Session II Supply-use tables as a framework for annual and quarterly accounts 

Session IISession II Supply-use tables as a Supply-use tables as a

framework for annual and framework for annual and quarterly accounts quarterly accounts 

Workshop on national accounts for Asian member Workshop on national accounts for Asian member countries of the organization of Islamic Conferencecountries of the organization of Islamic Conference

Ankara, Turkey Ankara, Turkey 1-2 December 2008 1-2 December 2008

bybyDevi ManrajDevi Manraj

IMF Regional statistics advisorIMF Regional statistics [email protected]@gmail.com

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Why use the SUT framework ?Why use the SUT framework ? Why use the SUT framework ?Why use the SUT framework ?

Use of SUT framework ensures internally consistent data for each activity and product category.

Data from different sources appear in a systematic and organized fashion

Allows the compiler to eliminate inconsistencies and to identify and fill in data gaps

Allows compilation of more reliable values for GDP than those obtained by calculating GDP from the production, expenditure or income side separately

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Use of SUTUse of SUT Use of SUTUse of SUT

SUT can be used as a compilation tool because the overall framework facilitates:

– data checking/reconciliation.– gap filling.

A number of countries treat SUT as central to their compilation process, not just as an irregular add-on needed to derive input-output tables.

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The Supply TableThe Supply Table The Supply TableThe Supply Table

The supply table containsThe supply table contains

Two transaction columns: Output at basic prices Imports c.i.f. and

Three adjustment columns: Taxes on products. Trade and transport margins; and C.i.f./f.o.b. adjustments.

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The Use TableThe Use Table The Use TableThe Use Table

The use table includes:The use table includes: Intermediate consumption; Final consumption; Gross capital formation; and Exports.

These transactions are valued at purchasers’ prices; i.e. the valuation includes taxes on production and imports, as well as trade and transport margins for each individual set of numbers.

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Valuation of TransactionsValuation of TransactionsValuation of TransactionsValuation of Transactions

Equality of supply and use

– Supply at basic pricesPlus

– Taxes less subsidies on products (Including nondeductible VAT)

Plus– Trade and transport margins

Equals– Supply at purchasers’ prices

Equals– Use at purchasers’ prices

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Supply table Output of industries Imports of goods and services

Total supply, basic prices

Trade and transport margins

Taxes on products

Subsidies on products

Total suply purch prices

Agri-culture

Manufac-turing

Trade and transport

Other service industries

Government

All industries

Supply of products

(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12)

1 Agriculturalproducts

300 300 165 465 30 20 -5 510

2 Manufactured products

25 930 10 5 970 310 1280 175 100 1555

3 Trade and transport services

45 305 350 35 385 -205 10 -20 170

4 Other services

20 295 315 85 400 25 425

5 Government services

340 340 340 340

6 Direct purchases abroad

70 70 70

7 TOTAL 325 975 335 300 340 2275 665 2940 0 155 -25 3070

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Use table Intermediate consumption of industries Final uses Total use, purchase prices

Agri-culture

Manufacturing

Trade and transport.

Other service industries.

Government

All industries

Final cons house-holds

Final cons government

Gross fixed capital form

Changes in inven-tories

Exports of goods and services

Total final use

(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13)

1 Agricultural products

20 240 10 5 275 85 5 -25 170 235 510

2 Manufactured products

85 305 105 25 40 56 445 260 10 280 995 1555

3 Trade and transport. services

30 40 15 10 20 115 40 15 55 170

4 Other services 25 70 5 20 30 150 135 20 10 110 275 425

5 Government services

5 5 5 15 20 305 325 340

6 Direct purchases abroad

10 5 5 10 30 40 40 70

7 Dir. purchase by non-residents

-50 50 0 0

8 TOTAL 160 670 135 75 105 1145 715 325 275 -15 625 1925 3070

9 Gross value added

165 305 200 225 235 1130

10 Compensation of employees

50 145 90 105 190 580

11 Other taxes on production

5 25 10 15 15 70

12 Other subsidies -10 -5 -15

13 Operating surplus/mixed income

120 140 100 105 30 495

14 TOTAL OUTPUT

325 975 335 300 340 2275

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Derivation of Supply Table Derivation of Supply Table at basic pricesat basic prices

Derivation of Supply Table Derivation of Supply Table at basic pricesat basic prices

Market output = Sales

+ Change in inventories (FG and WIP)  Non-market output (= Cost of production)

= Intermediate consumption + Compensation of employees + Other Taxes less subsidies on production + Consumption of fixed capital

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Derivation of SupplyTable Derivation of SupplyTable at basic pricesat basic prices

Derivation of SupplyTable Derivation of SupplyTable at basic pricesat basic prices

Intermediate consumption = Purchases - Change in inventories (materials)

Value added = Output - Intermediate consumption  Operating surplus = Value added - Compensation of employees - Taxes less subsidies on production - Consumption of fixed capital

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Transport MarginsTransport Margins Transport MarginsTransport Margins

 When is the cost of transportation to be treated as a transport margin?

  Transport margins consist of transport charges paid

separately by the purchaser to take delivery at a required time and place (SNA 15.28)

  If not paid separately, the transport cost could be

included as part of the basic price of the good, part of the wholesale or retail margin, or as an expense of the purchaser.

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Trade MarginsTrade Margins Trade MarginsTrade Margins

A trade margin (wholesale or retail trade) applies only when there is a distribution service provided by the trader through buying and reselling a product.

A trade margin does not apply to direct sales by a producer, even when the sales are to households.

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Trade MarginsTrade Margins Trade MarginsTrade Margins

Trade margin is defined as the difference between the selling price of the good for resale and the price that would have to be paid by the distributor to replace the good at the time it is sold.

The trade margin is the output of the distributor. As with other producers, value added is obtained by subtracting intermediate consumption.

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Trade MarginsTrade Margins Trade MarginsTrade Margins

Broadly, the trade margin is calculated as:

– Sales – less purchases of goods for resale– plus change in inventories for resale

– Note: purchases of goods for resale should exclude any transport charges invoiced separately to the distributor; such transport charges are to be shown as intermediate consumption of the distributor. (SNA 6.112)

The trade margin is part of the difference between the basic price of a good and its purchasers’ price.

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Trade MarginsTrade Margins Trade MarginsTrade Margins

Data sources for trade margins:

– Total margin earned from establishment data.– Margins for broad commodity groups.– Markup rates for particular kinds of goods– Supply/use of the goods subject to the margin. 

Balancing process to fit available, but incomplete, data. Much prorating in practice. Separate margin calculations for wholesale, retail, and

other? Yes, if different usage patterns and data available to do so.

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Treatment of ImportsTreatment of ImportsTreatment of ImportsTreatment of Imports

Consistent with the Balance of Payments Manual in valuing imports of goods in total on a f.o.b. basis, and to show international transportation as a service.

However, in the Supply/Use framework, imports at the commodity level are valued on a c.i.f. basis (including international transportation).

A c.i.f./f.o.b. adjustment is made in the Supply table to accommodate these two valuation bases, and to ensure that domestic carriage of imports is not double counted.

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Treatment of ImportsTreatment of ImportsTreatment of ImportsTreatment of Imports

Example of c.i.f./f.o.b. adjustment:

– Assume imports c.i.f. = 1,000 f.o.b. = 900

– International transportation = 100– Domestic carriers = 20– Foreign carriers = 80

– Assume domestic transportation to the user = 30

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Treatment of ImportsTreatment of ImportsTreatment of ImportsTreatment of Imports

Therefore,

– imports of goods f.o.b. = 900– imports of services = 80– Domestic services = 20 + 30 = 50– Supply at purchasers’ prices = 1,030

The c.i.f./f.o.b. adjustment ensures that these values are reflected in the Supply table.

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Steps for compilation of SUT Steps for compilation of SUT Steps for compilation of SUT Steps for compilation of SUT

Step 1: Design of classifications and conversion keys specific to the country.

Conversions are best carried out in Access. Results are subsequently imported to Excel

Step 2: Construction of files where data from

individual sources are treated

Step 3: Setting up of a computerised system for the balancing of supply and use by product category

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Balancing supply and use Balancing supply and use transactions consists of two main transactions consists of two main

steps:steps:

Balancing supply and use Balancing supply and use transactions consists of two main transactions consists of two main

steps:steps:

1. Manual balancing: Requires a great deal of judgment of the national

accountant. Procedure is largely a matter of trial and errors where

statistical discrepancies are eliminated step by step. 2. Mechanical balancing: Final part of the balancing exercise and requires no

further judgment on the part of the national accountant. It is not done until remaining discrepancies are so small

that they are devoid of economic or analytical meaning.

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ExamExamples of adjustments within ples of adjustments within the manual balancing processthe manual balancing process

ExamExamples of adjustments within ples of adjustments within the manual balancing processthe manual balancing process

Evaluate input / output structures of all columns to identify data gaps, and checking potential coding and classification problems (activity or vertical dimension);

Identify anchors – i.e. identify which transactions are most reliable, and therefore least subject to change.

Analyze and gradually eliminate discrepancies between supply and use for all rows of the SUT (product or horizontal dimension);

Finalize adjustments to input / output structures by activity, and make conclusive checks of product balances.

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Adjusting imports and exportsAdjusting imports and exportsAdjusting imports and exportsAdjusting imports and exports

Importers have an incentive to under-invoice. In addition, it is very probable that some smuggling occurs.

For exports, the incentive to under-invoice is weaker. It might be relevant to increase export data as well, but usually with a smaller percentage increase.

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Other adjustmentsOther adjustments Other adjustmentsOther adjustments

Identifying values for capital formationIdentifying values for capital formation

Identifying products that serve as inputs into Identifying products that serve as inputs into other product categoriesother product categories

Identifying purchases abroad (missing Identifying purchases abroad (missing exports)exports)

Identifying informal sector activitiesIdentifying informal sector activities

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SUT compared to SUT compared to Input-Output TablesInput-Output Tables SUT compared to SUT compared to

Input-Output TablesInput-Output Tables

Supply and Use Tables Input-Output Tables

Rectangular SquareProduct x Industry Industry x Industry

(Product x Product)Compilation tool (reconciliation, Model-buildingdata generation)Model-building

More oriented to More derived data (e.g.,observable data homogeneity, single

assumptions)

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SUT compared to SUT compared to Input-Output TablesInput-Output Tables SUT compared to SUT compared to

Input-Output TablesInput-Output Tables

Supply and Use Input-Output Tables Tables

Any countries Statistically advanced countries

Central focus of national Add-on to national accounts compilation accounts compilation