Why should policy makers care about PPIs for services? Services - PowerPoint PPT Presentation

Why should policy makers care about PPIs for services? • Services activities (ISIC 50-99) contributed 65% of global GDP in 2017 • Share of GDP from service activities showing steady, secular growth; particularly in lower middle income countries • Needed for accurate deflation of services production in national accounts • Needed to identify services sector productivity IMF | Statistics 2

Services Share of 2016 GDP 80,0 70,0 60,0 50,0 40,0 30,0 20,0 Luxembourg Lebanon Netherlands Israel Spain Denmark Iceland Guatemala Mexico Estonia Montenegro Honduras Namibia Croatia Sri Lanka Bosnia and Herzegovina Slovak Republic Ireland Peru Zambia Bangladesh Cameroon Lesotho Senegal Mozambique Kyrgyz Republic Armenia Algeria Uganda Sudan Kenya Uzbekistan Lao PDR Guyana Tanzania Mali Ethiopia Chad Source: World Bank World Development Indicators Database IMF | Statistics 3

Services Share of GDP Low income countries Lower middle income countries 55 50 45 40 35 30 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: World Bank World Development Indicators Database IMF | Statistics 4

Services Share of GDP Low income countries Lower middle income countries High income countries 75 70 65 60 55 50 45 40 35 30 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: World Bank World Development Indicators Database IMF | Statistics 5

Deflation of services production in national accounts • When PPIs for services are unavailable, CPIs often used in place • CPI represents very different basket Excludes sales for export, includes imported services • Excludes sales to businesses and government, for example: • • Warehousing • Freight transportation • Advertising sales • Custom software development • Cloud computing • Commercial rents • Price trends for services CPIs and services PPIs show persistent differences IMF | Statistics 6

Euro Area HICP-Services vs. SPPI (annual percent change) 4,00% 3,00% 2,00% 1,00% 0,00% 1 2 3 0 1 4 7 0 1 4 7 0 1 4 7 0 1 4 7 0 1 4 7 0 1 4 7 0 1 4 7 0 1 4 7 0 1 4 7 0 1 4 7 0 1 Q Q Q 1 Q 0 0 1 Q 0 0 1 Q 0 0 1 Q 0 0 1 Q 0 0 1 Q 0 0 1 Q 0 0 1 Q 0 0 1 Q 0 0 1 Q 0 0 1 Q M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M 7 7 7 8 9 0 1 2 3 4 5 6 7 8 0 0 0 0 1 1 1 1 1 1 1 1 1 0 7 8 8 8 9 9 9 0 0 0 1 1 1 2 2 2 3 3 3 4 4 4 5 5 5 6 6 6 7 7 7 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 2 2 2 0 2 0 0 0 2 0 0 0 2 0 0 0 2 0 0 0 2 0 0 0 2 0 0 0 2 0 0 0 2 0 0 0 2 0 0 0 2 0 0 0 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 -1,00% -2,00% -3,00% HICP - Services PPI - Services Source: Eurostat IMF | Statistics 7

Japan Services PPI vs. Services CPI (annual percent change) 6 5 4 3 2 1 0 0 9 5 2 9 5 4 9 5 6 9 5 8 9 5 0 9 5 2 9 5 4 9 5 6 9 5 8 9 5 0 9 5 2 9 5 4 9 5 6 9 5 8 9 5 9 0 9 0 9 0 0 9 0 0 9 0 0 0 0 0 0 0 0 0 1 0 0 1 0 0 1 0 1 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 9 / / 9 / / 9 / / 9 / / 9 / / 0 / / 0 / / 0 / / 0 / / 0 / / 0 / / 0 / / 0 / / 0 / / 0 / / 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 1 1 1 1 1 2 2 2 2 2 2 2 2 2 2 9 9 9 9 9 9 9 9 0 0 0 0 0 0 0 0 0 1 1 1 1 1 1 1 1 1 1 9 9 0 9 9 9 9 9 9 9 9 9 9 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 -1 1 1 1 1 1 1 1 1 1 1 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 -2 -3 -4 Services - CPI Services Less Imputed Rent - CPI CPI Services Less Imputed Rent Source: Bank of Japan Note: PPI in Japan is BtoB only IMF | Statistics 8

Comparison of prices with nominal GDP 2007-2010 Euro Area Japan (annual percent change) (annual percent change) 6,0 6,0 4,0 4,0 2,0 2,0 0,0 0,0 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q 1 1 3 4 1 1 3 1 1 2 3 1 1 1 3 4 1 1 Q 0 Q Q Q 0 Q 0 Q Q Q 0 Q 0 Q Q Q 0 7 7 7 7 8 8 8 8 9 9 9 9 0 0 0 0 - - - - - - 0 0 0 0 0 0 0 0 0 0 0 0 1 1 1 1 7 7 7 8 8 9 9 9 0 0 0 1 4 4 0 0 4 4 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 1 1 1 0 0 1 1 0 0 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 0 -2,0 - 0 0 0 - 0 - 0 0 0 - 0 - 0 0 0 - -2,0 2 7 2 2 2 8 2 8 2 2 2 9 2 0 2 2 2 1 0 0 0 0 1 1 0 0 0 0 0 0 2 2 2 2 2 2 -4,0 -4,0 -6,0 -6,0 -8,0 -8,0 -10,0 -10,0 HICP - Services PPI Services Nominal GDP CPI Services Services Less Imputed Rent - CPI Source: Eurostat, Bank of Japan Note: PPI in Japan is BtoB only, Euro Area is BtoAll IMF | Statistics 9

US Legal Services CPI vs. PPI (annual percent change) 7,0 6,0 5,0 4,0 3,0 2,0 1,0 0,0 6 6 6 6 6 6 6 6 6 6 6 6 7 7 7 7 7 7 7 7 7 7 7 7 8 8 8 8 8 8 8 8 8 8 8 8 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - n b r r y n l g p t v c n b r r y n l g p t v c n b r r y n l g p t v c c c c a p u a p u a p u a o e a o e a o e a e u u e O a e u u e O a e u u e O J J J M A M A M A J F M J A S N D J F M J A S N D J F M J A S N D CPI - Legal Services PPI-Legal Services Source: U.S. Bureau of Labor Statistics IMF | Statistics 10

Data for Decisions (D4D) Fund • Multi-partner initiative to improve statistical capacity in low and low-middle income countries • Project started in 2018, scheduled to complete in 2023 • Includes plan to provide workshops and technical assistance missions on PPIs for services https://www.imf.org/en/Capacity-Development/d4d-fund IMF | Statistics 11

Data for Decisions (D4D) Fund Services PPIs Improving business and consumer surveys; identifying non-survey data sources IMF | Statistics 12

Data for Decisions (D4D) Fund  77 low and low middle income countries are IMF members  29 of these currently compile a PPI or WPI  9 of these have started development of PPIs for services IMF | Statistics 13

Workplan for D4D project module on PPIs for services FY20 (May 2019 – April 2020) Workshop in Thailand (10/19) 2 Missions in Asia and Pacific Region IMF | Statistics 14

Workplan for D4D project module on PPIs for services FY21 (May 2020 – A p ril 2021) Workshop in Sub-Saharan Africa 2 Missions in Sub-Saharan Africa Potential for repeat missions to Asia and Pacific Region countries IMF | Statistics 15

Workplan for D4D project module on PPIs for services Work will continue in FY22 and FY23 IMF | Statistics 16

Workshops • Focus on assisting countries with selecting services activities for development • Considering size, importance, complexity, cost • Practical exercises to identify country-specific data • Overview of stages of PPI compilation, highlighting aspects unique to services: • Sampling • Weighting • Data collection • Index calculation • Analytical review IMF | Statistics 17

Context for developing countries Challenges • Large informal sectors • Insufficient source data • Insufficient data collection and review resources • Unsure about where to start Opportunities • Resourceful staff • Chance to develop and improve over time IMF | Statistics 18

Advice on SPPI development • Typically start with transportation and telecommunications activities • Prices may be available from administrative sources • High industry concentration • Pricing methods well developed • Accommodation and tourism may also be part of early development • For countries where foreign tourism is significant • If domestically oriented, CPI may be sufficient • More challenging sectors later in development • Retail and wholesale trade • Financial services IMF | Statistics 19

Where Voorburg Group fits • IMF will be utilizing the valuable resources developed by the Group • Sector papers Telecom, warehousing, transportation, accommodation • Developing countries are often interested in banking (FISIM) • Revisiting the largest most significant services activities is helpful • • Guidance papers Bundling, alternative data, quality adjustment • • Presentations of countries sharing development experiences • Strong interest in country and activity-specific materials • Repository of questionnaires? • Please share anything you think may be helpful! • Encourage country participation in Group, where practical IMF | Statistics 20