eurostat principals economic indicators ks 81-08-398 en

8/14/2019 Eurostat Principals Economic Indicators Ks 81-08-398 En

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2009 edition

S t a t i s t i c a l b o o k s

Principal European Economic

Indicators

A statistical guide


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2009 edition

S t a t i s t i c a l b o o k s

Principal European Economic

Indicators

A statistical guide


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5Principal European Economic Indicators - A statistical guide

Foreword

Tis is the second in a series o booklets explaining how the most important European statistics

are collected and compiled and what they are used or. Te rst in the series, on price statistics,was published in 2008. Tis second booklet deals with the principal European economic indica-tors, or PEEIs, a set o the most important monthly and quarterly indicators on economic devel-opment. It explains what they cover, why they are relevant, how they relate to and depend on eachother and how they are used, with practical examples. Te book should prove useul to economicanalysts, policy-makers, students and anyone interested in economic issues. Numerous links helpthe reader to nd additional inormation on Eurostat and its websites.

Editor-in-chie:

Ulrich Wieland, Eurostat Dissemination

Editorial team:

Agnieszka Mroz, Eurostat trainee, National Statistical Institute o Poland

Pavel Borkovec, Diana Ivan, Gunter Scher, Eurostat Dissemination

Contact details:

Eurostat,

Statistical Oce o the European Communities,

Btiment Joseph Bech,

5, Rue Alphonse Weicker

L-2721 Luxembourg

E-mail address: [email protected]

Credits:

It would not have been possible to produce this publication without the assistance and goodwillreceived rom the ollowing Eurostat units and authors:

Directorate C: National and European accounts

National Accounts - production (Christine Gerstberger, Jukka Jalava, Mira Lehmuskoski)
mailto:[email protected]:[email protected]


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6 Principal European Economic Indicators - A statistical guide

Public nance (Rasa Sodeikaite)

Balance o payments (Merja Hult, Luca Pappalardo)

Validation o public accounts (Peter Parlasca)

Directorate D: Economic and regional statistics

Key indicators for European policies (Rosa Ruggeri Cannata, Justyna Gniadzik, Gian-Luigi Mazzi)

Short-term statistics (Liliana Apostol, Brian Newson, Isabelle Rmond-iedrez)

Price statistics (atiana Mrlianova, Christine Wirtz)

Directorate F: Social statistics and inormation society

Labour market (Remko Hijman, Hannah Kiiver, Joachim Recktenwald)Directorate G: Business statistics

International trade statistics production (Gilberto Gambini)

Data extracted in February 2009.


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Contents

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Historical background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Importance or economic analysis and policy making . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Future trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Chapter 1: National Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Gross domestic product. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Private nal consumption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

How national accounts PEEIs are compiled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26

Chapter 2: External Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

External trade balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Balance o payments current account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Chapter 3: Prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

Infation (Harmonised indices o consumer prices - HICP) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

Chapter 4: Labour Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

Unemployment rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45Labour cost index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

Chapter 5: Business Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

Industrial producer prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52

Industrial import prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

Service producer prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59

Industrial production. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

62


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Industrial new orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65

Production in construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68

Retail trade turnover. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71

Explanatory notes on business indicators. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75

Chapter 6: Government Finance Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77

Government decit/surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78

General government gross debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80

Chapter 7: Financial Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83

Three-month interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84

Long-term government bond yields . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86

Euro exchange rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88

Chapter 8: Economic Sentiment Indicator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91

Annex 1: PEEIs on the Eurostat website . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96

Annex 2: The Business Cycle Clock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98Abbreviations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99

Further inormation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102


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Introduction

Te economic and monetary union and the setting up o the European Central Bank (ECB)

signicantly reinorced the need or a broad range o monthly and quarterly statistics to measureeconomic and monetary developments in the euro area and to support a common monetarypolicy. Designing an eective monetary policy and judging the business cycle depends on timely,reliable and comprehensive economic statistics giving an overview o the economic situation.

More generally, eective economic and political decision-making depends on a regular supply oreliable and objective inormation. Statistics are one main source o that inormation, providingessential gures to support the draing and implementation o policies. Te data is used by the Eu-ropean institutions and the ECB, by national governments and central banks, by nancial marketsand companies. Statistics are also a powerul tool or communicating with the general public.

Satisying these inormation needs involves constant interaction between policymakers and stat-isticians: the policymakers identiy their data needs, and the statisticians attempt to adapt thesystem to meet those needs. New policies drive improvements in statistical production, both interms o improving existing indicators and creating new ones.

Eurostat has responded to these needs by developing the Euro-indicators, o which the PrincipalEuropean Economic Indicators are the core. Tese indicators have been developed by expertsand agreed by policymakers. Tey are continuously monitored, improved and reviewed to keeppace with changing policy requirements.

Historical background

In the run-up to monetary union, Eurostat and the European Statistical System made majoreorts to improve monthly and quarterly statistics. In particular, national accounts, consumerprice statistics, business statistics and external trade statistics were all substantially expanded.

In 1998, when xed exchange rates were set or each currency participating in the euro, theeconomic and nance ministers in the Econ Council, the European Central Bank, and private and public analysts all increasingly needed to monitor economic developments in theeuro area. Eurostat responded to this by creating specic pages on its website, the so-calledEuro-indicator tables, oering easy access to a large set o economic indicators or the euroarea and the European Union.

In 2002, the European Commission produced a list o 19 principal European economic indica-tors (PEEIs) (see Communication COM/2002/661) in the ollowing areas:

National accounts, including government accounts,External trade,Balance o payments,Prices,


Introduction


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Labour market,Business statistics,Monetary and nancial statistics.

Following the Communication, an in-depth analysis began to review and improve the coverageand quality o the PEEIs, and many improvements were made. More details on the improvementsare given below.

In 2007, the list o PEEIs was substantially revised to increase its useulness or economic analysispurposes. Te PEEI list now comprises 26 indicators, o which 22 are currently available. able 1lists the 26 PEEIs together with requency with which they are published and the release date othe rst European aggregates, counted rom the end o the reerence period (t).

o promote the PEEIs, a specic PEEI page was added on the Eurostat website. Tis page bringstogether in a single place a set o the most relevant and timely short-term economic indicators orthe euro area and the European Union. More inormation on the Euroindicator/PEEI web pagescan be ound in Annex 1.

Table 1: Principal European Economic Indicators

PEEI Frequency Release date

Gross domestic product (GDP) quarterly t+45 days

Private nal consumption quarterly t+65 days

Investments quarterly t+65 days

External trade balance monthly t+48 daysBalance o payments current account monthly (euro area)

quarterly (EU-27)

t+8 weeks

t+2,5 months

Infation (Harmonised Indices o Consumer Prices HICP) monthly t+15 days

Unemployment rate (total, 15-24 years and above 24 years) monthly t+30 days

Employment quarterly t+70 days

Labour cost index quarterly t+75 days

Industrial producer prices monthly t+1 month and 2-3 days

Industrial import prices (or euro area) monthly 1 month and 11-12 days

Industrial production monthly t+1 month and 12 days

Industrial new orders monthly t+1 month and 22 days

Production in construction monthly t+1 month and 17 daysRetail trade turnover monthly t+1 month and 3 days

Government decit/surplus annually t+3 month and 3 weeks

General government gross debt annually t+3 month and 3 weeks

Economic sentiment indicator monthly 2nd last working day o

the reerence month

Three-month interest rate monthly t+12 days

Long term government bond yields monthly t+10 days

Euro exchange rates monthly t+2 days

Sector accounts quarterly frst results available

Turnover index or other services quarterly not available

Service producer prices quarterly frst results available

Job vacancy rate quarterly not available


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Improvements

Since 2002, PEEIs have been regularly monitored and improved. Working groups in all statistical

elds bring together experts rom Eurostat and the national statistical oces in order to discussand implement improvements. Te Euroindicators Working Group (which brings together pro-ducers rom the Member States and principal users o the PEEIs) plays a particularly importantrole in the technical improvements. Te main tool or monitoring and improving PEEIs is theannual EFC Status Report on Inormation Requirements in EMU, draed jointly by Eurostat andEuropean Central Bank and submitted to the Econ Council. In recent years several relevantimprovements have been raised in this document and endorsed by the Council:

increasing timeliness to reduce the gap with the US, partly by using statistical and econo-metric techniques,

improving the coverage o PEEIs lling in the missing indicators and ensuring geographi-cal and historical coverage,

harmonising some aspects o PEEI production and dissemination in key areas such as sea-sonal adjustment, revisions, estimates, etc.

Timeliness

At the beginning o 2000 European statistics tended to lag seriously behind those o the USA. oll this gap policymakers recognised that production needed to be accelerated, but in the short

term this was easible only or a ew indicators. A reasonable alternative or some other indicatorswas the use o statistical techniques to produce quick estimates. wo solutions were suggested:

the construction o fash estimates using orecasting techniques to estimate the recent pastor the present,

use o the European Sampling Scheme, which allows earlier estimation o a European aggre-gate by using inormation rom small European samples that would not necessarily producereliable estimates or individual Member States.

Various initiatives resulted in:

the production o a fash estimate o the euro area price index HICP at t+0 in 2003 (t being the end o the reerence period and 0 meaning zero days, i.e. no time-lag),the production o fash estimates o GDP or the euro area and the European Union at t+45in 2003, and

an early estimate o retail trade turnover or the euro area, the European Union and mostMember States at t+23.

Further improvements in timeliness were achieved especially in business statistics (e.g. or theindustrial production index and industrial producer prices). Te easibility o reliable fash esti-

mates or gross domestic product and the industrial production index at t+30 and or the labourcost index at t+45 is being examined with some Member States.


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Coverage

Considerable progress has been made in the coverage o the indicators listed in able 1.

More recently, gures or quarterly sector accounts, i.e. EU and euro area government, householdand company accounts as well as industrial import prices have been released or the rst time,which is an important step towards ull coverage. Quarterly statistics on turnover and output pricesor services also improved signicantly, and Council regulations on job vacancy statistics have re-cently been approved. In short, a ull coverage can be expected within the next two years.

Progress has been made towards ull country coverage and the situation is satisactory or almostall PEEIs.

In terms o coverage over time, there is an obvious lack o long time series (e.g. 15-20 years) in

some areas. In order to ll this gap Eurostat has started exploratory work on recalculating PEEIsor earlier years or the euro area and the EU, using statistical models.

Harmonising production

From the outset, some institutions signalled the need or harmonisation o some eatures o theprocessing and presentation o PEEIs. Te apparent discrepancies, mainly in revisions, seasonaladjustments and estimation practices, aect the comparability o PEEIs across countries. Fur-thermore, since European indicators are mainly obtained through aggregation or estimation, thelack o harmonisation o national practices aects the overall quality o the gures or the euro

area and the European Union.Recently, major steps have been taken to harmonise PEEI production:

publication o the ESS Guidelines on Seasonal Adjustment,revision o the Quarterly National Accounts Guidelines or Seasonal Adjustment,a rst attempt to dene a general scheme or PEEI revision policy,a proposal o a common scheme or the revision o national accounts data.

Note that while the ESS has now endorsed the rst two initiatives, the others still need urther

discussion beore they can be endorsed. Harmonising seasonal adjustment strategies, in par-ticular, will be a very important step orward because seasonally adjusted data are oen used asheadline gures.


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Importance or economic analysis and policy making

PEEIs are the primary source o inormation or assessing monetary policy and or monitoring

and ollowing up the cyclical situation or the euro area, the European Union and the MemberStates. Te PEEIs presented in able 1 give a very complete description o the economic situ-ation and they include all o the variables commonly used by analysts and policy makers. Inparticular, national accounts indicators, consumer prices and unemployment statistics providethe main ramework or all kinds o macroeconomic analysis. Monthly business indicatorssuch as the industrial production index, production in construction and retail trade defatedturnover give short-term sectoral views o the production and sale o goods and services. Ex-ternal trade, balance o payments and exchange rate gures describe the economic interactionso the euro area, the European Union and Member States with the rest o the world. Statisticson labour cost, industrial producer prices and industrial import prices complete the pictureo the processes that cause infation. Te three-month interest rate and long-term governmentbond yields are the main instrumental variables or monetary policy and the economic senti-ment indicator is included because it represents a very useul synthetic indicator with someorward-looking properties.

PEEIs can also be used to construct highly aggregated macroeconomic models, whereas orlarge-scale econometric models the underlying, more detailed, inormation is required.

Each PEEI usually represents a larger amily o indicators broken down according to the vari-ous disaggregation schemes (nomenclatures) in order to give detailed accurate pictures at di-

erent levels o disaggregation. Nevertheless, or large-scale macroeconomic models, severalnon-PEEI indicators may be also be relevant the energy market and energy prices, the rawmaterials market and prices, inormation on capital stocks, monetary aggregates, populationand migration.

Te main uses o Principal European Economic Indicators or economic analysis include:

the construction o coincident and leading indicators,the estimation o a monthly indicator o economic activity,the estimation o trend and cyclical components or the main economic variables,the study o convergence and synchronisation among economies and sectors,the detection and dating o turning points, andthe creation o small-scale econometric models or business cycle analysis and orecastingpurposes.

Eurostat, the European Central Bank (ECB) and the European Commissions Directorate-Gen-eral or Economic and Financial Aairs have launched several projects on the above-mentionedtopics in recent years. Relevant papers are available on the Eurostat, ECB and Economic and

Financial Aairs DG websites, and in international reviews and journals.


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Future trends

Principal European Economic Indicators orm the core o European monthly and quarterly

macroeconomic statistics. Tey are monitored with particular care by Eurostat and a medium-term development strategy has been dened. PEEIs do not represent a static set o data but areintended to adapt:

to include newly available data,to respond to user requirements,to better represent changing economic scenarios.

On the last two points, Eurostat, the ECB, the Economic and Financial Aairs DG and EU Mem-

ber States are currently rethinking PEEI coverage, especially to include new indicators on thehousing market. Te ECB and the Econ Council have strongly supported the inclusion o suchindicators, in the light o the recent events aecting the housing market. Further considerationsare increasing globalisation and its eect on the short-term behaviour o the economy.

Improved timeliness has been one o the major priorities and achievements in recent years. Mosto the timeliness targets set out in 2002 have now been achieved and more attention will be paidto other aspects o quality, especially the accuracy and reliability o PEEIs.

It is important to underline that the consensus around PEEIs is the key to their success. PEEIswill be urther promoted and should be widely used. Feedback and remarks rom PEEI users will

drive urther development and improvement.


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National Accounts1


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1 National Accounts

Gross domestic product

Gross domestic product (GDP) is a summary measure or economic production. It is generally

considered to be an overall indicator o the development o the economy.

GDP measures the nal result o the production activity o resident producer units (ESA95,8.89.). It is the value o all goods and services created during the accounting period, less the valueo the goods and services consumed as inputs in production processes. Tis dierence betweenvalue o output and value o input is also called gross value added.

Despite being a concept based on production, GDP can also be presented in two other ways:

End-use: the value added by an economy can be used or consumption, or investment or it canbe exported. GDP is hence the sum o all nal uses by domestic units (nal consumption ex-

penditure and gross capital ormation), plus exports and minus imports o goods and services.

Distribution: the value added by an economy is distributed among economic actors accordingto their participation in the production process. GDP is hence the sum o employee remunera-tion, gross operating surplus (the income which production units obtain rom their own useo their production acilities) and mixed income (the remuneration o work carried out by thesel-employed which cannot be distinguished rom their prots as entrepreneurs), and taxes lesssubsidies on production and imports.

Production perspective

value of all

goods and

services

created

during the

accounting

period

value of the

goods and

services

consumed

as inputs

exports

imports

investment

consumption compensation

of employees

gross

operatingsurplus and

mixed income

taxes

subsidies

End-use

perspective

Distribution

perspective

GDP = =


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National Accounts 1


All three approaches lead to the same total value o GDP.

Te term gross in GDP means that the consumption o xed capital (i.e. depreciation o capital

stock such as machinery and buildings) is not accounted or. Te term domestic in GDP meansthat it includes all production that takes place in the countrys territory, regardless o the pro-ducers nationality.

Economic importance

GDP is one o the best-known and most-used economic statistical gures. Its importance lies inthe act that it combines several desirable properties:

It merges all economic production into one measure that is easily understood and assessed.

It is based on a consistent ramework o detailed accounts in which all activities are naturally translated into monetary values. Tis means that merging the inormation into a singlegure does not involve arbitrarily combining incommensurable quantities. Tis also meansthat several levels o consistent additional detail beyond the summary measure o GDP areavailable to assess economic perormance.

It is based on a well-established, consistent international methodology, which makes it acredible statistic with ew pitalls in international comparison.

GDP oen in conjunction with other statistics is regularly used in a wide variety o analy-ses. For example, it serves as the primary indicator o the stage o the business cycle. As a widely

accepted measure, it is oen the basis or calculating derived indicators (such as the output gap)and is used in setting interest rates, deciding on tax rates, setting demands in wage negotiationsor xing the government budget.

GDP is also used beyond the connes o pure economic and monetary policy. One example is itsuse as a benchmark in indicators such as energy intensity, which is calculated as the ratio o grossinland energy consumption to GDP.

Note, however, that national accounts work with a production boundary to determine which ac-tivities are to be recorded in the accounts and which are not. Own-account production o certainservices a haircut or example inside households do not show up in GDP, while the sameservices would be included in GDP were they are produced by a provider outside the household a hairdresser rather than a amily member. In addition, attributing monetary values to outputswill not necessarily coincide with the amount o utility actually derived rom consuming them.

Hence, GDP is an important but not an exhaustive measure o a societys well-being.

Data availability

Eurostat publishes annual and quarterly GDP series or nominal values, volumes and defators asar back as national data are available. While, or some Member States, consistent data may be avail-

able even beore 1970, or others data may start only in 1995 or even 2000. Tis does not necessarily


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1 National Accounts

mean that GDP gures were not compiled beore then, just that changes in methodology have notbeen retraced beyond these dates. Series or the euro area and the EU currently start in 1995.

Each quarter, Eurostat produces our releases o gures or the EU and the euro area (EA). A fashestimate or quarterly GDP growth or the euro area and the EU becomes available 45 days aerthe end o the reerence quarter (t+45). Aer 65 days (t+65), the rst quarterly GDP is released,including GDP components on the output and expenditure side, at current and constant prices. Att+75 days, the rst quarterly employment gures are released. At t+105 days, the second (revised)quarterly GDP is released. Additional variables estimated are: GDP income-side components (in-cluding A6 industry breakdowns), population & national employment, breakdowns o exports &imports, gross xed capital ormation and domestic employment. Te EU and EA aggregates o thequarterly sector accounts are available 120 days aer the end o the reerence quarter.

GDP data are presented at current prices, at the previous years prices and as chain-linked vol-umes with reerence year 2000. In addition, growth rates, index numbers and per capita guresare provided. Current price data or Member States is presented in ECU/euro (using variableexchange rates), in national currency (using xed conversion rates or EA Member States) and inpurchasing power standards (centred on the euro or the EU-27).

All data are available on the Eurostat website: http://ec.europa.eu/eurostat => Teme: Economyand nance => Data => National accounts.
http://ec.europa.eu/eurostathttp://ec.europa.eu/eurostat


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National Accounts 1


Example

Te ollowing graph shows GDP growth over the period 1996-2008. It illustrates the movement

o the business cycle, notably the sharp downturn between 2000 and 2002 and rom the thirdquarter o 2007 onwards. Another typical eature is that growth rates in the EU-27 are usuallyhigher than those in the euro area, which is testimony to the more dynamic growth in the newEU Member States, as they are catching up with the income levels o the EU-15 countries. At thesame time, the small size o this growth dierence shows the comparatively small absolute size omost EU economies outside the euro area.

Graph 1: Quarterly GDP, chain-linked volume, seasonally adjusted% change to the same quarter of the previous year

5.0

4.0

3.0

2.0

1.0

0.0

-1.0

-2.0

1996

q01

1996

q03

1997

q01

1997

q03

1998

q01

1998

q03

1999

q01

1999

q03

2000

q01

2000

q03

2001

q01

2001

q03

2002

q01

2002

q03

2003

q01

2003

q03

2004

q01

2004

q03

2005

q01

2005

q03

2006

q01

2006

q03

2007

q01

2007

q03

2008

q01

2008

q03

European Union (27) Euro area (15)

Source: Eurostat, National Accounts (namq_gdp_k)
http://ec.europa.eu/eurostat/product?code=namq_gdp_khttp://ec.europa.eu/eurostat/product?code=namq_gdp_khttp://ec.europa.eu/eurostat/product?code=namq_gdp_khttp://ec.europa.eu/eurostat/product?code=namq_gdp_k


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1 National Accounts

Private nal consumption

Private nal consumption is a summary measure o the value o goods and services acquired

by residents and used directly to satisy their individual or collective needs. It is an importantmeasure o welare: higher consumption is expected to lead to a higher degree o satisaction oneeds, which in turn translates into increased welare in society as a whole.

Final consumption reers to spending to directly satisy individual or collective needs, whetherthat spending is incurred at home or abroad (ESA95, 3.75-3.99).

Private consumption reers to spending by households and non-prot institutions servinghouseholds (NPISH: e.g. trade unions, proessional societies, political parties, churches, chari-ties, and sports clubs), but not by the general government.

Economic importance

Roughly speaking, the total value added by economic activities (i.e. GDP) can be used or consump-tion, or investment or or (net) exports. Each o these three basic uses has its own characteristics:

Consumption meets the needs o individuals or collectives and thus directly increases soci-etal welare.

Investment adds to the capital stock and thus stores up potential or uture consumption.(Net) exports put added value at the disposal o economic units outside the country, whichcan use them or their own consumption or investment. In return, the domestic economybuilds up international claims which may, or example, be exchanged or imports o goodsand services later.

Ultimately, consumption is the nal goal o all productive activity. Both investment and (net)exports mean oregoing immediate consumption or the sake o increasing uture productionand consumption possibilities. Private nal consumption is a measure o how ar an economyprovides people with the means o satisying their needs, ranging rom basic needs (housing,ood) to more sophisticated ones (travel, recreation). Note that consumption covers both goodsand services. Further insight can be provided by breaking down consumption expenditure by

purpose. Te broad categories o this breakdown are:

Food and non-alcoholic beverages1.

Alcoholic beverages, tobacco and narcotics2.

Clothing and ootwear3.

Housing, water, electricity, gas and other uels4.

Furnishings, household equipment and routine household maintenance5.

Health6.


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National Accounts 1


ransport7.

Communication8.

Recreation and culture9.

Education10.

Restaurants and hotels11.

Miscellaneous goods and services12.

Te ull breakdown is called the COICOP classication (Classication o Individual Consump-tion by Purpose, 1999 version) and is available on the Ramon server o the Eurostat website.

Changes in consumption are also considered to give some indication o the economic expecta-

tions o citizens, as households tend to consume more i they expect their economic situation toimprove in the uture and less i they expect it to deteriorate.

Tis statistic is all the more relevant when it can be assessed with related gures, such as those oninvestment and exports, income or saving rates, as part o the national accounts.

Data availability

Eurostat publishes annual and quarterly national accounts series or nominal values, volumes anddefators as ar back as national data are available. While, or some Member States, consistent data

may be available even back beyond 1970, or others data may start only in 1995 or even 2000.Data or quarterly private consumption or the euro area, the EU and many o the Member Statesbecomes available about 65 days aer the end o the reerence quarter. More detailed breakdownso national accounts are published around 105 days aer the end o the reerence quarter.

Consumption data are presented at current prices, at the previous years prices and as chain-linked volumes with the reerence year 2000. In addition, growth rates and index numbers areprovided. Current price data or Member States is presented in ECU/euro (using variable ex-change rates) and in national currency (using xed conversion rates or EA Member States).

All data are available on the Eurostat website => Teme: Economy and nance => Data => Na-tional accounts.


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1 National Accounts

Example

Te ollowing graph shows private nal consumption growth over the period 1996-2008. It illus-

trates the movement o the business cycle, notably the sharp downturns between 2000 and 2002and rom the third quarter 2007 onwards. Growth rates in the EU-27 are usually higher thanthose in the euro area, which is testimony to the more dynamic growth in the new EU MemberStates, where consumption is growing aster as these economies become richer and the house-holds can aord more and better goods and services.

Graph 2: Quarterly private final consumption, chain-linked volume, seasonally adjusted% change to the same quarter of the previous year

5.0

4.0

3.0

2.0

1.0

0.0

-1.0

1996q

01

1996q

03

1997q

01

1997q

03

1998q

01

1998q

03

1999q

01

1999q

03

2000q

01

2000q

03

2001q

01

2001q

03

2002q

01

2002q

03

2003q

01

2003q

03

2004q

01

2004q

03

2005q

01

2005q

03

2006q

01

2006q

03

2007q

01

2007q

03

2008q

01

2008q

03




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National Accounts 1


Investment

Investment is a summary measure o the value o additions to the capital stock o an economy. A

larger capital stock in turn implies an increase in uture production potential. Investment is an im-portant measure since it is expected to create returns and increase economic growth in the uture.

Te term investment is used here to cover gross xed capital ormation (GFCF) in the nationalaccounts. GFCF consists o resident producers acquisitions, less disposals, o xed assets dur-ing a given period, plus certain additions to the value o non-produced assets. Fixed assets areproduced tangible or intangible assets that are themselves used in production processes or morethan one year. (ESA95, 3.102)

Practical examples o gross xed capital ormation might be:

buying machinery or a new production plant,building apartment blocks,building cargo ships,constructing a dyke to protect arable land,buying soware licences or patents,planting ruit trees on a arm,buying a company car or business use.

On the other hand, the ollowing do not constitute GFCF:

buying a private car,buying small tools or production plants,buying machinery or resale,building up stocks o raw materials or nished products.

Te term gross in GFCF means that consumption o xed capital (i.e. depreciation o capital stock)is not accounted or. Hence, investment does not necessarily mean a net increase in capital stock.

Economic importance

Investment is one o the central economic statistics that allows economists to assess the currentposition in the business cycle. As investment is expected not only to lead to uture returns, butto lead to uture returns larger than the original investment, it also has a certain power to predictuture economic development.


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1 National Accounts

Further insight can be provided by breaking down investment by the type o asset acquired, thebroad categories being:

cultivated assets,transport equipment,other machinery and equipment,dwellings,other construction,intangible xed assets.

Tis statistic is all the more relevant when it can be assessed with related gures such as consump-

tion and exports as part o the national accounts. Furthermore, investment is the main input intocalculations o capital stock and capital services, capital productivity and capital intensity.

Data availability

Eurostat publishes annual and quarterly national accounts series or nominal values, volumes anddefators as ar back as national data are available. While, or some Member States, consistent datamay be available even back beyond 1970, or others data may start only in 1995 or even 2000.

Quarterly investment data or the euro area and the EU and many o the Member States becomes

available about 65 days aer the end o the reerence quarter. More detailed breakdowns o nationalaccounts or the EA/EU are published around 105 days aer the end o the reerence quarter.

Investment data are presented at current prices, at the previous years prices and as chain-linkedvolumes with the reerence year 2000. In addition, growth rates and index numbers are provided.Current price data or Member States is presented in ECU/euro (using variable exchange rates)and in national currency (using xed conversion rates or EA Member States).

All data are available on the Eurostat home page: http://ec.europa.eu/eurostat => Teme: Econ-omy and nance => Data => National accounts.


26/107

National Accounts 1


Example

Te ollowing graph shows investment growth over the period 1996-2008. It illustrates the move-

ment o the business cycle, notably the sharp downturn between 2000 and 2002 and rom thethird quarter o 2007 onwards. Growth rates in the EU-27 are usually higher than those in theeuro area, which is testimony to the more dynamic growth in the new EU Member States. At thesame time, the EU-27 series is a bit more volatile. Investment may react aster and more stronglyto changes in economic expectations than other components o GDP, as can be seen rom a com-parison with the same graph or private consumption.

Graph 3: Quarterly gross fixed capital formation, chain-linked volume, seasonally adjusted% change to the same quarter of the previous year

10.0

8.0

6.0

4.0

2.0

0.0

-2.0

-4.0

-6.0

1996

q01

1996

q03

1997

q01

1997

q03

1998

q01

1998

q03

1999

q01

1999

q03

2000

q01

2000

q03

2001

q01

2001

q03

2002

q01

2002

q03

2003

q01

2003

q03

2004

q01

2004

q03

2005

q01

2005

q03

2006

q01

2006

q03

2007

q01

2007

q03

2008

q01

2008

q03




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National Accounts1

How national accounts PEEIs are compiled

Te compilation o national accounts, including GDP, private nal consumption and investment,

is governed by international standards. For the EU, this is the European System o National andRegional Accounts (ESA95), which EU Member States are legally obliged to apply. ESA95 itsel isconsistent with the worldwide SNA (System o National Accounts) standard.

National accounts are compiled rom a large set o source statistics, including most other stand-ard economic statistics such as production indices and consumer price indices. Other importantsource statistics are business and household budget surveys, administrative (e.g. tax) records andnon-economic statistics such as the labour orce survey or population censuses. Which statisticsare used depends on the specic circumstances in a given national statistical system.

Accounts are set up in nominal terms (i.e. current prices) and in volume terms to disentangleprice eects. Dividing GDP at current prices by GDP volume results in a measure o aggregateprice movements called the implicit GDP defator. While the nominal accounts are oen usedor structural analysis, national accounts volumes are better suited or assessing change overtime, and in particular the business cycle, because they remove infation (i.e. price movements)rom real economic change. Calculating volumes entails valuing economic activity at the pre-vious years prices, i.e. assuming that prices had not changed. Te resulting changes rom oneperiod to another are then chained together to give consistent volume time series.

Nominal national accounts aggregates, such as GDP, consumption and investment at currentprices, are naturally expressed in currency units, namely ECU/euros or the euro area (EA) andEU aggregates. Volumes, on the other hand, are normally presented as growth rates in the caseo quarterly accounts, compared both with the previous quarter and with the same quarter o theprevious year and index series. Another important way o presenting GDP in particular is as aper inhabitant gure, or which national data are oen given in a orm corrected or dierencesin purchasing power between dierent countries (and currencies).

EA and EU national accounts aggregates are, in principle, obtained as aggregates o national GDPdata. Te underlying compilation process or the EA and EU aggregates is somewhat more com-plex, because they require a ully consistent set o accounts, and national data have some methodo-logical dierences and are typically not ully available when the aggregates are calculated.

Quarterly GDP series are either unadjusted or seasonally adjusted, depending on the intendeduse. Seasonal adjustment usually includes a correction or dierences in the number o workingdays. GDP can either be adjusted as a time series in its own right or be derived rom adjustedcomponent series. EA/EU seasonally adjusted GDP series are derived rom adjusted nationalGDP series.


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External Transactions2


29/107


2 External Transactions

External trade balance

European external trade statistics cover the movement o goods across the rontiers o EU Mem-

ber States. Basically, all physically incoming and outgoing movable goods, including electricityor example, are recorded and documented.

Economic importance

Te trade balance is the dierence between the value o the goods that a country (or an economicarea like the EU or the euro area) exports and the value o the goods that it imports. I exportsexceed imports, it has a trade surplus and the trade balance is said to be positive. I importsexceed exports, the country (area) has a trade decit and its trade balance is said to be negative.However, the words positive and negative have only a numerical meaning and do not necessar-

ily tell you whether the economy o a country (area) is perorming well or not. A trade decit mayor instance refect an increase in domestic demand or goods destined or consumption and/orproduction. Te total trade balance, i.e. o all goods exported and imported, is one o the majorcomponents o the balance o payments. A big surplus/decit or a single product or productcategory can show a competitive advantage/disadvantage in the world market or goods.

Data compilation

Te Member States collect, compile and transmit external trade statistics to Eurostat in line withspecic EU regulations. Statistics on trade between Member States are based on Regulation (EC)

No 638/2004 o the European Parliament and o the Council, and Commission Regulation (EC)No 1982/2004, while statistics on trade with non-EU countries are based on Council RegulationNo 1172/95 and Commission Regulation (EC) No 1917/2000. Tese are designed to ensure thatthe statistics are harmonised and comparable. However, Member States may apply dierent con-cepts when publishing gures or national purposes.

External trade statistics are compiled under two dierent statistical systems: Extrastat or cross-border trade in goods between EU Member States and non-EU countries (extra-EU trade) and In-trastat or trade in goods between the EU Member States (intra-EU trade). Tis separation mainlyrefects dierent data collection instruments but is also logical in terms o policy impact: whereas

extra-EU trade statistics are needed or the Communitys common trade and customs policy, intra-EU trade statistics measure the integration o the Member States in a common market.

Extra-EU trade statistics are compiled rom statistical data in the single administrative document(SAD) provided by the customs authorities, while intra-EU trade statistics are compiled usingthe Intrastat declarations provided by traders. o limit the burden on businesses o providingtrade inormation, while at the same time maintaining the quality o the data, there is a systemo thresholds or both intra-EU and extra-EU trade below which no inormation, or reducedinormation, is collected.


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External Transactions 2


In addition to the data collected rom the SAD and Intrastat declarations, Member States compileand provide Eurostat with adjustments or the impact o the trade data not collected due to thethreshold system and o late replies. So trade coverage should be close to 100%.

Member States send detailed monthly Extrastat and Intrastat statistics within 42 days and 70 days,respectively, rom the end o the reerence month. In addition, a le o aggregated data or intra-EU and extra-EU trade has to be sent within 40 days o the end o the reerence month. Since EUand euro area trade balance statistics are released about 48 days aer the reerence month, theseaggregate data are particularly important or calculating the euro area trade balance. In act, euroarea trade is a combination o extra-EU trade (euro area members trade with extra-EU coun-tries) and intra-EU trade (euro area members trade with the other EU countries).

Te value used or trade data is the value calculated at national rontiers. It is the FOB (ree on

board) value or exports and dispatches (intra-EU exports) or CIF (cost, insurance and reight)or imports and arrivals (intra-EU imports).

Te indicator chosen is the seasonal and working day adjusted trade balance. It is calculated asthe dierence between the adjusted series o monthly exports and imports. Monthly trade dataare in act aected, as are most economic series, by recurring seasonal movements (e.g. tradein agricultural products) and by dierences in the number o working days (e.g. the eect oEaster holidays).

Data availability

Detailed statistics on trade in goods by each Member State are collected and disseminated on amonthly basis. Te trade value and the quantity are the basic indicators available or all products(more than ten thousand) in the Combined Nomenclature (a detailed EU product classicationbased on the international Harmonised System). Aggregated data series or the EU and the euroarea are available or the SIC (Standard International rade Classication) and BEC (BroadEconomic Categories) product groups. Series or the EU-27 and euro area (15) trade balance areavailable rom January 1999. All classications are available on the Eurostat classication serverRamon (http://ec.europa.eu/eurostat/ramon /).

Initial results on the EU and euro area trade balances are published around 48 days aer the

reerence month.

Detailed and aggregated data are available on the Eurostat home page: http://ec.europa.eu/euro-stat => Teme: External trade.
http://ec.europa.eu/eurostat/ramon/http://ec.europa.eu/eurostat/ramon/


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Examples

Te EU and euro area trade balances have ollowed a similar pattern in recent years, both showing

an overall declining trend. In particular, the EU-27 total balance has been persistently negative inrecent years; some products, in particular machinery and transport equipment, have shown bigsurpluses that have been oset by large decits in other sectors. During the most recent periodshown the total balance has been largely infuenced by the increasing decit in energy products,ollowing the remarkable rise in oil prices.

Graph 4: EU-27 and EA-15 External trade balanceSeasonally and working day adjusted, billion EUR

15

10

5

0.0

-5

-10

-15

-20

-25

-30

EU-27 EA-15

Source: Eurostat (ext_st_eu27sitc, ext_st_ea15sitc)

2004

01

2004

07

2005

01

2005

07

2006

01

2006

07

2007

01

2007

07

2008

01

2008

07
http://ec.europa.eu/eurostat/product?code=ext_st_eu27sitchttp://ec.europa.eu/eurostat/product?code=ext_st_eu27sitchttp://ec.europa.eu/eurostat/product?code=ext_st_eu27sitchttp://ec.europa.eu/eurostat/product?code=ext_st_ea15sitchttp://ec.europa.eu/eurostat/product?code=ext_st_ea15sitchttp://ec.europa.eu/eurostat/product?code=ext_st_ea15sitchttp://ec.europa.eu/eurostat/product?code=ext_st_eu27sitc


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Graph 5: EU-27 External trade balance by main product groupsSeasonally and working day adjusted, billion EUR

20

10

0

-10

-20

-30

-40

Source: Eurostat (ext_st_eu27sitc)

20071 200802 200805 200808 2008111sitc_7 Machinery

and transport

equipment

sitc_5 Chemicals

and related

products, n.e.s.

sitc_0_1 Food,

drinks and

tobacco

sitc_2_4 Raw

materials

sitc_6_8 Other

manufactured

products

total Total -

All products

sitc_3 Mineral

fuels, lubricants

and related

materials
http://ec.europa.eu/eurostat/product?code=ext_st_eu27sitchttp://ec.europa.eu/eurostat/product?code=ext_st_eu27sitchttp://ec.europa.eu/eurostat/product?code=ext_st_eu27sitchttp://ec.europa.eu/eurostat/product?code=ext_st_eu27sitc


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Balance o payments current account

Te balance o payments systematically summarises all economic transactions (such as purchas-

es o goods and services, interest or dividend payments, investment, etc.) between the residentsand non-residents o a country or o a geographical region during a given period. It is based ona double-entry system: each transaction is recorded twice, once as a credit and once as a debit.For instance, i a service is sold to a non-resident, and paid or in cash in oreign currency, thisservice export is recorded as a credit, and the corresponding payment, which shows the increasein oreign currency held by residents, as a debit. So the net balance o all entries is zero.

ransactions can be recorded in the current account, in the capital account or in the nancial ac-count. Te current account shows fows o goods, services, income and current transers betweenresidents and non-residents; the capital account pertains to capital transers and the acquisition

or disposal o non-produced non-nancial assets; the nancial account pertains to nancial as-sets and liabilities.

Economic importance

Te ratio o a countrys current account balance to its GDP is oen considered a measure o howopen its economy is, as it roughly measures exposure to the rest o the world.

More signicantly, there are important links between international transactions, as recorded inthe balance o payments, and the domestic economy. Firstly, it can be shown by accountancyidentities that the current account balance is equal to the gap between gross savings and grosscapital ormation, and thus mirrors the savings and investment behaviour o the economy.

In addition, the sum o the balance o the current and o the capital account represents net lend-ing and borrowing by the economy with the rest o the world. Tis is conceptually equal to thebalance o the nancial account, which measures how net lending or borrowing is nanced. Forinstance, a decit in the sum o the current and capital account implies that the economy needsto borrow unds rom abroad to nance the decit, and how it borrows is urther shown in detailin the nancial account.

Data compilation

Eurostat and the European Central Bank (ECB) share responsibility or compiling the balance opayments. Eurostat ocuses on quarterly and annual aggregates or the EU, while the ECB is incharge o compiling and disseminating the euro area monthly and quarterly balance o paymentsstatistics.

Te major components o the current account are:

Goods Tis includes general merchandise, goods or processing (that is, goods imported/exported to be processed and subsequently re-exported/re-imported), repairs to goods,goods procured in ports by carriers and non-monetary gold.


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Services Tis includes transportation services, travel, and other services. ransport ser-vices include the carriage o passengers, the movement o goods, rentals o carriers withcrew, and related support and auxiliary services. ravel mainly includes goods and services

acquired by travellers. Other services include communication services, construction serv-ices, insurance services, nancial services, computer and inormation services, royalties andlicence ees, other business services (which comprise merchanting and other trade-relatedservices, operational leasing services and miscellaneous business, proessional and technicalservices), personal, cultural and recreational services and government services not includedelsewhere.

Income Tis covers two types o transactions: employee remuneration paid to non-resi-dent workers or received rom non-resident employers, and investment income accrued onexternal nancial assets and liabilities.

Current transers Tis includes general government current transers, e.g. transers relatedto international cooperation between governments, payments o current taxes on incomeand wealth, etc., and other current transers, e.g. workers remittances, insurance premiums less service charges and claims on non-lie insurance companies.

Quarterly and annual data are revised with updated inormation sent by the Member States ac-cording to a timetable. New data received or a single country are published on Eurostats websiteonly when the data set is updated or all countries.

Quarterly data are considered to be provisional when rst released. Tey are revised when more

detailed inormation (by components and geographical breakdown) is sent by Member Statesthree months aer the reerence quarter. Quarterly data are also revised when inormation orthe next quarters is provided by Member States. Finally, quarterly data are also subject to revi-sion when the annual data are published, in order to ensure consistency between quarterly andannual gures.

Data availability

Te data are available as monthly (only or the aggregate euro area), quarterly and annual datasets. Monthly data are available starting rom 1999. Quarterly and annual data are available start-

ing rom 1980.

Monthly data or the euro area are released within eight weeks aer the relevant month. A rstestimate o the quarterly data or the EU aggregate and or the net fows o the current accountand services is published two and a hal months aer the reerence period. Te complete balanceo payments is published our months aer the reerence period.

Te aggregated and detailed data are available on Eurostats website at http://ec.europa.eu/euro-stat => Teme: Economy and nance => Data => Balance o payments International transac-tions => Balance o payments statistics and International investment positions.
http://ec.europa.eu/euro-stat=http://ec.europa.eu/euro-stat=http://ec.europa.eu/euro-stat=http://ec.europa.eu/euro-stat=http://ec.europa.eu/euro-stat=


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External Transactions2

Example

Te EU-27 is currently running a minor decit in the balance o payments. Te comparison

with the data or the 15 euro area countries (EA-15) indicates that it is mainly the Member Statesoutside the monetary union, such as the UK, that are contributing to this decit since the EA-15balance o payments fuctuates around zero.

Graph 6: Balance of payments Current account% of GDP

1.2

0.8

0.4

0.0

-0.4

-0.8

-1.2

-1.6

-2.0

-2.4


Source: Eurostat (bop_q_euro, bop_q_eu), ECB

2004

q01

2004

q02

2004

q03

2004

q04

2005

q01

2005

q02

2005

q03

2005

q04

2006

q01

2006

q02

2006

q03

2006

q04

2007

q01

2007

q02

2007

q03

2007

q04

2008

q01

2008

q02

2008

q03

2008

q04
http://ec.europa.eu/eurostat/product?code=bop_q_eurohttp://ec.europa.eu/eurostat/product?code=bop_q_eurohttp://ec.europa.eu/eurostat/product?code=bop_q_euhttp://ec.europa.eu/eurostat/product?code=bop_q_euhttp://ec.europa.eu/eurostat/product?code=bop_q_euhttp://ec.europa.eu/eurostat/product?code=bop_q_euro


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Infation (Harmonised indices o consumer prices - HICP)

Consumer price indices (CPIs) measure changes over time in the prices o consumer goods and

services acquired, used or paid or by households. CPIs aim to cover all the goods and servicesconsumed by a countrys population within its territory. Te price changes are measured againsta representative set o consumer goods and services the so-called consumer basket. Consumergoods and services include, or example, ood, beverages, personal hygiene products, newspapersand periodicals, expenditure on housing, water, electricity, gas and other uels, health, transport,communications, education, restaurants and hotels. Many o these goods and services are boughtrequently, or are consumed on a daily basis.

Te HICPs are a set o EU consumer price indices calculated according to a harmonised approachand a single set o denitions. Tey are designed primarily or assessing price stability in the euro

area and convergence in European Union countries, and or making international comparisonso infation, i.e. changes over time in the purchase prices o goods and services. Tis does notmean that they should not or cannot be used by a wider range o users or other purposes.

In most EU Member States, HICPs and national CPIs coexist. Both measure infation and theyare or the most part based on the same data sources, but they have dierent aims and thereoresometimes use dierent concepts or methods.

Although in general the dierences between HICPs and national CPIs have been diminishing asnational statistical oces have adopted HICP standards or their CPIs, they may sometimes besignicant in practice. Te main dierences are as ollows:

Coverage o households: the HICP covers households expenditure within the country,whether those households actually live in the country or they are merely visiting; it alsocovers institutional households (such as soldiers in barracks, patients in hospitals, etc.). Na-tional CPIs usually record expenditure by resident households whether it is incurred in thecountry or abroad, and may exclude institutional households.

Coverage and measurement o taxes and ees, and services such as health, social protec-tion, education and insurance services: the harmonised treatment o this expenditure is amajor advantage o the HICP. HICPs measure the actual prices aced by consumers includ-

ing taxes and duties, and net o reimbursements, or example in the case o medicines. Na-tional CPIs may adopt dierent approaches, or exclude parts o such expenditure.

Te treatment o owner-occupied housing (OOH): price changes or OOH are currentlyexcluded rom the HICP. In national CPIs they may or may not be included, and where theyare included the methods used dier substantially.

Economic importance

For the euro area, the HICP is mainly used or monetary policy purposes. Te ECB denesprice stability as a year-on-year increase in the HICP or the euro area o below, but close to, 2%


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over the medium term. Te change in consumer prices, as measured by the HICP, is one o theconvergence criteria used to assess whether a Member State is ready to join the euro area. Teseuses require a harmonised conceptual ramework and comparable results. In addition, HICPs are

being used increasingly or economic analyses in general and or indexation purposes.

Outside the euro area, CPIs play a role in some countries in monetary policy and or economicanalysis in general, but CPIs also have a wide range o other uses, such as indexation o com-mercial contracts, wages, social protection benets, and nancial instruments. Te range o usesmade o CPIs varies between countries. As a result, methods o calculating the CPI vary, andnational CPIs are not usually regarded as comparable or cross-country analyses. For the EU,only the HICPs provide comparable measures o consumer price infation.

Data compilation

Te HICP is made up o the EU consumer price indices (CPIs), calculated according to a har-monised approach and a single set o denitions as devised by Eurostat in conjunction with thenational statistical institutes o the EU Member States.

Te key HICPs are:

the Monetary Union Index o Consumer Prices (MUICP) an aggregate index coveringthe countries in the euro area,

the European Index o Consumer Prices (EICP) an aggregate index or all EU countries,

the national HICPs or each o the EU Member States.Te MUICP and EICP are calculated according to rules laid down in Council Regulation (EC)No 2494/95 o 23 October 1995.

In the Member States prices are typically collected by a combination o visits to local retailersand service providers and central research (via mail, telephone, email and the internet). Tedistribution o purchases o goods and services or which prices are collected, and the precisedescription o some o them, varies rom country to country there is no uniorm Europeanbasket. Data are collected on expenditure that is representative in each country. Te weights usedor computing HICPs in a country may relate to a period up to seven years prior to the currentyear. However, to minimise any incomparability this might cause, adjustments must be madeeach year or any especially large changes in expenditure patterns. HICPs are required to cover allnewly signicant goods and services. Special rules cover situations where prices are introducedor goods or services that were previously ree, or where markets are opened to new suppliers which may in practice deliver price benets or consumers.

o produce comparable results, each countrys HICPs must be compiled using specied or-mulae (the ratio o either arithmetic or geometric means, but not the arithmetic mean o pricerelatives). Te MUICP is compiled as a weighted average o the countries comprising the euroarea. Te country weights are derived rom national accounts data or household nal monetary

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consumption expenditure. For the EU and EEA HICP aggregates, the euro area is treated as asingle entity to which data or the other countries is then added (the weights again use nationalaccounts data, converted into purchasing power standards).

Te HICPs are in principle open to revision, in particular when new or improved inormationbecomes available.

Data availability

Eurostat publishes HICPs monthly, about 15 days aer the end o the reporting month, and pub-lishes a Flash Estimate or the euro area on the last working day o the reerence period.

Te HICP series begin in 1996 and have a common reerence year: 2005=100. Early data orcountries that have recently joined the EU are estimates based on national CPIs. For more in-

ormation, please see the country-specic pages under HICP Summary Methodology on theEurostat home page (http://ec.europa.eu/eurostat => Special topics: HICP => Methodology =>National HICP practices).

Te HICP data released each month cover the price indices themselves, annual average priceindices and rates o change, monthly and annual rates o change, and 12-month moving rates ochange. None o these are seasonally adjusted.

In addition to the all-items HICP, Eurostat publishes the ull range o around 100 COICOP/HICPindices or dierent goods and services and a series o over 30 special aggregates. Te complete

list o the COICOP/HICP classication (basket) and special aggregates are accessible through theclassications server Ramon on Eurostats website (http://ec.europa.eu/eurostat/ramon/).


3 Prices
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Example

EU infation is measured by the EICP (European Index o Consumer Prices as dened in Coun-cil Regulation (EC) No 2494/95 o 23 October 1995) which is the ocial EU aggregate. NewMember States are integrated into the EICP using a chain index ormula.Euro area infation is measured by the MUICP (Monetary Union Index o Consumer Prices asdened in Council Regulation (EC) No 2494/95 o 23 October 1995) which is the ocial euroarea aggregate. New Member States are integrated into the MUICP using a chain index ormula.

For the United States and Japan national consumer price indices are shown.

Graph 7: Annual inflation rates

%

6

5

4

3

2

1

0

-1

EU Euro area Japan (CPI) United States (CPI)

Jan/04 Jul/04 Jan/05 Jul/05 Jan/06 Jul/06 Jan/07 Jul/07 Jan/08 Jul/08

Source: Eurostat (prc_hicp_aind), ECB

Prices 3

http://ec.europa.eu/eurostat/product?code=prc_hicp_aindhttp://ec.europa.eu/eurostat/product?code=prc_hicp_aindhttp://ec.europa.eu/eurostat/product?code=prc_hicp_aindhttp://ec.europa.eu/eurostat/product?code=prc_hicp_aind


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Labour Market4


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Unemployment rate

Eurostat produces harmonised monthly unemployment rates or individual EU Member States,

the euro area and the EU. Tese unemployment rates are dened in accordance with Interna-tional Labour Organization (ILO) standards. Te measurement is based on a harmonised source,the European Union Labour Force Survey (LFS).

Based on the ILO concept, Eurostat denes unemployed persons as persons aged 15 to 74 who:

are without work;are available to start work within the next two weeks; andhave actively sought employment at some time during the previous our weeks.

Te unemployment rate is the number o people unemployed as a percentage o the labour orce.Te labour orce is the total number o people employed plus unemployed.

Economic importance

Te unemployment rate is an important indicator with both a social and an economic dimen-sion. From an economic perspective, unemployment indicates unused available labour (in per-sons). Rising unemployment may result in loss o income or individuals and increased pressureon government spending on social benet schemes.

Te ILO unemployment rate is the most widely used labour market indicator because o itsinternational comparability and relatively timely availability. Besides the unemployment rate,indicators such as employment and job vacancies also give useul insight into labour marketdevelopments.

Published monthly, the time series on unemployment are used by the European Communities,public institutions and media as an economic climate indicator. Banks use the data or businesscycle analysis. Finally, the general public is generally interested in changes in unemployment.

Te unemployment rate is considered a lagging indicator. When there is a downturn in theeconomy, it usually takes several months beore the unemployment rate starts to rise. Once the

economy starts picking up again, employers are usually cautious and it takes several monthsagain or the unemployment rate to start alling.

Data compilation

Te data are calculated monthly. However, there is no legal basis or producing and dissemi-nating monthly unemployment data. Tere are EU Regulations that govern the LFS and theproduction o quarterly labour orce statistics. While these quarterly LFS gures are used asinternationally comparable benchmarks, the monthly pattern is derived by using additionalmonthly gures rom unemployment registers. Few countries actually supply monthly unem-

ployment gures directly rom the LFS. All monthly gures are delivered by the Member Stateson the basis o a gentlemens agreement.


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Te results o the calculations yield harmonised monthly unemployment data. Quarterly and an-nual averages (structural indicators) are calculated rom these harmonised time series.

Eurostat aims to harmonise the calculation process as much as possible. For all countries, themonthly series are compared with the quarterly LFS gures. However, the calculation o monthlygures and o provisional gures (until LFS data are available) depends on the availability andspecic characteristics o sources in individual Member States.

Every month new gures rom the public employment oces administrative registers or romthe LFS are added into the process and new estimates are calculated. Tis might cause a slightrevision in past gures as the seasonal adjustment procedure is re-run. Whenever the new quar-terly LFS data become available, a potentially larger revision takes place rom the months o thatparticular quarter onwards.

Data availability

Harmonised unemployment gures are compiled or all EU Member States. Aggregates are avail-able or the EU-15, EU-25 and EU-27 and euro area aggregates are available or the EA-12, EA-13, EA-15 and EA-16.

New data are released every month, about 30 days aer the end o the reerence month.

Te data is available as totals, disaggregated by sex and two age groups (15-24, 25-74).

Te data is available unadjusted, seasonally adjusted and as trend estimates.

All data are available on the Eurostat home page at http://ec.europa.eu/eurostat => Teme: Popu-lation and social conditions => Data => Labour market.

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Examples

Graph 8: Unemployment rate, EU-27, January 2009

%, seasonally adjusted

30

35

25

20

15

10

5

0

Source: Eurostat (une_rt_m)

* November 2008 ** Q3 2008 *** Youth unemployment quarterly

NL AT DK CY

***

SI

***

CZ LU BG RO

**

MT UK

*

FI IT

**

PL BE DE SE EL

**

EU

27

PT EA

16

FR EE

***

HU IE LT

***

SK LV

***

ES

Total Persons aged less than 25

Graph 9: Unemployment in the EU-27 and the euro areaMillion, seasonally adjusted

20

22

24

18

16

14

12

10

EU-27, seasonally adjusted series Euro area, seasonally adjusted series

Source: Eurostat (une_rt_m)

I II III IV II IV II IV II IV II IV II IV II IV II IV II IVI III I III I III I III I III I III I III I III I

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009


4 Labour market
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Employment

Employment statistics measure the number o people engaged in productive activity that alls

within the national accounts): either employees (working by agreement or another resident unitand receiving remuneration) or sel-employed people (owners o unincorporated enterprises).

Employment is dened in the European System o National and Regional Accounts (ESA95,11.11) to ensure that labour input measures applied in assessing productivity are conceptuallyconsistent with the output measures derived as part o the national accounts. Hence employmentcovers people working in resident production units (since only resident producer units output isincluded in GDP), even i these people themselves are not resident in the economy.

Employment can be counted in persons, so every person engaged in productive activity countsas employed, regardless o the scope o their activity and regardless o their weekly workingtime. Every person however is only counted once. Alternatively, employment can be measuredin hours worked. Tis gives a better indication o the volume o work input, but is more dicultto compile and harmonise.

People who are temporarily not at work are also considered employees provided they have aormal job attachment. Tey may temporarily not be at work because o illness or injury, holidayor vacation, strike, maternity leave or parental leave.

Sel-employed persons also includes unpaid amily workers (e.g. on arms or small retail trades)and workers engaged in production undertaken entirely or their own nal consumption or own

capital ormation.

Economic importance

Employment, along with GDP and infation is a direct indication o the overall level o economicactivity, and highly correlates with the economic cycle, albeit with a certain time lag.

Human labour is the most important production actor. Higher employment means better useo the productive potential o a society. Other things being equal it leads to higher aggregaterevenue or the employed (wages and salaries or operating prot), and this revenue can in turnbe consumed or saved.

Employment also has an important social aspect. It is the main source o income or the majorityo population. Increased employment usually means increased total income, which not only canlead to additional economic growth, but can also reduce the risk o poverty, decrease dependencyon transers and generate additional tax revenues.

Te employment category is based on a well-established and internationally harmonised metho-dology. Compiled as part o the national accounts, it is conceptually consistent with monetaryaggregates such as employee compensation and value added. Tis allows important derivedmeasures such as productivity and unit labour cost to be calculated.

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Its useulness in economic analysis is urther enhanced by the availability o breakdowns byoccupational status (employee, sel-employed) and by economic activity or national accountsemployment. Further detail, in particular by age, gender and qualication, is not available rom

national accounts, but rom labour market statistics such as the labour orce survey.

Tere are some limitations: employment expressed in persons employed is insensitive to changesin the balance between ull-time and part-time employment. Neith

eurostat principals economic indicators ks 81-08-398 en

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