National Accounts - Quarterlies March 2021

Gross domestic product: March 2021 quarter – changes and revisions Introduction Gross domestic product (GDP) sources and methods are thoroughly 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. Changes made due to COVID-19 There are fewer series that required alternative indicators due to COVID-19 disruptions in the March 2021 quarter. We’ve continued to review and refine approaches applied in the March, June, September, and December 2020 quarters by confronting our usual quarterly indicators against other data sources to identify instances where our usual quarterly indicators were unable to represent the actual level of activity through the quarter. Where appropriate, we have used alternative data sources in place of the usual quarterly indicator. See March 2021 quarter gross domestic product and COVID-19, for details of the alternative data sources and changes in methods applied. This paper provides latest updates on: · key events in the March 2021 quarter · data and methodology considerations · additive outlier review · seasonal adjustment of travel services and the March 2021 quarter · differences between the production and expenditure measures · measurement of inventories · changes in the relationship between gross output and intermediate consumption · expenditure on managed isolation quarantine and emergency housing · redesign of the Quarterly Employment Survey · summary of approaches for Gross domestic product: March 2021 quarter. Adjusting for reduced business travel debits The closure of borders to almost all travellers has affected the value of business travel, both inbound and outbound. Outbound business travel (business travel debits) is part of the intermediate consumption of businesses. The fall in business travel debits in COVID-19-affected quarters has previously been captured in expenditure on GDP (GDE) but not in our production measure. For this release, we have used data from the annual supply-use balancing process to derive adjustments to subindustries based on their usual consumption of travel debits, on the assumption that there is no significant link between business travel and short-term output. These adjustments apply from the June 2020 quarter to the March 2021 quarter and have not been applied where subindustries are already using alternative indicators. Expenditure on managed isolation quarantine and emergency housing The introduction of managed isolation quarantine (MIQ), combined with an increase in the provision of emergency housing services, has changed the proportion of accommodation services being consumed by government. We have identified that some expenditure on both of these initiatives was being captured in household consumption expenditure (HCE) instead of government final consumption expenditure (GFCE). Rectifying this has reduced HCE and increased GFCE in recent quarters while leaving expenditure on GDP (GDE) relatively unchanged. 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 where required. This has the effect of subduing the impact of unusual data points on the seasonal adjustment process. Impact of seasonal adjustment methods on interpreting contributions to change in March 2021 quarter ###Multiplicative seasonal adjustment, direct seasonal adjustment and exports of services As outlined in March 2021 quarter gross domestic product and COVID-19, the use of multiplicative seasonal adjustment through periods of dramatic changes can lead to significant differences between the seasonally adjusted contribution to change of a lower level component, and its actual contribution to aggregate GDP or GDE. This is due to the use of multiplicative seasonal adjustment in GDP and GDE component series, and the use of direct seasonal adjustment at the aggregate GDP and GDE level. We’ve noted that this issue is affecting the ability to reconcile recent changes in the exports of services component, with its actual contribution to aggregate GDE. The seasonal component calculated in a multiplicative seasonal adjustment is scaled by the level of the series; in simple terms it is the seasonal factor times the level of the series. If a series decreases to low levels, the derived seasonal component shrinks. If a series rises significantly, the derived seasonal component increases in magnitude. Pre-COVID-19, March quarters represented the peak international tourist season, as well as the timing of international student arrivals for the start of the academic year. Our seasonal factors for both exports of services, and aggregate GDE, account for this expected rise in activity. Due to COVID-19 related border restrictions, exports of services have fallen significantly and are currently at a low level. Multiplicative seasonal adjustment as a result scales down the calculated seasonal component of exports of services. However, aggregate GDE has not changed in the same way, and is operating at levels similar to pre-COVID 19. Hence the derived seasonal component remains similar in size to pre-COVID. This means that the seasonally adjusted contribution to change in exports of services understate their actual contribution to aggregate seasonally adjusted GDP(E) movements, from September 2020 quarter onwards. Percentage changes however are accurate at both the component and aggregate levels. ###Multiplicative seasonal adjustment, indirect seasonal adjustment, and unallocated taxes In the March 2021 quarter, the seasonally adjusted contribution to change of unallocated taxes is not representative of their actual contribution to aggregate GDP. In the March 2021 quarter, import duties rose sharply. The March quarter seasonal factors rate up import duties as they typically fall in this quarter. Unallocated taxes are indirectly seasonally adjusted (i.e. are the sum of seasonally adjusted components) and therefore over represent the contribution of the rise in import duties. Aggregate GDP is directly seasonally adjusted, and this incorporates the true seasonally adjusted contribution of unallocated taxes to the aggregate GDP movement. 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. Correction to December 2020 quarter business price indexes While preparing data for the March 2021 quarter our Prices team discovered errors in their published December 2020 quarter data. See [Business price indexes: March 2021 quarter] (https://www.stats.govt.nz/information-releases/business-price-indexes-march-2021-quarter) for further information. Incorporating annual agricultural production statistics We incorporated data from Agricultural production statistics: June 2020 (final). The data replaced earlier published data 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 June 2019 quarter onwards. Incorporating updated Business Financial Data (BFD) Updated financial data from the [business financial data] (https://www.stats.govt.nz/information-releases/business-financial-data-march-2021-quarter) collection (BFD) has led to some revisions where we have been using the BFD data collection as alternative indicators from our normal methodology. This contributed to revisions in: · electricity, gas, water, and waste services . retail trade and accommodation · information, media, and telecommunications · financial and insurance services · business services · arts, recreation and other services · household consumption expenditure. Revisions due to updated indicator data We received updated respondent information and other source data, causing revisions to: · agriculture · fishing . manufacturing . construction · information, media, and telecommunications . financial and insurance services · rental, hiring, and real estate services · unallocated taxes · local government administration · household consumption expenditure . central government final consumption expenditure . local government final consumption expenditure · change in inventories . gross fixed capital formation. . exports of goods and services . imports of goods and services. 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 September 2018–December 2020 quarters’ GDP and expenditure on GDP. Previously published and revised quarterly movements Gross domestic product Gross domestic expenditure Percentage change from previous quarter Quarter Previously published Revised 17 Jun 2021 Previously published Revised 17 Jun 2021 September 2018 0.2 0.4 0.5 0.5 December 2018 1.1 1.1 1.1 1.1 March 2019 0.5 0.3 0.9 0.8 June 2019 0.5 0.5 0.4 0.4 September 2019 0.7 0.9 0.6 0.6 December 2019 0.1 0.2 0.4 0.4 March 2020 -1.2 -1.5 -1.1 -1.1 June 2020 -11 -10.8 -9.1 -9.1 September 2020 13.9 14.1 14.3 14.1 December 2020 -1 -1 -1.5 -1.5 Source: Stats NZ en-NZ