What’s next

Peter Patterson, Deputy Chief Economic AdviserGraeme Walker, Head of National Accounts

ONS Economic Forum

10 July 2014

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What’s next

• Johnson review of price statistics (autumn)

• Re-weighting of LFS estimates using 2011 Census data (October) – historic data in September

• Blue Book 2014

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Improvements to National Accounts in September 2014

Graeme Walker Head of National Accounts

ONS Economic Forum: 10 July 2014

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Outline

• What improvements are being made?• Impact on GDP

• Current price levels• Real GDP growths

• Other impacts• Public Sector Finances• Sector and Financial Accounts• Balance of Payments

• International experience

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Improvements

• New international frameworks (ESA 2010, BPM6, MGDD)

• Improvements to methods• New data (not relevant for period

up to 2009)

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New International Frameworks

• R&D• Weapons• Decommissioning costs• Pensions• BPM6 changes• 10 June articles

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Improvements to methods

• Review of Non-Profit Institution serving Households units (NPISH)

• Financial Intermediaries Services Indirectly Measured (FISIM)

• Illegal Activities • New Cars • Own-account construction• Exhaustiveness adjustments• Gross Fixed Capital Formation• Inventories• 29 May articles

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Impact on GDP levels (97 to 09)

• Average revision +3.6% (£43 bn)• ESA 2010 +2.0% (£24 bn)• Methods improvement +1.6% (£19 bn)

• Biggest impacts (average)• R&D +£17 bn• NPISH review +£9 bn• Illegal activities +£9 bn• Weapons +£3 bn• Pensions +£3 bn

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Revisions to GDP levels

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Revisions to GDP levels

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Real GDP annual growths

• Average growth 97-09 still +2.2%• 97-07 still +3.2%• 08-09 stronger than in BB13 but very similar to BB12

• Some changes to path• 99, 01 and 09 are stronger• 00, 04 and 07 are weaker

• Final analysis of downturn requires quarterly path (to be published early September)

• Length of downturn looks to be the same• Depth of downturn looks to be a bit shallower but similar

to BB12

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Revisions to Real GDP growths

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Annual Real GDP growth rates in various Blue Books

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Public Sector Finances

• PSND increased by around £30bn in recent years• all due to the reclassification of network rail to central

government• PSF only change at this stage due to timing of advice from

Eurostat• PSNB generally increased by £2bn - £4bn in recent

years• mainly due to network rail and change in treatment of Local

Authority pension schemes• Pension scheme impact on GDP already described; network

rail is PSF only• Change to treatment of receipts from 3G/4G mobile

phone licence auctions alter the PSNB profile • increase of £22bn in 2000 offset over subsequent years• PSF only change due to timing of advice from Eurostat

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Public Sector Finances

• Change to treatment of the Royal Mail Pension Plan transfer also alters the profile of PSNB• increase of £36bn in 2012 offset over subsequent years• current/capital transfers with no impact on GDP

• Weapons/R&D capitalisation switches• spending from current budget to net investment without

changing PSNB (GDP impact already described)

• Changes announced in December/February with detailed article published in June• PSF bulletin now includes detailed estimates of ESA10

impact on deficit and debt

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Comparison of PSND measures

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Comparison of PSNB measures

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Sector and Financial Accounts

• 9 July article• NPISH – uplifts both NPISH and household final

consumption expenditure (as HHs consume NPISH goods and services)

• Changes to the reference rates, removal of interbank FISIM and adjustments to FISIM imports will impact all sectors, especially HH

• Illegal activities will increase HH expenditure, intermediate consumption and mixed income

• Car list prices will reduce HH expenditure by less than £1 billion per year

• Exhaustiveness adjustments impact HH expenditure both positively (fuel) and negatively (gambling and digital TV)

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Sector and Financial Accounts (part 2)

• Own account construction increases PNFC and HH fixed capital formation

• R & D impact on gross fixed capital formation will be seen across the sectors

• Weapons systems capitalisation impact will be seen in the government sector

• Pensions – new service charge methods and including funded defined benefit schemes for local government and NPISH increases their expenditure and output

• Detailed impact and changes which only impact on 2010 and later to follow on 12 August

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Balance of Payments (BoP)

• Biggest change - measurement basis of direct investment profits for monetary financial institutions changes from an all inclusive (AI) to a current operating performance basis (COP)

• Other changes include: • Revised treatment of non monetary gold

• Introduction of remote gambling

• Revised treatment of goods sent abroad for processing

• Overall impact of BoP changes: • Before financial crisis – improvement in current

account balance

• During the financial crisis – deterioration in current account balance 20

International experience

• Worldwide implementation of SNA 2008 completed for US, Canada and Australia

• Impacts described by ONS for UK GDP are of the same magnitude and direction as those seen across EU member states and worldwide

• ONS has already provided more detailed information than most countries

• Most impacts expressed in nominal terms

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International Comparisons (Part 2)

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Publication Schedule

• 9 July– Summary of impact on Sector and Financial Accounts (SFA) and Balance of Payments, International Comparisons, Layout of Blue Book, Pink Book and UKEA publications

• 23 July - Impact on GDP components of ESA 2010 and non ESA 2010 changes for 1997 – 2009

• 12 August (prov) – Detailed impact on SFA and Balance of Payments

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Publication Schedule (part 2)

• Mid/End August - 2010 – 2012 real and nominal GDP annual changes

• Early September – Reminder of all impacts plus quarterly path of real GDP 1997 - 2012

• 30 September – Publication of Quarterly National Accounts and Balance of Payments on ESA 2010/BPM6 basis

• 31 October – Publication of Blue Book and Pink Book 2014

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