Assessing the Quality of SPPIs M G Šova, J Wood & I Richardson Office for National Statistics, UK.

Assessing the Quality of SPPIs

M G Šova, J Wood & I Richardson

Office for National Statistics, UK

Overview

• What are SPPIs?

• Quality Assessment of ONS SPPIs

– Products

– Business versus retail

– Sampling

– Weighting

• Non-standard estimation methods

• Other aspects

• Plans to improve and monitor quality

What are Services Producer Price Indices?

Price movements in business-to-business services

In UK:– Quarterly Laspeyres price index– Rebased every 5 years– Uses:

• Estimating corporate services inflation• Deflators for Index of Services

– Users:• National Accounts• Bank of England• Eurostat

Quality Assessment of ONS SPPIs

• In 2006 by Dr Markus Šova

– Replaced planned three-year programme

• 29 Product Classes

– 198 Product Categories

• 134 recommendations

Quality Assessment of ONS SPPIs

• Product descriptions often vague

• Dubious sample allocations between categories

• Weights– Some excessively large (potentially disclosive)

– Some excessively small

– Derivation and rationale not always clear

– Weighting for purposively selected respondents problematic

• Coverage incomplete

• Definition of ‘Europe’ ill-defined

• Some uses of external indices problematic

• Processing risks (manual transcription, spreadsheets)

Products - Classification

• CPA 2008 :124 pages– Agriculture & construction: 12 pages– Production: 72 pages– Wholesale & retail: 9 pages– Other services: 31 pages

• In-house service product classification

Product Definitions

• Need consistent product definitions over time• Not always possible (e.g. Market Research)• Not always possible to define the product

(e.g. canteen services)• Possible Solutions:

– standard services– quality adjustment– hedonic modelling– model contracts– hourly rates– unit value prices

Business versus Retail

• Intermediate consumption v. final consumption(Supply-Use Tables)

• Differentiation not always possible (e.g. rail fares)

• Possible solution:

– Product differentiation and differential weighting

(e.g. by destination, travel time, ticket class)

– Data not always available

Sampling

• ProdCom (sample size: 22,000)

• Ad hoc SPPI turnover surveys in 2000 and 2005

– Sample size: 5,000 (SPPI sample size: 4,500)

– Limited scope and coverage

• Purposive selection of respondents

– Amended method for estimating unit weights

• Sample (mis)allocation

Weighting

• Large, small weights

• Product class weights– Category definitions

– Uncertain and dubious derivation

– Limited coverage

– Supply-Use Tables (2005 rebasing)

• Unit weights– Purposive selection of respondents and products

– Probability proportional to size sampling?

– Consistency versus unbiasedness?

Non-Standard Estimation Methods

• Model contracts (e.g. computer programming)

• Hourly rates (e.g. legal services)

• Unit values (e.g. telecommunications)– cheap and easy– potential bias (but no variance)– quality adjustment

Other Aspects

• Percentage fees (e.g. employment agencies)

– Dependence on related index

• Use of external indices

– Quality assurance

• Annual chain-linking

• Scope and coverage– ProdCom for services? All products?

• Cost

• Timeliness

Plans to Improve and Monitor Quality

• Implement QA review recommendations– Re-specify vague item descriptions

– Reduce processing risks

• Re-allocate sample– Standard errors

– Re-categorisation

– 2000 weights versus 2005 weights

• Monitor unit value indices

• Periodically repeat quality assessment

• Resource constraints