economic forum: 31 january 2017
TRANSCRIPT
ONS Economic Forum31 January 2017
Email: [email protected]: @ONS
#ONSeconomy
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AgendaTime Item Speaker
10:00 – 10:10 Welcome and introduction Jonathan Athow
10:10 – 11:00 Special topic: Shaping the future of consumer price statistics
Jonathan Athow
11:00 – 11:15 Networking refreshment break
11:15 – 11:25 Theme days, publications and GDP figures Ed Palmer
11:25 – 11:45 Overview of data from January’s theme days:
Short-term Indicators Daniel Ollerenshaw
Prices Chris Watkins
Labour Market Sunny Sidhu
Productivity Sebnem Oguz
11:45 – 12:00 What’s next…
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Introduction and welcomeJonathan AthowDeputy National Statistician, Economic Statistics
3
Shaping the future of consumer price statisticsJonathan AthowDeputy National Statistician, Economic Statistics
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5
‘If the […] economy was quite static, with very few new products introduced, very little quality
improvement in existing products, little change in consumers' income, and very small and infrequent
changes in the relative prices of goods and services, measuring changes in the cost of living
would be conceptually quite easy and its implementation a matter of technical detail ...’
Boskin Commission final report, Toward A More Accurate Measure Of The Cost Of Living (1996)
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What I want to cover…
• Background and recent history• RPI (Retail Price Index)• CPIH (Consumer Price Index including Owner
Occupiers’ Housing (OOH) costs)• OOH comparisons• ‘Household’ measure• Future landscape
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Introducing the cast…• CPI: internationally comparable measure of inflation based on
EU-wide rules. Adopted as the Bank of England’s inflation target in 2004.
• CPIH: CPI including owner-occupiers’ housing costs. Launched in 2013, with data available from 2005. National Statistics status suspended in 2014.
• RPI: long-standing measure of inflation, with data available from 1947. No longer a National Statistic.
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Recent developmentsJan ‘13: RPI
loses Nat’l Stats badge
May ‘13: Paul Johnson begins review
Jan ‘15: Johnson review
published
Late ‘15: Consultation on
Johnson proposals
Mar ‘17: Introduce changes
Nov ‘16: ONS
statement on future plans
Mar ‘16: ONS announces
direction of travel
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Johnson review messages
• RPI is weak, but still required
• Too many measures of inflation…
• …CPIH should become the main measure
• ONS should explore a ‘household’ index
10
RPI: the official view“the methods used to produce the RPI are not consistent
with internationally recognised best practices” (UK Statistics Authority, March 2013)
“the RPI is known to be statistically flawed” (Paul Johnson’s review, January 2015)
“the RPI is not a good measure of inflation... I strongly discourage the use of RPI…” (National Statistician, March
2016)
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Problems with the RPI
Use of the ‘Carli’ formula
Excludes some households (richest households and the poorest-pensioner
households)
Housing includes both mortgage interest
payments and house prices
Legislation limits the scope of the ONS to
develop the RPI
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But still a need for RPI
• Used in many long-standing contracts (e.g. gilts)
• And therefore we will publish the minimum of RPI-related data necessary
• …and undertake routine changes (e.g. basket updates)
• …but we will not ‘invest’ in improving it
13
14
Too many measures of inflation
• From March 2017, we will discontinue:• RPIJ• Tax and Price Index (TPI)• RPI excluding mortgage index payments and
indirect taxes (RPIY)• RPI Pensioners’ indices
15
CPIH
• Includes owner occupiers’ housing costs (not in CPI)
• Will include Council Tax from March 2017 • Not constrained by international regulations – CPI
is same thing as HICP• Not subject to the same legislative constraints as
RPI• In ‘normal times’ expect CPIH to be around 0.3
percentage points above CPI
Owner-occupiers’ housing costs
• Costs of ‘housing services’: owning, maintaining and living in one’s own home.
• Distinct from the cost of purchasing a house…• …which is partly an accumulation of wealth
and partly for housing services• No single defined measure, in part as it
depends on what the target is
16
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Different approaches to OOH
• Method is widely debated• ONS looks at 3 approaches available, measured
at 3 different points:• Used - rental equivalence• Paid - payments approach (experimental)• Acquired – net acquisitions (experimental)
• CPIH uses rental equivalence: valuing ‘housing services’ according to the cost to rent an equivalent property
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Why rental equivalence
• Payments approach• Consumer prices index aims to measure consumption, and interest
payments represent the cost of borrowing money rather than the cost of consumption
• Net acquisitions • Due to the lack of available data, the methodology used does not
separate between the land and house price, and therefore there will be some measure of asset price included.
• Rental equivalence• Measures the consumption of OOH services
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CPIH as National Statistic
• Lost designation in 2014: problems with how private rents were used in ‘rental equivalence’
• Problem fixed in 2015, but wider requirements to get ‘badge’ back:• Strengthen QA• Better explain methodology• Monitor behaviour and compare to other data &
methods• Range of material now published
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OOH in recent past
-20
-15
-10
-5
0
5
10
15
Jan-
06
Jun-
06
Nov
-06
Apr-
07
Sep-
07
Feb-
08
Jul-0
8
Dec-
08
May
-09
Oct
-09
Mar
-10
Aug-
10
Jan-
11
Jun-
11
Nov
-11
Apr-1
2
Sep-
12
Feb-
13
Jul-1
3
Dec-
13
May
-14
Oct
-14
Mar
-15
Aug-
15
Jan-
16
Jun-
16
Annual growth rate(per cent)
OOH (NA)OOH (Payments)OOH (RE)
Effect of different OOH measures
-2
-1
0
1
2
3
4
5
6Annual growth rate
(per cent)
CPIHCPI-H(Payments 1)CPI-H(Payments 2)CPI-H(NA)
21
22
Effect of different OOH measures
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‘Household’ measure• Developing ‘Index of Household Payments’ (likely to be
named as Household Cost Index)• Asks the question of how households feel/perceive prices
change• Look at payments households are making (rather than other
ways of measuring prices)• Households weighted equally rather than weighting by
expenditure• Different household types experience of inflation• Work to be done, but aim to have first estimates by end of
2017
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Future landscape
• Headline inflation• Most comprehensive measureCPIH
• Internationally comparable• Inflation targetCPI
• Experience/perception of inflation• Use and development will depend on final design and
propertiesHousehold Cost Index
(HCI)
• Legacy measure• Use discouragedRPI
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Summary changes in March
• CPIH – as most comprehensive measure – becomes the headline measure• will incorporate council tax• time series will be revised back to 2005
• Publish the minimum of RPI-related data
• Publish additional level of detail published for CPI and CPIH (COICOP5)
26
Questions?
?
ONS Economic Forum
Email: [email protected]: @ONS
#ONSeconomy
WIFI code for Glaziers Hall: glaziershallwifi and password: event123
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Theme days, publications and GDP figures
Ed PalmerDeputy Chief Economist
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What we are going to cover
• How we tell the story: changes to how we publish economic statistics and other analysis and data
• What the story says: an overview of the latest data
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Changes to the publication schedule for our economic statistics
• ONS recently reviewed its approach to publishing economic statistics.
• Concluded that a more joined-up and consistent approach would help users.
• We now have a “theme days” where related statistics are released together.
• This allows ONS to present a more coherent and consistent picture of UK economic activity, and support public discussion about the UK economy.
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January’s “theme day” timetableTheme Date Data included
Productivity (quarterly) 6 January • Labour and public service productivity• Regional measures
Short term indicators 11 January
• Construction• Production• Trade• Turnover in UK production & GB services industries (TOPSI)
Prices 17 January
• Consumer Price Inflation (CPI)• Producer Price Inflation (PPI)• Services Producer Price Index (SPPI) (from May) • House Price Index (HPI)• Construction Prices (from February)• Rental prices
Labour market 18 January • Unemployment• Claimant count• Wages
Retail sales 20 January • Retail sales
Public Sector Finances 23 January • Public Sector Finances
National Accounts 26 January • Usual estimates given the current timetable• Including, depending on the month in the cycle, Services and
Balance of Payments
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A number of the theme days will have their own economic commentary …
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… and we will also produce an end of month economic commentary, plus a revamped quarterly Economic Review …
34
…and new products at visual.ons.gov.uk
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GDP preliminary estimate Q4 2016
2008 Q1
2008 Q2
2008 Q3
2008 Q4
2009 Q1
2009 Q2
2009 Q3
2009 Q4
2010 Q1
2010 Q2
2010 Q3
2010 Q4
2011 Q1
2011 Q2
2011 Q3
2011 Q4
2012 Q1
2012 Q2
2012 Q3
2012 Q4
2013 Q1
2013 Q2
2013 Q3
2013 Q4
2014 Q1
2014 Q2
2014 Q3
2014 Q4
2015 Q1
2015 Q2
2015 Q3
2015 Q4
2016 Q1
2016 Q2
2016 Q3
2016 Q4-3.5
-3.0
-2.5
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
-7.0
-6.0
-5.0
-4.0
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
Quarter on quarter GDP growth (LHS) Quarter on previous year's quarter GDP growth (RHS)
% %
36
International comparison of GDPQuarterly levels, chained volume measure, 2007=100
Source: ONS, Organisation for Economic Co-operation and Development
Overview of data from Short-term Indicators theme day
Daniel OllerenshawEconomic Analysis and Advice
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Covers data from services, production, construction and UK trade
Jan 2010 to Nov 2016, indexed to 100 at 2010 levels, chained volume measures (seasonally adjusted)
Nov 10
Nov 11
Nov 12
Nov 13
Nov 14
Nov 15
Nov 16
90
100
110
120
Services Production Construction
Strong quarterly growth in retail, motor and travel agencies
Combined contributions of retail, motor and travel agencies to total services growth, percentage points, Q4
Combined weight0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
Cont
ributi
ons t
o gr
owth
Total services growth (Q4)
Combined contribution
(actual)
Rising importance of exports in some manufacturing industries
Export share of total manufacturing turnover, non-seasonally adjusted
0% 10% 20% 30% 40% 50% 60% 70%
Other manufacturing & repairs
Transport equipment
Other machinery & equipment
Electrical equipment
Computer & electronic products
Metals
Rubber, plastic & non-metallics
Pharmaceuticals
Chemicals & related products
Wood, paper & printing
Textiles, clothing & leather
Food, beverages & tobacco
Bold labels Nov 2015-Nov 2016 average 2010-2015 average
Growth in housing new orders
New housing construction output and housing new construction orders (2 quarter lag), quarter on previous year growth, chained volume measures
1998
1998
1999
1999
2000
2000
2001
2001
2002
2002
2003
2003
2004
2004
2005
2005
2006
2006
2007
2007
2008
2008
2009
2009
2010
2010
2011
2011
2012
2012
2013
2013
2014
2014
2015
2015
2016
2016
-75
-50
-25
0
25
50
75
New housing output Housing new orders (2 quarter lag)%
Summary
• Strong services – continued strength of consumer spending
• Rising importance of exports for some manufacturing sub-industries
• Growth in housing new orders
Overview of data from Prices theme day
Chris WatkinsEconomic Analysis and Advice
43
Main Points
• Inflation continued to rise into December 2016.
• The depreciation of sterling and the recovery of the oil price have put upward pressure on producer prices.
• The increase in producer prices has started to push up some prices faced by consumers.
Headline measures of inflation broadly track each other
The relationship between Input PPI components and the sterling exchange rate varies
Impacts of Crude oil prices and the exchange rate
Consumers are now facing higher fuel prices
Food price deflation for consumers has moderated
Summary
• Producer prices are now increasing following a sustained period of deflation.
• The recovery in the oil price and the depreciation of sterling has driven the increase in producer prices.
• Higher producer prices have started to feed into higher consumer prices for some products.
Overview of data from Labour Market theme day
Sunny SidhuEconomic Advice & Analysis
51
Summary of the labour market
• In the three months to November 2016:– Unemployment rate remained steady at 4.8%.– Employment rate remained virtually unchanged at
74.5%.– Inactivity rate increased to 21.7%– Average weekly earnings for employees in Great
Britain grew by 2.8% including bonuses and by 2.7% excluding bonuses (MoY).
Indicators of spare capacity
% Part time could not find a FT job
Part time share of all Employed
Average Hours Worked- Whole Economy
Average Hours Worked- FT
Unemployment 18-24
Unemployment: Vacancy Ratio
Unemployment
-4 -2 0 2 4 6 8 10 12
Year ago Most Recent DataStandardised Units +/- 2001-2007 average
Resignations and Vacancies
20032003
20042004
20052005
20062006
20072007
20082008
20092009
20102010
20112011
20122012
20132013
20142014
20152015
20162016
0
20
40
60
80
100
120
140
160
180
200
Resignations All vacancies
Index 2012=100
Real Wage Growth
2002-07 2008-14 2015-16-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
1.8
2.9
0.3
4.2
1.7
2.42.4
-1.2
2.1
CPI Growth in AWE (Total Pay) Growth in Real Wages
%
Summary
• Spare capacity in the labour market continues to narrow.
• Confidence in the labour market remained resilient up to and after the EU Referendum.
• Increasing CPI inflation being offset by nominal wage growth - real wage growth remains stable.
Overview of data from Productivity theme day
Sebnem OguzPopulation and Public Policy
57
The productivity puzzle shows little sign of ending
1 1 1 1 1 1 1 1 1 1 1 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 260
70
80
90
100
110
120
130
140
Index, Quarter 4 2007 = 100Output per hour Output per worker Output per hour (trend) Output per worker (trend)
Figure 1: Trends and actual output per hour and output per worker Seasonally adjusted, Quarter 1 (Jan to Mar) 1994 to Quarter 3 (July to Sept) 2016, UK
The productivity puzzle shows little sign of endingFigure 2: Average annual growth of output per hour worked, UKSeasonally adjusted, whole economy and selected industries, Quarter 3 (July to Sept) 2016 and Quarter 1 (Jan to Mar) 1998 to Quarter 1 (Jan to Mar) 2008 average
Output per hour worked varies considerably across the UK
Figure 3: Nominal GVA per hour worked - NUTS 1 country and region, workplace based estimates, 2015
Variation within the regions
Figure 4: GVA per hour worked - North of England - highest and lowest ranking NUTS3 sub-regions, 2015
Figure 5: GVA per hour worked - Midlands - highest and lowest ranking NUTS3 sub-regions, 2015
Firm level productivityFigure 6: Median GVA per worker by Industry – London and the Yorkshire and the Humber, 2014
Manufacturing
Construction
Wholesale & Retail trade; repair motor vehicles
Accommodation & Food services
Information & Communication
Professional, scientific & technical
Administrative & Support Services
0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000
LONDON Y & H
Firm level productivityFigure 7: Distribution of firm level productivity (GVA per worker) in the non-financial business economy – NUTS1 Regions, 2014
Management practices and productivity among manufacturing business in Great Britain: Experimental estimates, 2015
Figure 8: Labour productivity and management practice scores by business Types (manufacturing industry) Great Britain, 2015
All man
ufacturin
g
Not family
owned
Family
owned
Family
owned an
d man
aged
Family
owned, n
ot family
manage
d
Domestic
Multinationals
UK Multinati
onals
Non-UK Multinati
onals0
10
20
30
40
50
60
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
Output per worker (£000s) Management scoreOutput per worker (£000s) Management score
Management practices and productivity among manufacturing business in Great Britain: Experimental estimates, 2015
Figure 9: Distribution of manufacturing businesses by ownership types – Great Britain, 2015
Multinationals (16.4%)
Family-Owned (63.7%)
Not Family-Owned (20%)
66
Summary
• UK labour productivity edges up in 2016 but still weak
• Significant variation in labour productivity across the UK regions and sub-regions
• Significant relationship between management practices and firm level productivity
What’s next …
Richard HeysDeputy Chief Economist
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ESCOE RESEARCH PROGRAMMENational Accounts and Beyond GDP
1.1 Historical National Accounts data
1.2 Measuring GDP at different publication horizons
1.3Democratic measures of income
1.4Modelling and communicating data uncertainty
Economic Forum – What’s Next?
UK Trade Developments and Priorities
31 January 2017
Richard Heys
Outline
1. Background2. Summary of recent developments3. User priorities4. Development plans
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UK Trade Statistics - Background
• National Statistics de-designation November 2014
• Reassessment published May 2015 with 13 requirements
• Published trade development plan in March 2016 for consultation
• EU referendum 23 June 2016 leading to high demand for UK Trade statistics
• Recruitment of trade analysts across Whitehall and beyond
• Expect demand to intensify• User engagement ongoing to assess
requirements and priorities• UK Trade statistical solution within ONS
must cope with a completely new demand for data and analysis on top of traditional NA and BoP requirements
UK Trade Statistics – Recent Developments
• New monthly UK Trade statistical bulletin within the Short Term Economic Indicators Theme Day
• Enhanced commentary and analysis, particularly regarding movements in the value of sterling and effects on trade
• Publication of more geographic detail on annual basis
• Production Process Review leading to improvements in quality assurance
• Recruitment of analysts, operational and development resources
• Working in partnership with other experts on Trade in Value Added and Trade Asymmetries
Quality, timeliness and trust
Pace of response
Granular statistics and analysis
Mode of supply
Price effects
Erratic trade
Trade in value added
Trade asymmetries
73
High PriorityLo
nger
-term
gl
obal
initi
ativ
es
Gra
nula
rity
and
deta
il
Measurement
improvements
UK Trade Statistics – User Priorities
UK Trade Statistics – Development Plans
• Established UK Trade project within Economic Statistics Transformation Programme to develop processes, systems and enhance analytical capability
• Looking into existing and new data sources• Designing new systems fit for new demanding
operational and user requirements• Building capability and working in partnership
(e.g. Economic Statistics Centre of Excellence)• Publish revised development plan (provisional
date 10 Feb 2017)
Data Science CampusJanuary, 2017
“Although better use of [data] has the potential to transform the provision of economic statistics, ONS will need to build up its capability to handle such data. This will take some time and will require not only recruitment of a cadre of data scientists but also active learning and experimentation. That can be facilitated through collaboration with relevant partners – in academia, the private and public sectors, and internationally.”
- Independent Review of Economic Statistics, Professor Sir Charles Bean, 2016, p.11
Bean Review
Bean Review: “Active Learning…Apprenticeship in Data Analytics•Two-year vocational programme•Welsh Government scheme• Level 4 Diploma in Data Analytics•Over 130 applications•Eight apprentices from 5 December 2016
MSc Data Analytics for Government•Dedicated Data Science pathway• First intake in September 2017•Multiple Academic partners• Framework published 5th December 2016,
partner applications close 8th February
Data Science Accelerator•3-month programme•Open to all Public Sector staff•Run in conjunction with GDS and GO-Science•Newport “hub” @ Data Science Campus
…and Experimentation"Research Teams • First research team launched in Sept 2016•22 FTE as of 1st February•5 Research projects underway•New MD, Tom Smith joined on 26th Jan.•Official launch on 27 March 2017
Partnerships•MoUs agreed with multiple research partners
including 5 universities, research institutes (e.g. Alan Turing Institute) and international stats authorities (Stats Netherlands).
•Collaborations with national and devolved government including DEFRA, DCMS, DFID and Welsh Government.
Data Science Campus:www.ons.gov.uk/datasciencecampus
What’s Next…
Richard HeysDeputy Chief Economist
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Future of the Economic Forums
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ONS Economic Forum
Email: [email protected]: @ONS
#ONSeconomy
WIFI code for Glaziers Hall: glaziershallwifi and password: event123
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