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Gross Domestic Product 3rd Quarter 2012

BACKGROUND NOTES

 

Definitions and Release Policy

 

  1. Gross Domestic Product (GDP) is a measure of the value added to materials and other inputs in the production of goods and services by resident organisations; before allowing for depreciation or capital consumption.  Net receipts from interest, profits and dividends abroad are excluded. 

 

  1. The estimates produced in this publication measure GDP at basic prices, also referred to as Gross Value Added (GVA), which does not account for taxes or subsidies on products. The estimates are produced in constant prices, meaning that they been adjusted for inflation to represent changes in the volume of output rather than value; in other words growth is estimated in real terms.

 

  1. This publication incorporates a number of updates to methodology and source data.

 

  1. This is the first Scottish GDP publication fully based on the Standard Industrial Classification (SIC) 2007, which is a major revision to the previous SIC 2003.

 

  1. As part of this process, annual GVA weights since 1998 for each industry have been updated following their estimation in a SIC 2007 based Supply-Use framework. The most recent annual GVA weights now relate to 2009, updated from 2007 in the previous publication. This update means that the latest estimates better reflect the current structure of the Scottish economy.

 

  1. A Standard Industrial Classification (SIC) was first introduced into the United Kingdom National Accounts in 1948 for use in classifying business establishments and other statistical units by the type of economic activity in which they are engaged. The classification provides a framework for the collection, tabulation, presentation and analysis of data, and its use promotes uniformity. In addition, it can be used for administrative purposes and by non-government bodies as a convenient way of classifying industrial activities into a common structure. Since 1948 the classification has been revised in 1958, 1968, 1980, 1992, 1997, 2003 and 2007. The change in these estimates reflects the latest revision of this framework. Further details about SIC 2007 can be found on the Office for National Statistics website at:

 

http://www.ons.gov.uk/ons/guide-method/classifications/current-standard-classifications/standard-industrial-classification/index.html

 

  1. The next publication of GDP for Scotland, covering the fourth quarter of 2012, is planned for Wednesday 17th April 2013.

 

Revisions

 

  1. Results in this Statistical Bulletin incorporate revisions to previously published estimates. Table R1 identify the extent of revisions since the last publication in October 2012. Revisions to index numbers (not to growth rates) are shown to one decimal place for total GVA. Comparisons for subsectors will be misleading as it is not possible to disambiguate changes due to implementation of SIC 2007 from revisions in the regular sense. Subsector revisions tables will be included from the next publication onwards.

 

  1. The latest estimates of total GVA growth show that 2012 Q2 has been revised from minus 0.4% to minus 0.1% published in October 2012. Growth in 2012 Q1 is revised from minus 0.2% to minus 0.5%.

 

  1. The incorporation of the updated GVA weights and full transition to SIC 2007 has included significant work to update underlying systems and a full review of sources and methods.  The main reason for revision in the current quarter is this work, which has included
  • Review of classification of industry units and enterprises into SIC categories
  • Development and review of all seasonal adjustment models and parameters
  • Enhanced methodology for some sub components e.g. imputed rent
  • Update of deflators to reflect the new industrial structure.

 

  1. As well as revisions associated with the update of weights and methodological review a number of small revisions also occur where the most recent data causes re-estimation of previous quarters, or updating of seasonal adjustment parameters.

 

  1. In this publication, the most significant revisions of this type are to the Electricity & Gas Supply sector. These revisions are driven by incorporating the latest quarters results into estimation of seasonal adjustment parameters.

 

  1. The Scottish Government’s revisions policy for economic statistics is available at:

 http://www.scotland.gov.uk/Topics/Statistics/Browse/Economy/ScotStat/revisionspolicy

 

Key quality issues

 

  1. Common pitfalls in interpreting series: Scottish GVA estimates will generally be less reliable than the equivalent estimates for the UK, primarily because the UK figures are produced by balancing three independent sets of estimates (Output (GVA), Income and Expenditure-based approaches).

 

  1. Furthermore, the survey data for Scotland tend to be based on smaller numbers of units, making figures for Scotland more likely to be susceptible to statistical variance. Statistical variance in estimates is directly proportional to the variability in the underlying population of interest. In the current economic climate, the variability in the economy is increased and users should bear this in mind when interpreting all economic indicators.

 

  1.  Very few statistical revisions arise as a result of 'errors' in the popular sense of the word. All estimates, by definition, are subject to statistical 'error' but in this context the word refers to the uncertainty inherent in any process or calculation that uses sampling, estimation or modelling. Most revisions reflect either the adoption of new statistical techniques, or the  incorporation of new information which allows the statistical error of previous estimates to be reduced. Only rarely are there avoidable 'errors' such as human or system failures, and such mistakes are made quite clear when they do occur.

 

Reliability

 

  1. Revisions to time series provide one indication of the reliability of key indicators. The tables below show summary information on the size and direction of the revisions which have been made to results covering a five-year period. A statistical test has been applied to the average revisions to find out if they are statistically significantly different from zero. An asterisk (*) shows that the test is significant.

 

  1. Table 1 below shows the revisions to estimates of GDP between their first publication and next publication one quarter later, for the period 2007 Q3 to 2012 Q2. Table 2 shows the revisions to GDP estimates between their first publication and one year later, using estimates for the period 2006 Q3 to 2011 Q2.

 

  1. The average revision can be used as an indicator of bias (systematic over- or under-estimation) in the initial estimates of GDP. Both tables show that the average revision is not significantly different to zero, and suggest that there is no bias in the initial release of these statistics. The average absolute revision gives an indication of how much users might expect the initial estimate to be revised up or down in future publications.

 

Table 1.

 

 

 

 

 

Value in

latest period

(2012 Q3)

Revisions between first publication and estimates one quarter later (covering period 2007Q1-2012Q1)

Average revision

Average absolute revision

(without regard to sign)

Quarterly GDP growth

(per cent)

+0.6

0.00

0.12

 

Table 2.

 

 

 

 

 

Value in

latest period

(2012 Q3)

Revisions between first publication and estimates one year later (covering period 2006Q2-2011Q2)

Average revision

Average absolute revision

(without regard to sign)

Quarterly GDP growth

(per cent)

+0.6

-0.04

0.18

 

  1. A paper summarising analysis of revisions to these GDP statistics, and identifying the main sources of revision, is available on the Scottish Government website at:                                               http://www.scotland.gov.uk/Topics/Statistics/Browse/Economy/GDP/research/Revisions2010

 

Cash estimates of GVA

 

  1.  Estimates of the cash value of Gross Value Added (GVA) at current prices for Scotland (and other regions of the UK) are produced by the Office for National Statistics.  Estimates for 2011 were published on 12th December 2012.  The ONS current price value estimates are methodologically different from the Scottish Government volume (constant price) index and are based on different data sources.

 

  1.  The Scottish National Accounts Project team are developing a number of National Accounts measures for Scotland, including estimates of cash value GVA and GDP (including taxes and subsidies on products). These statistics are not classed as National Statistics and are released as soon as they are ready following the GDP statistics. For further information on these statistics please see the SNAP website http://www.scotland.gov.uk/SNAP.

 

 


 

 

 

Methodology Notes

 

Chain-linking

 

  1.  Annual chain-linking is the technique used to compile the overall measure of GVA growth and also the other, lower-level published aggregates.  The resultant indices represent changes in the value added, at constant prices, in the production of goods and services in individual industries.

 

  1. Series are derived from indicators based on data from a wide range of sources.  Examples include: deflated turnover, deflated production, the volume of a good or service sold or produced and, for some parts of the public sector, employee numbers.

 

  1.  The Office for National Statistics updated the weights used to compile their aggregate measures, including GVA, in the 2012 Q1 Quarterly National Accounts published on 28 June 2012. UK data are now calculated using weights relating to 2009.

 

Seasonal Adjustment

 

  1. The data used in the production of these quarterly GDP estimates are seasonally adjusted in accordance with the European System of Accounts guidelines and international practice.

 

  1. The X-12-ARIMA technique is used where appropriate to remove regular seasonal peaks and troughs so that the underlying trends and other features of the data are easier to identify.  Further information about the seasonal adjustment of the GDP data can be found in section A3 of Scottish Economic Statistics 2006 (www.scotland.gov.uk/stats/ses).

 

Methodology developments

 

  1. The Scottish GDP indices are under a continuing program of methodological development which is regularly peer reviewed by the Scottish Economic Statistics Consultants Group (SESCG). Information about SESCG, including papers and minutes from recent meetings, is available on the Scottish Government website at http://www.scotland.gov.uk/Topics/Statistics/Browse/Economy/ScotStat/comms.

 

National Statistics

 

  1.  National Statistics are produced to high professional standards set out in the National Statistics Code of Practice.  They undergo regular quality assurance reviews to ensure that they meet customer needs.  They are produced free from any political interference.

 

  1.  Detailed results for all industries, are available to download from the Scottish Government website www.scotland.gov.uk/gdp.

 

 

 

 

 

 

Issued by

Office of the Chief Economic Adviser

St Andrew’s House

Regent Road

Edinburgh, EH1 3DG

 

Telephone

Press Office:  Karen MacKinnon      0131-244-2175 

Statistician:    Richard Morrison      0131-244-3768