the ber's business tendency surveys in south africa: method and results
TRANSCRIPT
The BER’s business, consumer and inflation
expectation surveys
George Kershoff, BER
Presented at the macroeconomic seminar series of the School of Economics at the University of Cape Town, 5 October 2012
The BER’s business surveys
Origin
Business tendency surveys (BTS) developed
independently in Europe and US between world
wars
When BER started surveys in 1954, SA became 7th
country in the world
Today they are conducted world wide by
Statistical agencies (France, Italy, Russia, China)
Central banks (Some US Federal Reserve Bank districts,
Tankan in Japan, Belgium, Korea, Thailand)
Research Institutes (Germany, SA, Brazil, Poland)
Business organisations (UK, Australia)
Origin
Harmonised standards –
OECD – BTS handbook
Workshops and academic conferences organised by
CIRET (Centre for International Research on Economic
Tendency Surveys) and EU / OECD
Journal of Business Cycle Measurement and Analysis
History of the BER’s Tendency Surveys
Manufacturing and Trade (retail, wholesale & motor): 1954; data is electronically available since 1985
Building contractors: 1969
Building cost (quantitative): 1969
Consumer confidence: 1975 (whites), 1982 (blacks), 1994 (all)
Architects & quantity surveyors (1986), civil construction (1997)
Manufacturing PMI: 1999 – only monthly survey
Inflation expectations (quantitative): 2000
Financial sector: 2002
Other services (hotels, restaurants, transport, storage, real estate, business services): 2005 – not made public yet
How business surveys are conducted
Requirements: simple, rapid, voluntary
Use deliberate (convenience non-probability) sampling to create and maintain a panel of participants Degree of representation
Response rate
Questionnaire Few questions
Business activity and constraints
Only indicate “up”, “remain the same” or “down” compared to a year ago
Diffusion index = the degree to which the measured change is dispersed or "diffused" throughout the sample population.
Calculating the results
Firm and sector weights
Example:
60% “up”, 30% “same” and 10% “down”
Net balance: 60% “up” less 10% “down” = 50%
Survey data vs. official data: for
example, manufacturing production
-80
-60
-40
-20
0
20
40
60
80
95 97 99 01 03 05 07 09 11
Net
bala
nce
BER
-25
-20
-15
-10
-5
0
5
10
15
95 97 99 01 03 05 07 09 11
% c
han
ge Y
oY
Stats SA
Survey data vs. official data
-20
-15
-10
-5
0
5
10
15
20
-80
-60
-40
-20
0
20
40
60
80
95 97 99 01 03 05 07 09 11 13
% c
han
ge Y
oY
Net
bala
nce
Manufacturing production
BER Stats SA
In sum
Compliment official data – indicate direction of
change prior to its release
Reliability
Aggregate sector vs. sub-sector
Direction of change vs. size of change
Business confidence
Covers manufacturers, building
contractors, retailers, wholesalers and new vehicle
dealers
Indicates % rating prevailing business conditions as
satisfactory
Business confidence
0
50
100
75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13
Lo
w
Hig
h
RMB/BER BCI
Business confidence is an excellent
indicator of business cycle
-20
-15
-10
-5
0
5
10
15
20
25
30
0
10
20
30
40
50
60
70
80
90
100
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12
BCI Index (lhs) SARB Coincident % ch YoY (rhs)
Business confidence peaks before SARB
cyclical indicator
0
10
20
30
40
50
60
70
80
90
100
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12
BCI Index (lhs)
SARB upper
cyclical
turning point
Business confidence bottoms at the same
time as the SARB cyclical indicator
0
10
20
30
40
50
60
70
80
90
100
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12
BCI Index (lhs)
SARB bottom
cyclical turning
point
Business confidence vs. GDP growth
-6
-4
-2
0
2
4
6
8
10
0
10
20
30
40
50
60
70
80
90
100
81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13
BCI Index (lhs) Real GDP %ch YoY (rhs)
Purchasing managers index (PMI)
Survey method
Origin: Institute of Supply Management (ISM) in the
USA
Survey a panel of purchasing managers in the
manufacturing sector
Respondents must indicate whether nine activities
have “increased”, “decreased” or “remained
unchanged” compared to the previous month.
Require seasonally adjustment.
Index = % “increase” + ½ the % “no change”
Total PMI = 0.25% Business activity + 0.30% New
sales orders + 0.20% Employment + 0.15% Supplier
deliveries + 0.10% Inventories.
PMI vs. manufacturing production
-20
-15
-10
-5
0
5
10
15
20
35
40
45
50
55
60
65
99 00 01 02 03 04 05 06 07 08 09 10 11 12
% c
han
ge
Yo
Y, 2 p
er
MA
Ind
ex
PMI (lhs) Mnf prod Stats SA (rhs)
Consumer confidence
Origin and how consumer confidence
surveys are conducted
Origin: University of Michigan
In SA, personal interviews of a representative
sample of 2500 adults
Questions
Economic performance of country in 12 months’ time
Household financial position in 12 months’ time
Rating of present time to buy durable goods
Origin and how consumer confidence
surveys are conducted
Net balance results could vary between -100 and
+100
Results are available per
Question
Income group
Other: LSM group, Age, Gender, Province
Consumer confidence vs. spending
-10
-5
0
5
10
15
-40
-30
-20
-10
0
10
20
30
82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12
CCI Index (lhs) % ch YoY in PCE (rhs)
Consumer confidence
-30
-20
-10
0
10
20
30
40
07 08 09 10 11 12 13
CCI per question
EconomyOwn financesTime to buy
07 08 09 10 11 12 13
CCI per income group
High >R5000
Low <R5000
Inflation expectations
The survey method
Origin
Dedicated quantitative survey
Follow Philadelphia Fed’s Livingstone and Reserve
Bank of New Zealand’s surveys
Quarterly frequency
Who are surveyed and how?
Business executives, analysts and labour union
representatives
Mail questionnaires to a panel of participants
Households
Personal interviews of a sample of adults
Participants
Panel of analysts, business and labour
Sampling method & panel maintenance
Sample size
Analysts 32
Business 763
Labour 42
Households
Stratified randomly selected sample of 2 500 largely
urban adults
Questions
Analysts, business and labour
Households
Over the past five years prices increased by on average
7.0% per year. During 2011 prices increased by 5.0% By
about how much do you expect prices in general to
increase over the next 12 months?
07-11 2011 2012 2013 2014
What do you expect the average
overall inflation rate (as measured
by the percentage change in the
CPI) to be during the year
7.0 5.0
Impact of
Per calendar year
Provision of historical data
Processing of the survey results
Analysts, business and labour
Mean
Rules for standard deviation
No revision - late responses are not included
Households
Exclude don’t know (11%) and responses >25% (2%)
Target inflation expectations
0
2
4
6
8
10
12
00 01 02 03 04 05 06 07 08 09 10 11 12
Per
cen
t
Survey quarter
Analysts: current year
Expectations Actual annual
-2
-1
0
1
2
3
4
00 01 02 03 04 05 06 07 08 09 10 11 12
Perc
en
tag
e p
oin
ts
Survey quarter
Analysts: current year
Forecast error
0
2
4
6
8
10
12
00 01 02 03 04 05 06 07 08 09 10 11 12
Per
cen
t
Survey quarter
Analysts: one year ahead
Expectations
-3
-2
-1
0
1
2
3
4
5
6
7
00 01 02 03 04 05 06 07 08 09 10 11 12
Perc
en
tag
e p
oin
ts
Survey quarter
Analysts: one year ahead
Forecast error
Copyright and disclaimer
This presentation is confidential and only for the use of the intended recipient. Copyright for this publication is held by Stellenbosch
University. Although great care is exercised to record and interpret all information correctly, Stellenbosch University, its division
BER and the author(s)/editor do not accept any responsibility for any direct or indirect loss that might result from accidentally
inaccurate data and interpretations by third parties. Stellenbosch University further accepts no liability for the consequences of any
decisions or actions taken by any third party on the basis of information provided in this publication. The view, conclusions or
opinions contained in this publication are those of the author(s)/editor and do not necessarily reflect those of BER or Stellenbosch
University.