of domestic output, valued in basic prices ( bp ), i.e. prices excluding taxes as charged by enterprises (column 10), and imports (column 12). Imports have to be Cif-Fob adjusted to make them comparable to output in basic prices 6 (column 11). Also, direct purchases of residents abroad ( DP.R ) have to be added to imports (see row 7). To make supply comparable to use the valuation needs to change to purchasers prices, i.e. prices as charged to customers ( pp ). This is achieved by adding net taxes, i.e. taxes minus subsidies (column 3), and by adding margins, consisting of trade margins and transport margins (column 2), to total supply in basic prices. This gives total supply in purchasers prices (column 1). Note for output the difference between columns and rows. Columns represent activities (industries), whereas rows represent product groups. So column 5 gives to output in the activity agriculture, which consists mainly of agricultural products (row 1), but also some manufacturing products (row 2). In the manufacturing industry mainly goods are produced (row 2), but also some services (rows 3, 4 and 5). The following table presents the main data sources for the supply table. SUT Item Output Imports of goods Imports of services Product taxes / subsidies Trade margins Transport margins Table 5 Typical data sources supply table Source Annual Reports, Business Surveys Foreign Trade statistics Balance of Payments Tax authorities Survey of trade sector Survey of transport sector 6 Explained in part 1. 3

4 More information on the data sources and compilation of output can be found in earlier papers dedicated to the production approach to GDP compilation 7. Imports have been reviewed in the paper Exports and Imports in current and constant prices. The example use table is as follows: Use Intermediate consumption by industries Total Exports FCE GCF Total (pp) Agri Man Serv 1 Serv 2 Serv 3 IC HH GG Economy (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (1) Agri (2) Man (3) Serv (4) Serv (5) Serv (6) DP.R (7) DP.NR (8) Total (9) GVA (10) CE (11) Taxes (12) OS Table 6 Use table in purchasers prices Total use in purchasers prices is built up from intermediate consumption (column 7) and the final use components exports (column 8), final household consumption (column 9), final government consumption (column 10) and gross capital formation (column 11). Direct purchases of residents abroad ( DP.R ) are added to household consumption, direct purchases of non-residents ( DP.NR ) in the country are subtracted from household consumption and added to exports. Gross value added (row 9) consists of compensation of employees (row 10), net taxes on production (row 11) and operating surplus (row 12). Column 12 gives the GDP total by the income approach, as composed of the value added components. Both tables are linked both horizontally (supply by product should equal use by product) and vertically (supply by activity should equal the sum of intermediate consumption and gross value added). If both equalities have been met the SUT is balanced. But since data will come from many different data sources, this will initially never be the case because of measurement issues and data imperfections. Hence, an important function of the SUT is to identify gaps in basic data sources and inconsistencies between data sources. The following table presents the main data sources for the use table. SUT Item Intermediate consumption Export of goods Export of services Household consumption Source Annual Reports, Business Surveys, special surveys on inputs Foreign Trade statistics Balance of Payments Household income and expenditure survey 7 The papers are: - Agriculture in National Accounts: Value added in current and constant prices; - Industry and Construction in National Accounts - Value added in current and constant prices; - Services in National Accounts, part 1: Value added in current prices; 4

5 Government consumption Gross Capital Formation Wages & salaries Social contributions Production taxes/subsidies Gross operating surplus Table 7 Typical data sources use table Government budget Annual Reports, Business Surveys, Investment survey Labour force survey Labour force survey, social insurance authorities Tax authorities Annual Reports, Business Surveys More information on the data sources and compilation of intermediate consumption can be found in papers dedicated to the production approach to GDP compilation mentioned earlier. Information on the data sources and compilation of the final demand categories can be found in earlier papers dedicated to the expenditure approach to GDP compilation 8. The value added components will be the subject of a future paper. Supply and Use Tables Compilation As we saw in part 1, the main accounting identities for the SUT are as follows. The identity by industry is: Output by industry = input by industry Output = intermediate consumption + value added Industry (budget) balance (discrepancy) = Output - intermediate consumption - value added The identity by product is: Total supply by product = total use by product Output + imports = intermediate consumption + final consumption + gross capital formation + exports Product balance (discrepancy) = Output + imports - intermediate consumption - final consumption - gross capital formation - exports Balancing may be defined as making both industry and product balances zero simultaneously. Normally a Column Row Column approach is followed: Columns: The data is collected and analyzed by the column. Consistency is enforced on activity data, such that the system starts out with a zero budget discrepancy. This is easy to achieve if for each activity the data is obtained from an integral source such as company accounts or an industrial survey. Rows: The rows phase of the reconciliation process is the most involved. Here one examines the commodity balances, and adjusts output, intermediate demand, final demand or imports. Columns: In the final columns phase one examines again the activity data, and will make adjustments to reflect and accommodate the implications of the rows phase. The adjustments will usually be in the value added block, therefore at this stage the implications for value added and therefore for GDP will become clear. The adjustments at this stage should be fairly minor. 8 The papers are: - Final Consumption Expenditures in current and constant prices, part 1: Households - Final Consumption Expenditures in current and constant prices, part 2: Government, NPISH - Gross Capital Formation in current and constant prices, part 1: Gross Fixed Capital Formation - Gross Capital Formation in current and constant prices, part 2: Changes in Inventories - Exports and Imports in current and constant prices 5

6 Balancing is done by changing the values of data cells in the tables. Note, however, that changing the cells in the output or intermediate demand parts of the SUT tables both product and activity balances may be affected. If only rows must be balanced without affecting column balances, values should be changed in the final demand part of the use table or in the imports columns of the supply table (taxes and margins are normally calculated on the basis of the balanced tables, and, consequently, cannot be altered). If only columns must be balanced, data in the value added rows in the use table can be changed. The above procedure is complicated by the fact that net taxes and margins depend on other parts of the SUT, such as output. If during balancing these parts change, so should the net taxes and the margins. Hence, during balancing net taxes and margins must be included in the process as well. Instead of working with net taxes and margins columns in the supply table, the SUT framework is usually set up with net taxes and margins tables, splitting these transactions up by activity and final demand categories as well. The will allow the compiler to inspect and control taxes and margins in detail. Also, as we will see in the following section, it will make it possible to express the use table in basic prices. Following the earlier SNA example we have as margin table: Margins Intermediate consumption by industries Total Exports FCE GCF Agri Man Serv 1 Serv 2 Serv 3 IC HH GG (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (1) Agri (2) Man (3) Serv 1 (4) Serv 2 (5) Serv 3 (8) Total Table 8 Trade and transport margins by use categories Trade and transport margins pertain to goods and not to services. Transport margins cover the costs of transport of goods from the places of production (such as factories) to the place of consumption (such as stores). Trade margins cover the mark-up for trade services (as provided e.g. by shopkeepers). In the example there are margins for intermediate consumption and for all final consumption categories except government final consumption (although there could be a margin here too). The total of the trade and transport margins on the demand side in the economy will come from the output in the trade and transport industries on the supply side as we will see in the next section. The following table gives the product taxes: Product Intermediate consumption by industries Total Exports FCE GCF Taxes Agri Man Serv 1 Serv 2 Serv 3 IC HH GG (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (1) Agri 5 5 (2) Man (3) Serv (4) Serv (5) Serv (8) Total Table 9 Product taxes by use categories 6

7 As can be seen in the table, there can be taxes on services as well. The table for subsidies is as follows: Product Intermediate consumption by industries Total Exports FCE GCF Subsidies Agri Man Serv 1 Serv 2 Serv 3 IC HH GG (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (1) Agri -3-3 (2) Man -5-5 (3) Serv 1 (4) Serv 2 (5) Serv 3 (8) Total -8-8 Table 10 Product subsidies by use categories Subsidies are recorded as negative numbers here, so that they can be added to the taxes to give net taxes. In the example there are subsidies for households on certain agricultural and manufacturing products (such as fuel). SUT compilation usually takes place on all tables simultaneously: the supply and use tables, together with the tax and margins tables. Both taxes and margins can be further divided. For example, there can be separate trade and transport margins tables, trade can be divided into wholesale and retail trade, transport can be divided into road, water, railways and air transport, etc. Full balancing of the SUT assumes that all data are exogenous, i.e. taken from source data. If during balancing any cell of the SUT changes, this may impact other parts of the SUT. For example, if total supply for a particular commodity exceeds total use, either output and / or imports should be reduced, or intermediate or final consumption increased. If supply or demand changes the taxes and margins are likely to be affected as well. Given that total taxes and margins (over all commodities) is fixed, this means that taxes and margins on other commodities need to be reduced. However, in practice not all SUT data may be exogenous. Often, value added components may not be fully specified, especially operating surplus may not be known. In this case value added is not constrained by its components, independent of output and intermediate consumption, and will therefore serve as a balancing item in itself. Often, gross value added (GVA) by industry is given by the production approach to GDP, and the aim of column balancing becomes specifying output and intermediate consumption by products in such a way to ensure that industry GVA estimates correspond to these initial totals. Another possibility is that not all final demand categories are known. An example is changes in inventories (part of gross capital formation). If not known then this component may serve a residual item to absorb any commodity discrepancies. Of course, there are limits to what are acceptable values for changes in inventories, so in practice this strategy may be of limited use only. Also, for services there are no inventories. Since any attempt to balance rows may change the column balances and vice versa, it is often difficult to balance the SUT fully, the dependency of tax and margin tables on the supply and use tables being an additional complication. Sometimes automated balancing procedures can be useful to accomplish the final balancing. One such procedure is the RAS method, involving biproportional adjustments. The RAS method allows one to adjust the cells of a table in such a way that the row and column totals for the range approximate as closely as possible a set of row and column constraints. The method is best illustrated using a simple example. Let the following table be given: 7

8 Let the totals across the rows be constrained to the following: 10 4 And let the totals across the columns be constrained to: 9 5 Let us first try to adjust the values of the table in such a way that the row sums equal the values of the row constraint. RAS updates the table as follows: 3/8*10=3.75 5/8*10= /5*4=3.2 1/5*4= The sums across the rows now indeed equal the given constraint. Next, let us adjust the values of the table in such a way that the column sums equal the values of the other constraint. RAS now updates the table as follows: 3.75/6.95*9= /7.05*5= /6.95*9= /7.05*5= The sums across the columns now equal the constraint. But as we see from the table, the sums across rows do not equal the other constraint anymore. So RAS starts with another round of updating, first across rows, then across columns. It will keep updating this way until the difference between the row/column sums and the constraints is small enough (smaller than the so-called convergence limit, to be specified in advance). In practice one should implement the RAS procedure in such a way that cells, row and columns can be fixed, i.e. not part of the proportional adjustment. Use Table in Basic Prices The supply table is valued in basic prices, i.e. without net taxes (on products) and trade and transport margins. The use table is valued in purchasers prices, i.e. including net taxes (on products) and trade and transport margins. To make supply and use directly comparable, it is necessary to convert the use table into basic prices as well. This amounts to: Subtraction of net taxes on products from each cell of the intermediate and final demand tables. The column total of these taxes should equal the net taxes from the supply table (so as not to upset the product balances). Whatever amount of taxes is subtracted from the use table needs to be added to intermediate demand again in order to get the correct activity balances back. Subtraction of the trade margins from each cell of the intermediate and final demand tables. The column total of these margins should equal the trade margins from the supply table (so 8

9 as not to upset the product balances). Whatever amount of trade margins is subtracted from the use table needs to be added to product row for the trade sector in the use table in order to get the correct activity balances back. Subtraction of the transport margins from each cell of the intermediate and final demand tables. The column total of these margins should equal the transport margins from the supply table (so as not to upset the product balances). Whatever amount of transport margins is subtracted from the use table needs to be added to product row for the transport sector in the use table in order to get the correct activity balances back. Carrying out this procedure in the example use table, with the tax and margin tables of the previous section, gives the following use table in basic prices: Use Intermediate consumption by industries Total Exports FCE GCF (bp) Agri Man Serv 1 Serv 2 Serv 3 IC HH GG (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (1) Agri (2) Man (3) Serv (4) Serv (5) Serv (6) DP.R (7) DP.NR (7a) Net Tx (8) Total Table 11 Use table in basic prices Note that the sum of the tax and subsidies tables subtracted from the use table is added back as row 7a, leaving the column totals unaffected. For the margin tables the margin row totals are added to the service rows to which trade and transport belong (in our case row 3 Serv 1 ). Domestic Use Table In some cases it may be useful to know what part of the use table comes from domestic supply and what part from imports (e.g. when compiling input-output tables). To facilitate this, one needs to compile an import table, as in the example below: Imports Intermediate consumption by industries Total Exports FCE GCF Total Agri Man Serv 1 Serv 2 Serv 3 IC HH GG (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (1) Agri (2) Man (3) Serv (4) Serv (5) Serv 3 (6) DP.R (7) CifFob (8) Total Table 12 Imports by use categories As can be seen from this table, intermediate consumption, household consumption and gross capital formation all have import components. By subtracting the import table from the use table (in basic prices) we obtain the domestic use table in basic prices. For our example, this gives the following table: 9

10 Dom.Use Intermediate consumption by industries Total Exports FCE GCF CifFob (bp) Agri Man Serv 1 Serv 2 Serv 3 IC HH GG (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (1) Agri (2) Man (3) Serv (4) Serv (5) Serv (6) DP.NR (7a) Net Tx (7b) CifFob (7c) Imports (8) Total Table 13 Domestic use table in basic prices The row with import totals is added to the use table as row 7c. Note that the corresponding Cif / Fob items from the supply table are also added (row 7b, column 12) to preserve the balances. Annual Cycle of SUT Compilation So far our attention has focused on the SUT in current values. One may also wish to compile a SUT in constant values. This is typically done within a SUT compilation cycle. Such a cycle may consist of two phases: Benchmark compilation, say once every five years; Updating for non-benchmark years using indexes. The following table illustrates the idea of annual updating. Compilation year Statistical year 2007 Final SUT values 2007, 1 April Semi-final 2008, end July Final SUT values 2008, 1 April Provisional 2009, Flash end March, Semi-final 2009, end July Final SUT values 2009, 1 April 2012 Provisional end September 2010 Provisional 2010, Flash end March, Semi-final 2010, end July Provisional end September 2011 Provisional 2011, Flash end March, Provisional end September Updating year T on the basis of a table in year T-1 ( T-1/T compilation ) may be split up in three revisions: To compile the final estimates for the year 2007, the base year is loaded with the (final) estimates for the year 2006; To compile semi-final estimates for the year 2008, for the base year the final estimates for 2007 will be used; To compile the provisional estimates for 2009, we use the semi-final estimates for 2008 as base year. Thus, to integrate Annual Accounts compilation with SUT compilation within the restrictions on timeliness commonly followed is to follow a methodology based on the use of a final SUT for year T (e.g. SUT 2006), for obtaining semi-final and provisional SUTs for T+1 and T+2 using price and volume index data. The basic idea behind the compilation cycle approach is very simple. To enable the easy 10

11 use of the proper deflation methods and to avoid discontinuities in compilation it is convenient to compile a SUT for a certain year using the previous year estimate as basis. So we compile SUTs in pairs. The last one is the basis for the next and so on. Further, two or three pairs can be placed in a consecutive order defining the regular Annual compilation cycle going from final to provisional estimate, as explained earlier. This guarantees that even for the provisional estimate a clear link is established with the most recent detailed final estimate. Let us assume that the final estimate for a year comes available 3 years after the calendar year. The compilation cycle approach to be completed in the year T can be illustrated as follows: The final estimate (T-3) will have to come available early in T using the final estimate for year (T-4) as base year; The semi-final estimate for year (T-2) will be compiled using the final estimate for year (T-3) as base year; The provisional estimate for year (T-1) will be compiled using the semi-final estimate for year (T-2) as basis. The actual updating mechanism may be formally introduced by using the following symbols 9 : Values T-1 in prices T-1 (previous year in current prices: Prv) Values T in prices T-1 (current year in prices of previous year: Con) Values T in prices T (current year in current prices: Cur) Laspeyres volume indices with weights of the previous year: QIdx Paasche price indices with weights of the current year: PIdx The following calculations then become possible: Con = Cur / PIdx Con = Prv * QIdx PIdx = Cur / Con QIdx = Con / Prv VIdx = Cur / Prv (value index) VIdx = PIdx * QIdx Since there is redundancy (2 ways to calculate Con and VIdx; comparison with implicit PIdx and QIdx with given index data) this constitutes a powerful way to check the SUT data and the index data. The above calculations can be performed with all transactions available in the SUT. It is most important for: Output method: P1 (output), P2 (intermediate consumption) and VA = P1 P2 (value added); Expenditure method: VA = sum of final use components (domestic and by rest of the world). For each of these major macro-economic aggregates one can calculate Con, VIdx, QIdx, PIdx on the basis of data for Prv and Cur and index data at detailed product / activity level. Note that PIdx is calculated according to the Paasche formula and QIdx according to the Laspeyres formula as is recommended. In this case the calculation VIdx = PIdx * QIdx will yield a proper value index. 9 See the papers - National Accounts in Constant Prices, part 1: Elementary Indexes - National Accounts in Constant Prices, part 2: Aggregated Indexes - Annual GDP by production approach in current and constant prices: Main issues 11

12 Note that the T-1/T setup yields chained indexes as is recommended, which can be linked together to obtain index series. In such an updating scheme, taxes and margins are typically determined "endogenously, i.e. given by ratios depending on other parts of the SUT, such as output. For constant price calculations ratios of the previous year are used, for current values estimates ratios of the current year. From SUT to Sector Accounts As we have seen in part 1, it is possible to derive the three estimates of GDP from the SUT. And in the previous section we saw that the SUT can be expressed in volume terms, so that estimates can also be made of growth rates based on the tables. However, to complete the sequence of accounts, production accounts are needed by institutional sector 10. To ensure that the SUT and the sequence of accounts are integrated and consistent, we should take output from the supply table and intermediate consumption and the components of value added from the use table and allocate (or cross-classify ) these columns to institutional sectors. To do this, we should first split up the output, intermediate consumption and value added columns into columns for market production, non market production and production for own final use, as is done in the original SNA example (SNA table 14.12). Next, we allocate over institutions. The easiest allocation is for financial corporations, since typically such corporations do not undertake secondary activity and other institutional units do not undertake any financial activity. In this case the columns for the finance and insurance activity can be taken in its entirety as appropriate for this institutional sector (SNA 28.27). The columns relating to non-market producers must be allocated between general government and NPISHs. It is possible that either general government or NPISHs may have some market production. Hence, it is possible that non-market producers may have small amounts of operating surplus. It is also possible that both general government and NPISHs may have some production for own final use, as capital formation (SNA 28.28). The last step is to allocate all columns not yet accounted for between non-financial corporations and households. Typically, some parts of market production of agriculture, manufacturing, construction and trade are attributable to households as market production as well as production for own final use. The SNA use table example cross-classified by institutional sector is given in table 28.4 of SNA Concluding remarks This paper set out to provide some background on some practical aspects of SUT compilation, such as: Integration of data sources; Preparation of auxiliary tables for net taxes and margins; 10 An introduction to institutional sector accounts can be found in the papers: - Introduction to the SNA 2008 Accounts, part 1: Basics - Introduction to the SNA 2008 Accounts, part 2: Current Accounts - Introduction to the SNA 2008 Accounts, part 3: Accumulation Accounts 12

13 SUT balancing; Derivation of the use table in basic prices; Derivation of the domestic use table; Compilation of the SUT in constant prices; Cross-classifying output, intermediate consumption and value added over institutions. In part 3 we will introduce the input-output table and see how this table is related to the SUT. To find out more, The 2008 SNA, European Commission, IMF, OECD, UN, World Bank, 2009, Chapter 14 The supply and use tables and goods and services account Handbook of Input-Output Table Compilation and analysis, Series F, No. 74, UN