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Developing the Trend Indicator of Output

Starting from the February release, the former Monthly Indicator of Total Output has been published as the Trend Indicator of Output. The development work is still ongoing, and the project continues until the end of 2008. So far the calculation of the indicator has been harmonised with the calculation methods of the quarterly accounts output. The calculation of industry-specific data is now primarily based on value data deflated with previous year's average prices. This produces volume figures at previous year's prices, in which the previous year is always the base year. Volume changes at previous year's prices are used to chain a continuous volume series at reference year 2000 prices with the so-called annual overlap method. This series is published as the Trend Indicator of Output. This method corresponds to the deflation and chaining method applied to quarterly accounts output.

The volume of the source data used in the calculation of the Trend Indicator of Output has been increased significantly and the calculation is performed at a more detailed level than before (2-digit level of the Standard Industrial Classification). The publication level is primary production, secondary production and services. In the published indicator already a considerable proportion of the source data used in the calculation has been changed to comply with the revised quarterly accounts. As a rule, the source data used for manufacturing and private services are preliminary data from indices of turnover. As regards the other industries, development work still continues. The calculation of value data is currently based on 63 sources and the description of price developments on 64 sources. The time series have been completely revised from 1996 onwards in accordance with the new sources and methods.

Many important questions still remain unsolved in the development work. One of the central questions is whether the Trend Indicator of Output should in future predict the output or the value added of the national economy. As the trend indicator is based on output indicators and the estimation of intermediate consumption can, under the present publication schedule, not be regarded as reliable, the current trend indicator should be seen as an indicator predicting predominantly output. The estimation of intermediate consumption is being examined.

Another important question is how to benchmark historical time series. This methodological measure aimed at improving the quality of the statistics is justified by the fact that quarterly and annual accounts are based on more comprehensive sources than the Trend Indicator of Output, and in order to produce a coherent history of the economy, the exploitation of the information contained in quarterly and annual accounts through benchmarking methods has generally been seen as worthwhile. Currently the historical time series of the Trend Indicator of Output is benchmarked against the value added series of quarterly accounts. The benchmarking could be done also against the annual accounts series. The different alternatives will be examined during the development project as new information on the accuracy of the new trend indicator becomes available. Despite the benchmarking, the Trend Indicator of Output cannot be treated as an indicator directly predicting value added, as under the current schedule the data sources do not allow for estimation of intermediate consumption and benchmarking does not apply to the most recent months of the quarter not yet published in the quarterly accounts.

Inquiries: Mr Samu Hakala +358 9 1734 3756, Mr Veli-Pekka Karvinen +358 9 1734 2667, kansantalous.suhdanteet@stat.fi

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Last updated 8.10.2008