National Accounts - Quarterlies June 2020

Gross domestic product: June 2020 quarter – changes and revisions Introduction Gross domestic product (GDP) sources and methods are well documented (see: Quarterly gross domestic product: Sources and methods (second edition), with a further update in Quarterly gross domestic product: Sources and methods (fifth edition) ). The quarterly indicators used to compile our estimate of GDP are the best that we have available at that point in time. When compiling our quarterly estimates, we usually face trade-offs between timeliness and the quality, coverage, length of historical series, and/or conceptual alignment of available data sources to the component it is meant to represent. As a result, the methodologies that we use vary depending on the data available and are underpinned by certain assumptions. In normal periods of activity, these assumptions provide us with reasonable estimates of activity. In periods of abrupt disruption (such as the alert level 4 lockdown) resulting in changes to activity and temporary shifts in the structure of the economy, some of these relationships weakened or no longer held. Around the time New Zealand closed its borders on 19 March 2020 we commenced reviewing all our data sources and methods to identify areas of risk and what could be done about them to mitigate that risk. We adjusted data sources and methods where the usual approach would not have accurately represented the sharp changes occurring in the economy and a suitable alternative existed. In reviewing all industries, we also discovered an incorrect calculation affecting the Retail trade and accommodation industry, which we have now fixed, causing revisions back to June 1986. See Historical correction to retail trade and accommodation below. Changes made due to COVID-19 COVID-19 presented a lot of challenges to GDP compilers around the globe. We have used a range supplementary data to carefully evaluate our estimates and, where necessary, have used alternative data sources to produce more precise and accurate measurement of GDP this quarter. The industries and expenditure components where such changes have been made to existing data sources and methods this quarter were highlighted in June 2020 quarter gross domestic product and COVID-19: Updated. In addition to the industries and expenditure components discussed in the paper, changes were also made to the following items: • In gross fixed capital formation, the research and development component of intangibles usually uses interpolation without a quarterly indicator. For the June 2020 quarter, Business Data Collection sales values data was used. • In central government final consumption expenditure, we made an adjustment to compensation of employees to match the treatment of the early childhood education industry within our production measure, where attendance data was used as an indicator. Seasonal adjustment treatment Sharp changes in activity, such as those caused by the lockdown, pose challenges for our usual seasonal adjustment processes. We have reviewed all series and have applied outliering of the latest data point where required. This has the effect of subduing the impact of unusual data points on the seasonal adjustment process. Revisions to previously published statistics Revisions are usually driven by new or improved data that affect historical results, or changes to the underlying measure. In both cases we aim to better represent the real-life situation of a changing society, economy, and environment. The most significant revisions introduced this quarter are described below. Balance of payments annual revisions We incorporated balance of payments annual revisions this quarter. These revisions mostly applied to the expenditure measure of GDP (GDE), particularly to exports and imports of services, household consumption expenditure, gross fixed capital formation (transport equipment), and other expenditure components. These revisions included the incorporation of digital services imports back to 2014 which also impacted on historical household consumption expenditure (HCE) estimates. See International trade: June 2020 quarter – data sources and methods and 2020 revisions to balance of payments and national accounts for further information. Historical correction to retail trade and accommodation Three years ago, the method of aggregating sub-components in the retail trade and accommodation industry was changed from fixed weighting to chaining. A typographical error in the implementation of this methodology change in the production system resulted in the ‘Hardware, building and garden supplies’ sub-industry not being included in all subsequent higher-level series. This has now been fixed and has introduced minor revisions to both quarterly levels and growth movements back to the June 1986 quarter. Incorporating annual agricultural production statistics We incorporated data from Agricultural production statistics: June 2019 (final). The data replaced earlier provisional and modelled stock levels. Incorporating the data led to revisions to agricultural activity in GDP, and to agricultural inventories in the expenditure measure of GDP. These changes caused revisions from the March 2019 quarter onwards. Financial intermediation services indirectly measured (FISIM) Updated FISIM input data resulted in revisions to financial and insurance services in the production measure of GDP, and in the expenditure measure of GDP. Some of these FISIM revisions were impacted by updated Balance of Payments international investment income data. FISIM changes caused revisions from the June 2017 quarter onwards. Electricity generation and consumption Updated electricity generation and consumption data back to June 2017 impacted electricity, gas, water and waste services, and household consumption expenditure. Revisions due to updated indicator data We received updated respondent information and other source data, causing minor revisions to: · fishing · mining . manufacturing · electricity, gas, water and waste services . construction · information, media, and telecommunications · rental, hiring, and real estate services · local government administration . central government final consumption expenditure . local government final consumption expenditure . gross fixed capital formation. Revisions to inventories Revisions were also made during the process of reconciling change in inventories with other movements in production and expenditure series. This process is designed to minimise inconsistencies in timing and valuation. Revisions table The following table shows previously published and revised quarterly movements for the June 2014–March 2020 quarters’ GDP and expenditure on GDP (GDE). Previously published and revised quarterly movements Gross Domestic product Gross domestic expenditure Percentage change from previous quarter Quarter Previously published Revised 17 Sep 2020 Previously published Revised 17 Sep 2020 June 2014 0.5 0.5 0.5 0.5 September 2014 1.2 1.2 1.2 1.2 December 2014 1.5 1.5 1.2 1.3 March 2015 0.3 0.3 0.7 0.6 June 2015 0.8 0.8 0.9 0.9 September 2015 1.0 1.0 1.5 1.5 December 2015 0.9 1.0 1.0 1.0 March 2016 1.2 1.2 1.1 1.1 June 2016 1.0 1.0 1.0 1.0 September 2016 0.9 0.9 0.7 0.7 December 2016 0.3 0.3 0.6 0.6 March 2017 0.8 0.8 0.8 0.9 June 2017 1.1 1.1 1.4 1.4 September 2017 0.7 0.7 1.2 1.1 December 2017 0.7 0.7 0.9 0.9 March 2018 0.7 0.7 0.5 0.5 June 2018 1.0 1.0 0.8 0.9 September 2018 0.5 0.5 0.4 0.4 December 2018 1.0 1.0 0.8 0.9 March 2019 0.4 0.4 0.7 0.6 June 2019 0.1 0.1 0.3 0.2 September 2019 0.8 0.7 0.6 0.6 December 2019 0.5 0.5 0.2 0.3 March 2020 -1.6 -1.4 -1.3 -1.3 Source: Stats NZ Note: While the revisions to retail trade impacted total GDP levels and movements earlier than the June 2014 quarter, no individual quarterly result was revised by more than 0.1 percentage points. en-NZ