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SERBIAN COMPOSITE INDEX - INDICATOR OF MONTHLY GDP

Authors:Dragan Vukmirović, PhD Rade Ćirić, MSc

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�The impact of the world financial and economic crisis on the national economies brought out the importance of short-term analysis.

�SORS established composite index of economic activity, in the middle of 2009.

�Firstly, its main role was to show an early signal.

�Over time additional objective was set up – to reflect more precisely and accurately the monthly dynamics of overall economic activity.

Composite index

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�Compared to the composite index from 2009 considerable methodological improvements:

1.Indicators for agricultural production, net taxes and FISIM are included;

2.The weighting system is changed;

3.Transition to the NACE Rev. 2 classification;

4.Benchmarking to annual GDP data is introduced;

5.Time series has been restored back to January 2001.

Methodological improvement

Indicators

�First group - monthly indicators available 30 days after the end of the reference month. Sections: B, C, D, E, G (retail trade), I, K, M, N, O, P, Q, R, S -around 56% of total GVA.

�Second group - monthly indicators, but available 75 days after the end of reference quarter. In order to provide monthly indicator in time for composite index calculation econometric models are used. Sections: H, J, and G (wholesale trade) - around 17% of total GVA.

�Third group - quarterly indicators, which must be disaggregated to monthly using appropriated related series. Sections: A, F and L - around 27% of total GVA.

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Weighting system

�Weights - share of GVA of each section, FISIM and net taxes in the GDP.

�Weights are updated every year.

�The benefits of transition to the new weighting system are:

1.weights are representative,

2.latest available annual information are used;

3.elimination of subjectivity in selection of base year.

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Benchmarking

�One of the improvements in the process ofcomposite index calculation is benchmarking ofmonthly composite index to official annual GDP data.

�The benchmarking procedure provides adjustedmonthly dynamics of aggregated economic activityunder the limitations of annual GDP data. TheEurostat’s software – Ecotrim was used for thispurpose.

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2005 2006 2007 2008 2009 2010 2011

Jan 104.9 105.4 108.4 107.6 96.0 99.1 102.6

Feb 102.3 107.4 106.1 110.4 94.5 98.6 104.4

Mar 102.8 105.9 107.4 104.6 98.0 100.4 102.3

Apr 107.7 103.2 107.8 105.5 94.5 101.8 101.0

May 107.2 105.3 106.4 103.7 95.1 100.6 103.4

Jun 108.5 102.8 107.6 102.6 97.2 100.4 102.6

Jul 105.9 104.1 104.3 105.9 96.3 100.9

Aug 109.0 102.4 105.1 101.2 97.0 102.5

Sep 106.7 102.8 102.8 104.3 98.0 102.2

Oct 105.6 101.0 104.4 102.1 96.0 100.6

Nov 104.8 101.0 102 101.2 97.5 102.2

Dec 99.8 103.5 104.1 99.3 97.5 101.5

Analysis of results

Composite index – the same month previous year=100

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Quarter/

year

GDP growth

rates based on

composite index

Official GDP

growth rates

Difference

(percentage

points)

GDP growth

rates based

on “old”

composite

index

Q1/2009 -3.8 -3.9 0.1 -3.7

Q2/2009 -4.4 -4.6 0.2 -3.7

Q3/2009 -2.9 -3.1 0.2 -2.6

Q4/2009 -3.0 -2.6 -0.4 -1.8

Q1/2010 -0.6 -0.6 0.0 0.7

Q2/2010 1.0 0.8 0.2 2.6

Q3/2010 1.8 2.0 -0.2 2.9

Q4/2010 1.4 1.4 0.0 2.2

Q1/2011 3.1 3.4 -0.3 -

Q2/2011 2.3 ? ? -

Quarterly GDP based on composite index vs. the official quarterly GDP

Comparison of composite index and quarterly GDP

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�Method of “growth cycle”, which is used by OECD, is applied.

Use of composite index in business cycle analysis

T

Nov 09

Feb 08

P

T

Nov 03

Aug 02

P

T

Feb 02

85

90

95

100

105

110

115

Ja

n-0

1

Ja

n-0

2

Ja

n-0

3

Ja

n-0

4

Ja

n-0

5

Ja

n-0

6

Ja

n-0

7

Ja

n-0

8

Ja

n-0

9

Ja

n-1

0

Ja

n-1

1

Phase/

Cycle

Turning Points

(Dates)

Duration

(Months)

Trough Peak Trough Phase Cycle

Expansion 2/2002 08/2002 6

Slowdown 08/2002 11/2003 15

Cycle 1 2/2002 11/2003 21

Expansion 11/2003 02/2008 51

Slowdown 02/2008 11/2009 21

Cycle 2 11/2003 11/2009 72

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Thank you!