ONS Economic Forum

Email: economicforum@ons.gov.ukTwitter: @ONS

#ONSeconomyWebsite: http://www.ons.gov.uk/ons/about-ons/get-involved/events/events/economic-forum/index.html

15 January 20151

ONS Economic Forum – January 2015

09.45 Introduction & welcome

10.00 Johnson review of price statistics

11.00 Refreshment break

11.30 What’s new

12.10 What’s next

12.30 Close

2

Agenda

Introduction and welcome

John Pullinger, National Statistician

ONS Economic Forum

15 January 2015

3

The Johnson Review

Paul Johnson, Institute for Fiscal Studies

ONS Economic Forum: 15 January 2015

4

What’s new

Peter Patterson, Deputy Chief Economic Adviser

ONS Economic Forum

15 January 2015

5

• Latest ONS economic statistics, including quarterly national accounts

• New quarterly release on indicators of economic well-being

• NA measure of living standards - relationship between RHDI and GDP growth

• Variations in the inflation experience of UK households

What’s new - outline

6

Sharp fall in inflation to 0.5%, record low

7

% changes on a year earlier

GDP growth stabilised in 2.5-3% annual range during past year

8

Revisions to three measures of GDP

9

Mean revisions to GDP growth estimates

10Source: OECD

4 time intervals:M5_P 5 mthsY1_P 1 yearY2_P 2 yearsY3_P 3 years

Percentage points

Services maintain the momentum of growth

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More than half of growth in services output (or 70% of cumulative GDP growth) since 2011 is due to 3 sectors:•Other professional service activities•Admin & support service activities•Real estate activities

Sectoral financial balances

12

UK current account deficit

13

Primary income balance

14

Economic Well-being Q3 2014

• Traditional measures of progress such as GDP are increasingly considered an incomplete picture of the state of the nation.

• First of regular quarterly bulletins to coincide with QNA.

• Economic Well-being provides a fuller understanding of the economy & how it impacts on national well-being

• To give a more rounded and comprehensive basis for assessing changes in material well-being

15

GDP, GDP per head and NNDI per head

90.00

95.00

100.00

105.00

110.00

115.00

120.00

125.00

130.00

135.00

2000 Q1

2001 Q3

2002 Q3

2003 Q3

2004 Q3

2005 Q3

2006 Q3

2007 Q3

2008 Q3

2009 Q3

2010 Q3

2011 Q3

2012 Q3

2013 Q3

2014 Q3

Gross Domestic Product (GDP)

GDP per head

Real Net National Disposable Income (RNNDI) per head

Q1 2000 = 100

16

GDP and household income per head

95

100

105

110

115

120

125

2000 Q1

2001 Q1

2002 Q1

2003 Q1

2004 Q1

2005 Q1

2006 Q1

2007 Q1

2008 Q1

2009 Q1

2010 Q1

2011 Q1

2012 Q1

2013 Q1

2014 Q1

GDP per head RHDI per head

2000 Q1 =100

17

Cumulative contributions to growth since 2007 – GDP and RHDI

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GDP = £1,618bn in 2011

Variation in the inflation experience of UK households

• Developed alongside the Johnson Review, this paper is one response to their second recommendation: the regular publication of inflation indices for sub-groups in the UK

• Uses micro-level expenditure data and detailed price indices to estimate inflation rates for:o Expenditure and income decileso Households with and without childreno Retired and non-retired households

• Published 15th December 2014, it is the first UK paper to do this on a CPI consistent basis

• Full methodology and supporting documents available online, headline results presented here

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Lower income households have experienced higher inflation rates ...

Note: 1= lowest income, 10= highest income20

... as have lower expenditure households

Note: 1= lowest expenditure, 10= highest expenditure21

Retired households have experienced higher price increases than non-retired households...

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... mostly because of Energy & Fuel costs

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Headline results, average inflation 2003 - 2013

        %

Group   Inflation

Decile of   1 2 9 10

Disposable Income 2.9 2.7 2.5 2.6

Expenditure 3.7 3.3 2.3 2.3

           

Households with Children 2.4

Households without Children 2.7

Retired Households 2.8

Non-Retired Households 2.5

     

CPI   2.624

What’s next

Frankie Kay, Head of National Accounts Methods and DevelopmentDerek Bird, Head of Prices

ONS Economic Forum

15 January 2015

25

What’s next - outline

• ONS response to NSQR of National Accounts and BoP

• Flow of Funds

• Blue Book 2015 plans

• New ONS website

• Prices update – owner occupier housing costs, house price consultation, web-scraping and scanner data

26

NSQR of National Accounts and Balance of PaymentsONS Response - Overview

• ONS very supportive of review recommendations and suggestions and grateful to Dame Kate Barker and Art Ridgeway

• ONS accepts most of the recommendations completely and partially accepts the remainder (where full acceptance requires further practical considerations, review or consultation)

• Response to the review means we will:• develop annual volume balanced Supply and Use tables. This will include the

introduction of annual double deflation of Gross Value Added, reintroduction of the Purchases survey and a possible change to the alignment of GDP(O) with annual expenditure.

• develop the IDBR

• review capital stock methodology including consultation with experts

• prioritise development of the extended flow of funds dataset

• draw on wider statistical and economic expertise to support and enhance our work

• Response work will be open to public consultation later in 2015 and will influence future work plans 27

Flow of Funds

• Developing financial data is considered essential for identifying the build-up of risks in the financial sector and to understand better the financial connections. An important part of this development is the ‘Flow of Funds’.

• New tables published in BB14 (Chapter 14).

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Flow of Funds

• ONS is considering wider options for developing Flow of Funds datasets, in conjunction with the Bank of England

• Wider consultation and user engagement will be taken forward this year

• A business case is being prepared around options by May/June 2015

• Email: Flowoffundsdevelopment@ons.gsi.gov.uk

29

Scope of BB 2015

• On-going work to address Gross National Income (GNI) reservations

• Classification changes

• Other methodological improvements

• Take on of new data and moving forward base and reference year

30

BB15 Communications

• Similar process to Blue Book 2014

• Series of articles on impact of changes

• Seminars and user groups

• External peer review

31

Saving and “visible” income

• Users have requested a measure of the saving ratio that corresponds more closely to the economic factors that are pertinent to households' decisions on what to spend and what to save.

• ONS considering whether to publish a supplementary indicator that users may find useful, including reviewing the approach taken by other countries

• Stakeholders will be consulted ahead of any publication

32

Alpha.ons.gov.uk

33

House price index consultation

• User consultation around the development of a single 'official' house price index - closed 12 December 2014.

• Over 40 responses received and good attendance at a series of user events held across UK. ONS will publish formal response to the consultation by mid-March 2015.

• Further work to follow after which a case for the next stage of the development will be put before departments for agreement to proceed.

34

Owner occupiers’ housing costs in CPIH

• National Statistics status was suspended for CPIH in August 2014

• ONS and VOA have completed work looking into Owner Occupiers’ Housing (OOH) component

• Growth in private rents now more responsive to recession

• Still at odds with HPI, but rents a stock measure and HPI a flow measure

• 70% of rent updates result in no price change

35

OOH - next steps

• Improvements to OOH in CPIH will be introduced as part of the 2015 annual update on 24 March 2015

• Revise only OOH component of CPIH back to 2005

• Article documenting the improvements to be published 30 January 2015, responds to Johnson Review: Recommendation 21

• Planned user event in February/March around housing statistics

36

OOH - next steps

• Also take opportunity of revision to VOA data to align OOH weight in CPIH with national accounts estimates historically and anticipate methodological changes to the measurement of imputed rents, planned for BB16.

• Begin process for re-accreditation of National Statistic status for CPIH (from 30 January 2015), aim for process to be completed March/April 2015

37

Prices by webscrapingONS is looking at alternative options for obtaining price quotes including:1. Scanner data 2. Web scraping

Web scraping can be:1. collected by the ONS directly 2. purchased. ONS is investigating both of these options – in two research phases

Phase one: Web scraping started in April 2014 collecting 35 CPI/RPI items from 3 online supermarkets – 6,500 price quotes collected dailyPrototype cleaning and classifying programs have also been set up – and exploratory analysis is being conducted on the data

Phase two: Will assess data ONS has recently purchased from mysupermarket.com, and further explore methodological and technical challenges of using such data

.....</div><div class="productLists" id="endFacets-1"><ul class="cf products line"><li id="p-254942348-3" class=" first"><div class="desc"><h3 class="inBasketInfoContainer"><a id="h-254942348" href="/groceries/Product/Details/?id=254942348" class="si_pl_254942348-title"><span class="image"><img src="http://img.tesco.com/Groceries/pi/121\5010044000121\IDShot_90x90.jpg" alt="" /><!----></span>Warburtons Toastie Sliced White Bread 800G</a></h3><p class="limitedLife"><a href="http://www.tesco.com/groceries/zones/default.aspx?name=quality-and-freshness">Delivering the freshest food to your door- Find out more &gt;</a></p><div class="descContent"><!----><div class="promo"><a href="/groceries/SpecialOffers/SpecialOfferDetail/Default.aspx?promoId=A31234788" title="All products available for this offer" id="flyout-254942348-promo-A31234788--pos" class="promoFlyout"><span class="promoImgBox"><img src="/</a></li></ul></div></div></div></div><div class="quantity"><div class="content addToBasket"><p class="price"><span class="linePrice">£1.45<!----></span><span class="linePriceAbbr"> (£0.18/100g)</span></p><h4 class="hide">Add to basket</h4><form method="post" id="fMultisearch-254942348"

......

38

Prices by webscrapingSuch data has the benefits of:1. Being high frequency2. Collecting many items3. Timely collection

It has its challenges, such as: 1.Item classification2. Methodological challenges3. Website diversity4. Website change5. Cleaning challenges

ONS is learning/using open source tools, data science concepts and big data technologies to overcome these challenges

High frequency data allow detailed investigation of price distributions at the lowest level

The production of (very) experimental indices...more methodological research needed

39

Scanner Data Project

• Scanner data are point of sale data held within retailers’ systems. They can:o provide real-time price and quantity information, allowing for use of

up to date weightso allow for complete coverage of sales by selected retailerso create data handling and acquisition challenges

• ONS has test scanner data from one UK retailer for two products (shampoo and toothpaste)

• Investigations are in early stageso Continue to explore potential useso Learn from other countries whose

research is further advanced

60

70

80

90

100

110

120

130

Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13

CPI item level index

Scanner data item level index

Index values (Jan 2012 = 100) Shampoo

40

Forthcoming event – Trade & Balance of Payments Seminar

• 9.00am to 1.00pm, Friday 23 January• Will cover:

trade balance developments and why deficit persists.

UK net income account and its recent deterioration.

the UK's net international investment position and its expanding deficit.

change in the treatment of banks' profits and the impact on BoP up to, during and since the financial crisis.

41

ONS Economic Forum

Email: economicforum@ons.gov.ukTwitter: @ONS

#ONSeconomyWebsite: http://www.ons.gov.uk/ons/about-ons/get-involved/events/events/economic-forum/index.html

15 January 201542