Balancing revisions and precision in a multiple-source
estimation for the index of production in construction
Stefan Linz ([email protected])1
Keywords: multi-source estimation, revisions, quality, longitudinal phenomena,
administrative data
1.
INTRODUCTION
The aim of a production index is to trace short term developments in the volume of
production in an branch or sector. The national index for production in construction is
calculated as an estimation based on multiple sources, using survey results as well as
administrative data. First, due to a lack of direct production statistics in the field of
construction, production has in these branches to be approximated by auxiliary variables.
Second, because of the timeliness of the index, the development of the variables applied
has again to be approximated by data extracts, which refer to smaller samples than the
respective final monthly, quarterly or yearly figures for the same variables. The medium
or long-term trend of the auxiliary variables can thus be measured with a higher
preciseness than short-term developments. In order to avoid that short-term
developments get increasingly disconnected from medium and long-term trends, it is
reasonable to adapt the monthly figures to quarterly or yearly results when they become
available. Such adaptions however will inevitably lead to revisions of the published
results.
Taking the timeliness of the index as given, the amount of revisions depends on the
desired precision, but possibly also on the variables applied for the estimation of
production. Suitable variables for approximation are for example turnover (deflated),
work input (corrected for labour productivity) or raw material input.[1] The standard
approach is to apply one single variable for approximation. Bacchini et al. have proposed
a multivariate approach where production in construction is approximated by a linear
combination of inputs.[2]
In the paper, the auxiliary variables used for approximation are scrutinised with respect
to correlation between short-term and medium or long-term development. The higher the
gap between these courses, the higher will be the necessary amount of revisions or the
loss of preciseness in absence of revisions of the resulting index. A further consideration
addresses the impact of applying a multivariate approach with more than one auxiliary
variables, which could increase the amount of revisions due to a higher variability of
input data, or reduce it by introducing more stability.
2.
METHODS
The analysis is based on descriptive measures of revisions in dependence of index
designs and of the desired precision. The first step consists in a description of the
currently applied data sources and their quality properties. The total revisions of the
national index of production in construction can thus be retraced to their sources. Second,
the coherence between short-term and longer term developments is analysed for the
auxiliary variables in order to analyse revision needs or precision losses. Third,
alternative variables or groups of variables are considered with respect to their
1
Federal Statistical Office of Germany (Destatis)
1
(interactive) contribution to the amount of revisions or stability in the index
development.
3.
RESULTS FOR THE CURRENT INDEX
3.1. Headline index
Original data (without seasonal adjustment) on the national production index for one
reference month is issued 40 days after the end of the reference period as preliminary
figures. In the release one month later, the results for the same reference month are
republished as corrected figures. Additionally, there are revisions of the results for the
same reference month in later publications due to quarterly, yearly or incidental
information being incorporated into the index when it becomes available. The diagram
shows for each reference month of the national index of production in construction the
preliminary and corrected results (month-on-month growth rates) as well as later releases
for each one reporting month.
50
40
30
20
10
0
-10
-20
-30
-40
-50
preliminary
corrected
revised 1
revised 2
revised 3
Figure 1. releases of the month-on-month growth rate of headline index
The biggest change of results occur 30 days after the first release. The growth rate
published in the second release differs in average by an absolute value of 1,2 percentage
points from the growth rate in the first publication (absolute value of difference between
“corrected” and “preliminary” in the chart). The influence of a further revision of the
corrected growth rate is much lower, it amounts to 0.5 percentage points in average
(absolute value of difference between “revised 1” and “corrected”). If a further revision
occur, it changes the results by 0.3 and a third revision by 0.1 percentage points in
average.
The next chart shows the development of the index when only preliminary or only
corrected results, without further revisions of the index, would be taken into account.
140
120
preliminary
100
corrected
80
final
2013-01
2013-03
2013-05
2013-07
2013-09
2013-11
2014-01
2014-03
2014-05
2014-07
2014-09
2014-11
2015-01
2015-03
2015-05
2015-07
2015-09
2015-11
2016-01
2016-03
2016-05
2016-07
60
Figure 2. headline index with preliminary or corrected figures only and final index
2
Single revisions may be relatively small, especially for later reference periods. However,
the omission of revisions can leave the short-term developments getting increasingly
disconnected from medium and long-term trends. The loss of preciseness would
accumulate over time, as shown in figure 2.
In order to retrace revisions to their sources, index construction is considered. The
national index on production in construction is compiled from three auxiliary variables
referring to (a) building construction (b) civil engineering and (c) building completion
work.2 The fields (a) and (b) together are referred to as “main construction industry”. The
auxiliary variables for compiling the index for production in construction are hours
worked for main construction industry and turnover for building completion work.
3.2. Main construction industry
Main construction industry is weighted in the national index for production in
construction with nearly 48%. A multi-purpose survey on hours worked, turnover and
other variables is available on a monthly basis in this branch. It refers to a cut-off sample
covering all establishments having their economic focus in main construction industry
and working with at least 20 employees. These are nearly 8 000 local units. The variable
“hours worked” has been chosen for the approximation of production with the reasoning
that hours worked are theoretically more closely connected to production than turnover.
A first data extract from the survey, which includes only those respondents who have
filled in the figures early, is available 30 day after the end of the reference period. These
results are taken to calculate the preliminary issue of the index of production in main
construction industry (in t+40). The official survey results then are available 45 days
after the end of the reference month and serve to calculate the corrected results of the
production index in main construction industry (in t+70). The change in coverage of the
input data explains parts of the above shown difference between preliminary and
corrected results for the index of production in construction.
Due to later clarifications of data entries with the respondents, there are corrections of the
survey results even of earlier months. Those corrections are piled up during the year and
incorporated altogether once a year into the production index. On this occasion, the
productivity factor is also updated. This factor serves as a link between the desired
volume of production and the variable “hours worked” used as input. Beyond these
cases, the index of production in construction can be subject to incidental corrections,
which can be necessary to react to revelations of former false reports by respondents or
major changes in the sample of local units reporting to the survey.
3.3. Building completion work
The weight of building completion in the national index for production in construction
amounts to nearly 52%. Unlike in main construction industry, there is no monthly survey
on hours worked or turnover available in this branch; for building completion, such
results are only obtainable on a quarterly basis. Due to the lack of any monthly survey
results, the index is based on administrative data for turnover. Tax authorities monthly
transmit turnover tax declarations of taxpayers to the statistical office. As not all tax
payers send their declarations in due time to the fiscal authorities, turnover data is
2
The latter includes painting, wall covering, installation of kitchens and the like. The three aggregates are
not directly comparable to the NACE classification. Especially, building completion work is not equal
to NACE 43 “Specialised construction activities”.
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gathered progressively. The first data transmission from tax authorities after one month
covers about 30% of the total turnover generated in the building completion branch. The
next transmission, referring to the same reference period, comes one month later and
covers about 90% of turnover. There are further transmissions in subsequent months.
The preliminary release of the production index for building completion refers to the first
data transmission from tax authorities, which is relatively incomplete. In the second
release, the preliminary result can be replaced by more complete turnover data. Again,
the change in coverage explains parts of the above mentioned corrections in the second
release of the production index. Further, the index is regularly adapted to the results on
turnover of the quarterly survey in building completion. This survey is based on a cut-off
sample covering all establishments with at least 20 employees, which are nearly 8 500
units. The adaption causes an additional revision four times a year, but is necessary to
align the monthly development to the quarterly trend. Together with the quarterly
adaptions, the quarterly available prices for the deflation of turnover are incorporated into
the index.
4.
ALTERNATIVE INDEX DESIGNS
Alternative index designs are taken into consideration: First, the frequency and dates for
the incorporation of new information into the index could be changed. Information could
be piled up in order to achieve a less frequent revision of the index or it could be
excluded completely. Second, an alternative auxiliary variables could be applied, for
example turnover instead of hours worked for main construction industry. Also,
combinations of auxiliary variables are possible. The impact of those changes on the
preciseness and amount of revisions is analysed in the paper.
5.
CONCLUSIONS
Different index designs could be imagined as points on a budget constraint with certain
realisations of preciseness and amount of revisions (see figure 3). The preferable solution
depends ultimately on the preferences of the users. Beside these relations, the paper will
consider the question, whether the use of alternative auxiliary variables could allow a
certain shift of the budget constraint with a possible reduction of revisions without
hampering preciseness, or the reverse (moving from index design A to design B).
preciseness
User preferences
B
A
Budget constraint
low revisions
Figure 3. preciseness and revisions imagined as realisations on a budget constraint
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REFERENCES
[1] Eurostat: Guidelines for compiling the monthly Index of Production in Construction,
Luxemburg 2011.
[2] F. Bacchini, P. Gennari, R. Iannaccone: A new index of production for the
construction sector based on input data, Contributi Istat n.2 (2003), Roma.
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