11th CEIES Seminar EU Short Term Economic Indicators: Meeting

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Luxembourg: Office for Official Publications of the
European Communities, 2001
2001
COPYRIGHT
Cat. No. KS-AN-01-006-EN-I
© European Communities, 2001
11th CEIES Seminar
EU Short Term Economic
Indicators: Meeting New Needs
Part 1 - Current situation
Presentation of Mr Giovanni De Cindio - ISAE
«Statistical information for short-term economic analysis»
E U R O P E A N
COMMISSION
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THEME 1
General
statistics
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INDEX
1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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2. Official statistics for short-term analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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3. Business and Consumer Surveys. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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4. The requirements of users of short-term economic information. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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5 Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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1. Introduction
I have spent my whole professional life working in the field of short-term economic
analysis. I joined the ISCO (National Institute for the Study of Economic Trends) in the
early seventies, and am now working for the ISAE, the Institute for Economic Study
and Analysis. This was set up in 1998 by merging the ISCO and the ISPE (Institute for
Financial Planning). These developments could potentially lead to the creation in Italy
of a body similar to the INSEE (National Economic Studies and Statistical Institute) in
France).
Building on this personal background, I think it would be most interesting to focus
on the fact that, in Italy, changes in what statistical information for short-term economic
analysis is used for were followed by changes in the institutions.
This observation would seem to imply that the European Union will also have to
change its institutions – or at least the way it is organised – if it is to meet the new needs
for economic indicators on short-term trends.
In my opinion, we might even think of giving Eurostat a role that resembles that of
the European Central Bank.
I would like to take the situation in Italy as my starting point once again to highlight
some of the needs of users of short-term economic indicators.
The fact that the producer of short-term statistics and indicators is often the main
user is no surprise. But there are many others: economic players, research institutes and
the authorities responsible for economic policy. The general public is mainly exposed
to short-term economic statistics via the mass media. However, all of these users have
different needs, so the ability to provide differentiated short-term economic statistics
will become increasingly necessary.
2. Official statistics for short-term analysis
As in other countries, Italy’s official statistics providers had long ignored the need
for information for short-term economic analysis.
This neglect was largely due to the fact that short-term analyses were not considered
very important in theoretical terms. When this opinion changed, all the technical and
practical difficulties of producing statistics for short-term analysis came to light.
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Users demand that statistics be at least quarterly – and monthly if possible. They
also want them to be available quickly and they want them to be detailed.
In Italy, the gap between the supply of official statistics and the need for data that
were suitable for short-term economic analysis had been partially filled by the ISCO.
One only needs to think back to the 1980s to remember a time when it was the ISCO
that was responsible for constructing indicators for quarterly national accounting and for
seasonally adjusting the indices of industrial output.
Today ISTAT (the National Statistical Institute) has brought Italian statistics up to
speed in this respect, but there are still many other needs that have not been met. For
example, some short-term statistics are still not available for the service sector, not to
mention the total lack of short-term data at levels other than the national one.
Still, the situation in most European countries does not seem to be very different.
3. Business and Consumer Surveys
In Italy, the need for short-term economic information could hardly be filled by the
ISCO producing a few statistical indicators – not only because of the sheer size of the
task, but also because of the specific kind of information needed for short-term
economic analysis. Nonetheless it is true that the statistical indicators based on the
official data become available much too late to be useful. Moreover, not all variables of
interest for short-term economic analysis are easy to include in an official statistical
survey.
Take the variables that represent the prevalent climate among economic
operators and consumers (judgements, intentions, expectations), for example.
It is often useful to know not only the trend of a given economic variable, but also
the attitude economic players take towards the change.
The instrument which solved the problem of obtaining this kind of information is, as
mentioned above, the business and consumer survey. A questionnaire can be used to
ask economic operators directly for their opinions on the main economic trends, their
expectations for the following months and their attitudes towards various important
economic phenomena. For a long time, these surveys looked only at industry, and only
analysts of short-term economic trends used them
It should be mentioned that for quite some time there was considerable opposition to
this new instrument, not only in terms of economic theory, but also in terms of statistics.
On the one hand, there was a refusal to recognise the usefulness of the study of cyclical
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fluctuations.
On the other, the results of the surveys were not accepted as being
statistically correct. It must be admitted that they do normally refer to a panel of
respondents instead of to a random sample.
New research has considerably reduced the importance of these criticisms.
However, there is no doubt that many users were put off the business and consumer
surveys for other reasons, not least of which was the difficulty of reading the results.
Since most of the questions in the questionnaire are qualitative, they need to be
gathered together as the percentages for each response. The real problem lies not in
actually reading the percentages (or of the difference between the two responses), but in
the fact that the user often needs to look at the series of previous results to make sense
of the latest data. Such evaluations are not always easy. Last spring the ISAE carried
out a survey in order to discover how the results of business and consumer surveys were
used in industry. Even today, despite the widespread popularity of these surveys, users
are often unable to use the results, Only 59% of enterprises replied that they found the
business and consumer surveys useful.
This problem, which has always existed, has led to research on clearer ways to
present the results.
In order to present the results of a question in a single piece of data, it was decided
to use the difference between the two extremes (or in some cases the sum of the median
response and one of the two others if three were required). This also makes it possible
to produce effective charts and diagrams.
Nonetheless, a single survey normally includes a large number of questions. Users
would like to see the whole survey summed up in a single figure. This has not been
done, but composite indices have been constructed to sum up groups of responses from
individual surveys. The purpose of these indices is not only to sum up the results of
several questions to simplify presentation but also to make the most of various
responses by bringing them together.
There are no fixed criteria for choosing the variables and the type of aggregation to
be used to construct a composite index. But selecting a reference variable is important,
as is trying to create a composite index that is able to represent short-term movements in
the economy.
Various composite indices, such as consumer confidence, have been popular with
users, which confirms that they meet specific needs.
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4. The requirements of users of short-term economic information
Up to now the need for information for short-term economic analysis has been filled
mainly by a few official statistics and surveys of business and consumers.
As
mentioned above, there are many gaps in these sources, and, in many ways, they are
extremely inflexible.
Therefore the first thing that users need is more and better official statistics and a
greater number of business and consumer surveys in order to cover sectors of economic
activity and geographical areas that are not currently covered.
The surveys have shown themselves to be the most flexible instrument, and they
have already made it possible to fill in some of the gaps, for example, short-term
economic information for territories. The survey on the manufacturing industry in Italy
was developed in such a way that the results were also meaningful at regional level.
But users have other needs that are often neglected by the producers of short-term
statistical information. I would like to examine some of them with regard to business
and consumer surveys.
The qualitative results of the surveys can be made simpler, but not simple, to read.
There is, however, room to lower the number of qualitative questions.
When business and consumer surveys were first set up, convincing economic
operators to reply was a major problem, so it was necessary to ask questions that could
be answered without too much effort. In addition, the survey’s goal was mainly to
detect the direction of change.
Today’s users want more: they want to know not only the direction of change, but
also its essence.
So, in addition to the quantitative indicators derived from the
qualitative information in the business and consumer survey, asking for it directly in the
surveys is another possibility. In Italy, Confindustria has for many years carried out a
monthly survey which collects quantitative data on several variables, including
industrial production.
These quantitative estimates, which are available before the
official statistics are made public, have been markedly successful with users.
Of course, those questions which specifically address the attitudes of economic
players and their intentions cannot be posed quantitatively. In all probability, new
composite indices could be developed for these. In any case, the meaning of these
indices should be independent of other, correlated empirical data. In other words, they
should not simply serve to forecast other variables.
variables that cannot be directly collected.
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They should indicate other
The reliability of composite indices is
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normally tested by comparing them to reference variables. But this is a conventional
criterion. For certain variables, the survey might be able to detect short-term trends
more efficiently than the related empirical data provided in official statistics.
Another need users have is related to the widespread presence of econometric
models.
Many are keen to include some of the variables from the business and
consumer surveys in their models. However, this is held back by the difficulty of
determining how the qualitative variables from the surveys correspond to the variables
from official statistics. Even in the case of a specific variable such as the level of
industrial output, it should not be forgotten that the judgements given by enterprises
refer to a normal level known only to the respondents. The enterprises are asked to take
seasonal variations into account, and of course, each one does so as they see fit. In
addition, the survey variables do not usually refer to the average for the reference
period, but simply to the end of that period. And when speaking of expectations, the
period to which these apply is not always sufficiently clear.
Naturally, these are not defects of the business and consumer survey itself. But it
would probably still be possible to make some changes to the questionnaires in order to
provide more of the accuracy required by those who work with econometric models.
Policy-makers also have other requirements for short-term economic information.
Generally, their interest in business and consumer surveys is second-hand, as policymakers need certain types of information that point out what action should be taken,
while the surveys only provide some of the facts needed to derive that information.
An easy way to meet such needs, which I have already put forward elsewhere, would
be to carry out short-term economic surveys which focus on policy-makers’ needs. In
practise this would mean carrying out a normal business and consumer survey, but
doing it in such a way that the various sectors of economic activity would be covered at
the same time, and adding a certain number of “ad hoc” questions on subjects of interest
to the sectoral questionnaire.
The ISAE is already carrying out such a survey on an experimental basis.
The
survey covers the city of Rome, and began in the third quarter of 1999. So far, it has
been successful. The “ad hoc” questions addressed to the enterprises concerned, among
other things, the effect of lowering VAT on construction, the existence of a black
market for labour, Internet use, the amount of bureaucratic and administrative expense
incurred, intentions to change shops’opening hours, etc.
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It goes without saying that the most significant aspect of this type of survey is the
possibility of analysing the responses to the “ad hoc” questions in the light of the
answers to the other questions.
5. Conclusion
As a conclusion to this brief overview, I think it may safely be said that, firstly,
much remains to be done to broaden the scope and improve the quality of the official
quantitative statistics used for short-term economic analysis. And work remains to be
done to extend coverage to the sectors and areas that are still not covered by the new
business and consumer surveys. The European Union is fulfilling a fundamental role,
which is certainly not limited to distributing and harmonising the statistics from the
business and consumer surveys.
In any case, modifying the business and consumer survey questionnaires in order to
better meet users needs is a possibility.
And lastly, it might be useful to reflect on the possibility of seeing business and
consumer surveys as instruments which are more suited to the needs of policy makers.
In future, it will be crucial to be able to manage the production of quantitative
statistics, carry out business and consumer surveys and collect the information needed
by policy-makers, all at the same time. At the national level, organising the institution
along the lines of the INSEE therefore seems to be the best way to develop statistical
information for short-term economic analysis.
But at the European level, a new role should be devised for Eurostat, modelled on
that of the European Central Bank.
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