Transcript Service Price Indexes

SPPI for Wholesale Services in Canada
Fred Barzyk
23rd Voorburg Group Meeting
Aguascalientes, Mexico
September 22nd to September 26th 2008
Background
• Distributive Trades Division
– Responsible for surveys of revenue and
expenses (turnover)
• Prices Division
– Responsible for developing/producing
SPPI
• System of National Accounts
– Responsible for estimates of real and
nominal GDP
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Definition of the service (1)
• North American Industry Classification
(NAICS) 2002
Classification 41  Wholesale Trade
• Establishments primarily engaged in wholesaling
merchandise and providing related logistics,
marketing and support services.
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Definition of the service (2)
• Wholesale Merchants
– Buy and sell merchandise on their own account, take
title to the goods they sell.
• Wholesale Agents and Brokers
– Buy and sell merchandise owned by others on a fee or
commission basis, do not take title to the goods they
buy or sell.
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Pricing Unit of Measure Collected
• Margin price per unit for product or
homogeneous product line.
• Prices reflect real transactions measured
monthly, but collected on a quarterly basis.
• The reported purchase and selling prices
represent an average monthly price.
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Market conditions and constraints (1)
• In Canada, wholesaling is a multi-billiondollar industry, with sales totalling
$660 billion in 2006.
• The industry employed an average 740,000
Canadians in 2006.
• Between 2001 and 2006, wholesale output
(GDP), grew 2X the rate of the overall
economy, fastest growing of all major
industrial sectors during this period.
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Market conditions and constraints (2)
SPPI - Distribution by Service Group
(Service sector weight 2000)
Distributive trades
7%
Transportation and
warehousing
2%
27%
20%
Finance, insurance, leasing,
real estate, and business
mgmt.
Scientific, technical and
professional services
12%
32%
Information, communication
and cultural services
Other
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Market conditions and constraints (3)
Table 1: Approximate Count of Wholesaling Units In Canada
Total Number of
Trade Group
Units
Farm products
2,619
Petroleum Products
1,676
Food, products
12,107
Alcohol and Tobacco Products
696
Apparel
5,729
Home and Personal Products
11,930
Pharmaceuticals
972
Motor Vehicles
2,649
Motor Vehicle Parts and Accessories
4,759
Building Supplies
11,332
Metal Products
1,678
Lumber and Millwork
2,076
Machinery and Equipment
14,276
Computers and Other Electronic Equipment
5,457
Office and Professional Equipment
7,268
Other Products
21,922
Agents and Brokers
13,547
Total
120,693
%
2.2
1.4
10.0
0.6
4.7
9.9
0.8
2.2
3.9
9.4
1.4
1.7
11.8
4.5
6.0
18.2
11.2
100.0
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Special Conditions and Restrictions
• Not a regulated industry in Canada
• Import a large share of the goods they distribute
(typically from the United States)
• Quick to adopt new information and
communications technologies, have recorded
above-average growth in capital investments
• Globalisation, offshore outsourcing, and the
arrival of American-style retailing (big box stores
and club warehouses)
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Record Keeping Practices (1)
•
Specific data collection issues were
identified for each of the Trade
Group/NAICS strata.
•
Variation in the types and quantities of
products that wholesalers carry
– Relatively small number of unique items
to thousands and sometimes tens of
thousands of specific products
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Record Keeping Practices (2)
•
Some wholesalers have difficulty in reporting
price information by product or item, and find it
much easier to supply information by line or
department
•
Collection of corresponding detailed product or
item specifications is an ongoing challenge for
the wholesale industry
•
Availability of electronic data, but historical
product price data is generally difficult to get
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Standard classification structure, product
detail/levels (1)

Main classification of wholesale activity is
by industry  NAICS (North American
Industrial Classification System)

The wholesale sample of approximately
3,000 units selected using the 2005
Business Register (BR) frame

Publication target NAICS 5-digit
classification (excluding Brokers & Agents
for now)
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Standard classification structure, product
detail/levels (2)
Main variables collected
•
Product Description
•
Country of Origin (if imported)
•
Wholesale Average Purchase Price
•
Wholesale Average Selling Price
•
Unit of Measure
•
Wholesale Activities
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Standard vs. Definition and Market
Conditions
• No special or additional classifications that differ
from the turnover survey program
– Existing classification structure (NAICS) used to
produce the SPPI are consistent with the turnover
surveys.
• Sample source for the SPPI and turnover surveys
is the same – STC’s Business Register.
– Sample comparison and clean up is easier
– Industry level estimates of price change and
turnover will also be directly comparable
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National Accounts Concepts and
Measurement Issues (1)
For monthly GDP,
• Changes in constant price output are used
as indicators of the growth rates in
constant price value added.
• The movement in constant price output is
assumed to be represented by the monthto-month growth rates in constant price
sales by wholesalers.
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National Accounts Concepts and
Measurement Issues (2)
For annual GDP estimates,
Real GDP is derived by taking the difference between the
industry gross output and the industry intermediate inputs
at constant prices (the double deflation method)
In the absence of a direct price index, the price movement is
measured indirectly via a derived implicit price index.
The implicit price index is calculated by taking the sum the
current dollar wholesale margins divided by the sum of
constant dollar wholesale margins.
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Pricing Method and Criteria for Choice (1)
Price is the margin for a product or product line.
MP
t
unit
 PSelling/ unit  P Acquistion/ unit
t
t
Relative is constructed on margin price t/t-1
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Pricing Method and Criteria for Choice (2)
Why? Nominal output (margin) is defined as,
Outputt = Pricet x Quantityt
for wholesale services.
In the classical sense, we need a price index
for deflation.
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Pricing Method and Criteria for Choice (3)
Quality Assurance Framework:
 Shipment Price
 Representative of current period production
 Transaction price
 Output price
 Timely measure
 Constant quality maintained
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Quality Adjustment Methodology
• Quality change in service
 identified in survey and follow-up with
respondent
• Quality change in product
 comparable or non-comparable substitution
• Change in price
 reason(s) identified and assessed
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Evaluation of Comparability with
Turnover/Output Measures
The level of comparability is high.
• Turnover and SPPI use the same industry (and soon
product) classification system (NAICS, and then NAPCS).
• SPPI sample is a sub-sample of the Annual Wholesale Trade
Survey (AWTS) frame
• Coherence analysis is conducted between the SPPI and
turnover
• One difference in comparability  wholesale margin data
(turnover) is collected annually, SPPI will be monthly data.
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Other Uses - Import Price Information (1)
• Acquisition cost as proxy for import price
– What does it measure?
• LIFO valuation
• Total cost to wholesaler (includes freight etc.,)
• Average for the month
• About 60% of reported products are
imports.
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Other Uses - Import Price Information (2)
If same product or product line (k) is imported for a sufficient
period,
,k
PtAcquisitio
n / unit
t 1,k
P Acquisition / unit
then a second price relative could be constructed for
imports,
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Discussion
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