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Calculation of unit value indices at Eurostat

Training course on Trade Indices Beirut, 14-16 December 2009

European Commission, DG Eurostat Unit G3 International Trade Statistics - Production

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Eurostat approach to calculation of unit value indices (1)

Eurostat is responsible for the calculation of UVIs for the EU and euro area:– There are no legal requirements for the EU Member States to

calculate UVIs or to transmit them to Eurostat– There are, however, legal requirements to transmit detailed

intra- and extra-EU trade data to Eurostat on monthly basis– => Eurostat approach is to compile the UVIs by using the

detailed trade data rather than requesting Member States to transmit their UVIs

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The EU approach to calculation of unit value indices (2)

Why such an approach is chosen and its benefits:– To fulfil various Community needs: the main users are the Commission and

ECB whose interest is for the EU aggregates (EU and euro area)– To harmonise the methodology: the use of harmonised compilation method and

data ensures consistency of the EU aggregates and comparability over the Member States

– To minimise burden: Member States are requested to transmit only detailed data, not to implement an index calculation system according to a harmonised methodology

– To ensure flexibility: new indices can be calculated easily in the case of EU or euro areas enlargement

– To ensure completeness: all relevant classifications and breakdowns (product or geographical) can be used

The main problems:– Possible differences between the UVIs calculated by an EU Member State and

by Eurostat– Data transmitted to Eurostat is aggregated at CN8/partner country level: “the

composition problem” and the impact of outliers can be stronger

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Eurostat UVI compilation procedure

Current methodology and application in use since 2000 Fully automatic system, no manual intervention during

the calculation procedure The procedure has six phases:

1. Extraction of basic data2. Calculation of the unit value changes3. Data validation and correction4. Aggregation and weighting5. Chaining6. Dissemination

Duration of the procedure: 2 to 3 working days

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Phase 1: Extraction of basic data

Indices are based on detailed data extracted from Comext – Monthly detailed data sent by the EU Member States– Deadlines for the Member States to deliver basic data to Eurostat:

• 40 days after the reference period for extra-EU data• 70 days after the reference period for intra EU data

Once a month basic data is extracted from Comext– Compilation of the indices takes place at the same time as

production of press release Revisions of basic data are frequent

– Every month new indices are calculated not only for the most recent month but also for previous months of the same year

– Indices are also calculated for the previous years, depending on the revisions of basic data and other reasons

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Phase 2: Calculation of the unit value changes

Calculation of the unit value changes (elementary UVIs)– Unit value = trade value / quantity– Net mass is used as quantify except if supplementary units exists – Unit values of the current month are divided by the average unit

values of the previous year in order to obtain elementary unit value indices

– Calculated at the most detailed level of data :

all flow/reporter/partner/product combinations are calculated• Flow: Imports and Exports• Reporter: each EU 27 Member State• Partner: all detailed intra- and extra-EU partner countries• Product: all CN8-codes

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Phase 3: Data validation (1)

After the calculation of elementary UVIs, unsuitable product codes and records with outliers need to be excluded from the calculation of final UVIs

Unsuitable product codes– Each year, a list of the CN-codes is created for each EU

Member State, to exclude unsuitable CN8-codes– Codes excluded if there is no significant correlation between

value and weight/supplementary unit

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Phase 3: Data validation (2)

Records with outliers– All records are validated by checking the change of unit values

from the previous year and previous month– Validation is based on the assumption that although the levels

of unit values may differ between the product codes and reporting EU Member States, the changes in the unit values are nevertheless similar within a specified group of products, for instance unit values of all energy products develop in a similar way

– All records are allocated to “blocks” (groups of observations by flow - reporter – partner – product SITC at 3-digit level)

– All records within the block are tested against the median unit value change of the block

– Accepted if the unit value change belongs to [0.5;2.0] interval– Coverage rate (= share of accepted items with respect to total

trade) on average 70-75 %, in terms of trade value

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Phase 4: Aggregation and weighting

Elementary UVIs aggregated over reporter and partner aggregates and by several product classifications

Both base-weighted (Laspeyres) and current-weighted (Paasche) non-chained indices are calculated

Only records which have been accepted in the validation process are used for weighting of UVIs

All records are nevertheless used in the weighting of value index, in order to obtain consistent volume indices

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Phase 5: Chaining

Fisher indices are calculated from Laspeyres and Paasche non-chaned indices and chained back to the reference year

Reference year: 2000 (2000 = 100) Volume indices are derived by dividing the value indices

with corresponding unit value indices Quarterly and annual indices are derived from the

monthly indices

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Phase 6: Dissemination

Lot of possible reporter/partner/product combinations are calculated but not all of them are suitable for dissemination due to qualitative reasons (low coverage rates, breaks in the series, volatility)

Two groups of indices are disseminated:1. Detailed partner countries and aggregated products2. Aggregated partner countries and detailed products

Partner countries– Aggregated partners: Total, Intra/Extra EU, Intra/Extra euro zone– Detailed partners: Large number of individual partner countries and

partner aggregates Products

– Aggregated product classifications• SITC at 1-digit level • CPA at 2-character codes level

– Detailed product classifications• SITC at 2-digit level• BEC • CPA at 2- and 3-digit level

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Thank you for your attention !Questions ?