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Quality Description of Producer Price Index for Services

• 1. Relevance of statistical information
• 2. Methodological description of survey
• 3. Correctness and accuracy of data
• 4. Timeliness and promptness of published data
• 5. Accessibility and transparency/clarity of data
• 6. Comparability of statistics
• 7. Coherence and consistency/uniformity

1. Relevance of statistical information

1.1 Summary of the information content and purpose of use of the statistics

The Producer Price Index for Services describes developments in the prices of services enterprises produce for other enterprises and public sector (Business to Business, BtoB) and for households (Business to Consumers, BtoC). In addition, these indices are weighted together to form total level (Business to All, BtoAll). The index describes relative changes in these prices against a comparison point in time.

The Producer Price Index for Services is compiled on product basis. The index describes the price development of services irrespective of the main industry of the enterprise. If a service enterprise also produces goods, its goods production is excluded from the scope of the description of the index. On the other hand, an enterprise that mainly produces industrial goods may also produce services, in which case its services production is included in the scope of the description of the Producer Price Index for Services.

One of the key purposes of the Producer Price Index for Services is to function as a deflator in national accounts calculations. With it the value of production or sales is converted to the volume of production. Enterprises can use the data of the Producer Price Index for Services when comparing the development in the prices of their purchases or sales against the average development in their respective service item.

1.2 Data sources and classifications and concepts used

1.2.1 Data sources

The price data for the Producer Price Index for Services are mainly collected from enterprises quarterly. In addition to the direct price data collection, price data or point figures from other statistics of Statistics Finland, such as the Consumer Price Index, are also used in calculating the Producer Price Index for Services.

Information on other price and cost indices is available on the home pages of the indices, which can be accessed via http://www.tilastokeskus.fi/til/hin_en.html.

1.2.2 Classifications

Starting from the base year 2015, the classification is the Classification of Products by Activity CPA 2015 (CPA Ver. 2.1) which is the European Statistical Classification of Products by Activity. In addition, the classification of services can be specified when necessary.

In indices with the base year 2010 and 2005, the publication levels used is the Standard Industrial Classification TOL 2008 based on the EU's statistical classification of economic activities NACE Rev. 2.

1.3 Acts and decrees

The production of the index is based on the Finnish Statistics Act (280/2004, amend. 361/2013) and on Council Regulations (EC) concerning short-term statistics (No 1165/1998 and 1158/2005). Only the data necessary for the calculation of the index that are not available from other sources are collected from data suppliers. The Statistics Act obliges Statistics Finland to treat the data as confidential. In published statistics, data are reported at a level from which data on an individual enterprise cannot be identified.

2. Methodological description of survey

2.1. Compilation of the index

The sampling frame of the Producer Price Index for Services is based on Statistics Finland’s Business Register and Business Services Statistics. The Business Register contains data on the industry and turnover of enterprises. The Business Services Statistics describe the service selection and distribution of turnover in industries producing business services. Industry-specific product indices have been designed independent of each other, and hence the used sampling method varies by service. Depending on the service, data suppliers have been selected by applying PPS (Probability Proportional to Size) sampling or judicious sampling, or by combining judicious and probability-based sampling. Services, in which price development is monitored, have been selected in cooperation with the enterprises.

The Producer Price Index for Services is calculated according to the Laspeyres index formula. Geometric averages for all the service groups of each enterprise are calculated on the basis of price ratios (=current price/previous price) derived from individual price observations. These micro indices are combined into an total index/product indices by weighting each micro index with its own weighting coefficient. In other words, price changes of individual services have different-sized effects on the total index.

An enterprise's weighting coefficients are based on data on enterprises’ turnover and turnover breakdown between service groups in each enterprise. The used data on turnover are either figures reported by the enterprises themselves or figures on turnover obtained from the Business Services Statistics and the Business Register. Turnover only includes turnover accumulated from the industry in question. The weights between the service groups are based on the year’s 2017 supply and use tables of the national accounts.

The calculation of the Producer Price Index for Services was reviewed starting from the index of the first quarter of 2019 so that the indices will in future be annual chain-linked indices. In practice, the shift to the chain-linked index method means that the weight structure of the Producer Price Index for Services will in future be updated every year. The new weight structure will take effect starting from the index for the first quarter of each year. In addition to the weight structure, product categories and the enterprise sample can also be updated annually, if needed. The base year of the index remains unchanged (2015=100). In future, index calculation will be made so that each index series is chained forward with changes in the index calculated according to the new weight structure. These changes improve the quality of the index, because with their help, structural changes in the production of services can be taken into account faster in the future.

More detailed information on the compilation of the Producer Price Index for Services and its contents can be found on the statistics page under Methodological descriptions.

2.2. Development and publication of new indices

Statistics Finland continues to improve the coverage of the total index by designing indices for new service groups. The publication of a new index can commence once data have been collected for at least twelve months from an adequate number of enterprises and it has been ascertained that the price data provided by the data suppliers can be used for calculating sufficiently reliably index figures depicting the average price development in the service group concerned.

Development of the Producer Price Index for Services started in 2000 and indices are constantly being developed for new service groups. Each index describes the average price development of the service activity in question. In connection with the 2015=100 periodical renewal, Other auxiliary transport services (CPA 2015: 52.29) were added as a new service.

At the moment, the total index of the Producer Price Index for Services covers around 60 per cent of the market services. For example, wholesale and retail trade, as well as financial and insurance activities are missing from the index.

Expansion of the data content of the Producer Price Index for Services

In addition to the price development of services produced by enterprises to enterprises and to public sector (Business to Business, BtoB), starting from the base year 2015=100, the index will also describe the price development of Business to Consumers (BtoC) services. In addition, these indices are weighted together to form total level (Business to All, BtoAll). In terms of Business to Consumer services, the Consumer Price Index less the effects of value added tax changes is used.

3. Correctness and accuracy of data

The Producer Price Index for Services is calculated using over 3,200 price data items collected from approximately 420 data suppliers. In addition, data sets where there are around 20,000 price observations are available for some service groups. The index also utilises other Statistics Finland's indices, like the Consumer Price Index. The numbers of price data items and data suppliers vary by service.

4. Timeliness and promptness of published data

The statistics are published on the 24th day of the month following the statistical reference quarter or on the first working day following it at 8 a.m.

The data collected from enterprises concern the average price for the quarter under review or the data for the first, second or third month of the quarter under review depending on the service group.

5. Accessibility and transparency/clarity of data

Producer Price Indices for Services is published quarterly on the free website of Statistics Finland at http://stat.fi/til/pthi/index_en.html.

6. Comparability of statistics

The time series of the total index of producer prices for services starts from the year 2005. The length of the industry-specific time series varies depending on when the production of the index started.

7. Coherence and consistency/uniformity

The point figures of Producer Price Index for Services are final; they are not to be revised or altered other than in exceptional cases.

Source: Producer Price Indices for Services 2019, 4th quarter. Statistics Finland

Inquiries: Ville Markkanen 029 551 3023, pthi.tilastokeskus@stat.fi

Director in charge: Ville Vertanen

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Updated 24.01.2020