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Eurostat – Unit C4 Key indicators for the European policies
EU Workshop on Recent Developments in Business and Consumer Surveys
Hotel Bedford, 135-137,Hotel Bedford, 135-137,
Rue du Midi, 1000 BrusselsRue du Midi, 1000 Brussels
15-16 November 201215-16 November 2012
Eurostat – Unit C4 Key indicators for European policies
On-going international work and prospects in the field of BCS
A statistical overview of the economic situation in the
euro areaBy
Gian Luigi Mazzi
Filippo Moauro
Rosa Ruggeri-Cannata
Eurostat – Unit C4 Key indicators for European policies
Outline
Introduction PEEIs' nowcasts: a bridge modelling approach
real time simulation exercise PEEIs' nowcasts: an unobserved component based
approach
performance of EuroMIND based on survey data The system of turning point detection Real time monitoring and the early warning system Conclusions
Background
PEEIs: a tool for short term economic monitoring based on official statistics
Picture for the euro area rather incomplete for 2012
- few monthly data
- quarterly GDP only for the second quarter
- employment provided with delay Updated picture for the euro area
- combining official statistics and econometric techniques
Eurostat – Unit C4 Key indicators for European policies
Most recent evolution of main PEEIs
Eurostat – Unit C4 Key indicators for European policies
2011q2 2011q3 2011q4 2012q1 2012q2 2012q3
GDP % (Q/Q-1) 0.2 0.1 -0.3 0.0 -0.2 -0.1
% (Q/Q-4) 1.7 1.3 0.3 0.3 -0.9 -0.6
Employment % (Q/Q-1) 0.2 -0.1 -0.3 -0.3 0.0 -0.2
% (Q/Q-4) 0.5 0.3 -0.1 -0.5 -0.6 -0.7
2012m5 2012 m6 2012m7 2012m8 2012m9 2012m10
HICP % (M/M-1) -0.1 -0.1 -0.5 0.4 0.7 0.2
% (M/M-12) 2.4 2.4 2.4 2.6 2.6 2.5
PPI % (M/M-1) -0.5 -0.5 0.3 0.9 0.2 0.0
% (M/M-12) 2.3 1.8 1.6 2.7 2.7 2.6
IPI % (M/M-1) 1.0 -0.5 0.6 0.6 -0.7 -
% (M/M-12) -2.6 -2.0 -2.8 -2.9 -1.0 -
Unemployment rate % 11.3 11.4 11.5 11.5 11.6 -
ESI Index 90.5 89.9 87.9 86.1 85.2 84.5
Note: forecasts (in red) obtained by a bridge modelling approach
GDP growth by country
Eurostat – Unit C4 Key indicators for European policies
2011q2 2011q3 2011q4 2012q1 2012q2 2012q3
Belgium 0.2 0.0 -0.1 0.2 -0.5 0.0
Netherlands 0.0 -0.3 -0.6 0.2 0.2 0.1
Spain 0.2 0.0 -0.5 -0.3 -0.4 -0.5
Italy 0.3 -0.2 -0.7 -0.8 -0.8 -0.8
France 0.0 0.3 0.0 0.0 0.0 0.1
Germany 0.5 0.4 -0.1 0.5 0.3 0.2
Euro area 0.2 0.1 -0.3 0.0 -0.2 -0.1
Note: forecasts (in red) obtained by a bridge modelling approach
Eurostat – Unit C4 Key indicators for European policies
Quarterly GDP of the euro area
Billions of euro, chain-linked volumes, reference year 2000
1400
1500
1600
1700
1800
1900
2000
1995
Q1
1995
Q4
1996
Q3
1997
Q2
1998
Q1
1998
Q4
1999
Q3
2000
Q2
2001
Q1
2001
Q4
2002
Q3
2003
Q2
2004
Q1
2004
Q4
2005
Q3
2006
Q2
2007
Q1
2007
Q4
2008
Q3
2009
Q2
2010
Q1
2010
Q4
2011
Q3
variations over prevoius quarter
-3.0
-2.5
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
1995
Q1
1996
Q1
1997
Q1
1998
Q1
1999
Q1
2000
Q1
2001
Q1
2002
Q1
2003
Q1
2004
Q1
2005
Q1
2006
Q1
2007
Q1
2008
Q1
2009
Q1
2010
Q1
2011
Q1
variations over same quarter of prevoius year
-6.0
-4.0
-2.0
0.0
2.0
4.0
1995
Q1
1996
Q1
1997
Q1
1998
Q1
1999
Q1
2000
Q1
2001
Q1
2002
Q1
2003
Q1
2004
Q1
2005
Q1
2006
Q1
2007
Q1
2008
Q1
2009
Q1
2010
Q1
2011
Q1
variations over same quarter of prevoius year
-8
-6
-4
-2
0
2
4
6
1995
Q1
1996
Q1
1997
Q1
1998
Q1
1999
Q1
2000
Q1
2001
Q1
2002
Q1
2003
Q1
2004
Q1
2005
Q1
2006
Q1
2007
Q1
2008
Q1
2009
Q1
2010
Q1
2011
Q1
Germany France
Italy Spain
Netherlands Belgium
Some comments: the euro area in the first 3 quarters of 2012 3 negative signs of GDP growth in last 4 quarters Persisting slowdown of employment accompanied by a
rising unemployment rate Pretty stable inflation Negative perception of the economic situation by
producers and consumers as shown by the ESI
Eurostat – Unit C4 Key indicators for European policies
Some comments: economic growth at country level Germany shows a recovery after the negative result in
2011Q4 The growth in France is rather weak Belgium shows a stop and go development in last
quarters. Netherlands shows a positive growth in all quarters of
2012 after two consecutive negative quarters. Italy and Spain continue in their negative trend Trend in France is flat and never negative in last
quarters
Eurostat – Unit C4 Key indicators for European policies
Eurostat – Unit C4 Key indicators for European policies
PEEIs' nowcasts: the Eurostat BM approach (1)
p
i
k
j
q
ltltjjlitit Ttuxycy
1 1 0, ,...,1 ,
yt is the dependent variable observed over the sample period t = 1, …, T taken in its first (log-) differences, with Δ the difference operator such that Δyt = yt - yt-1;
c is an intercept; αi and βjl are regression coefficients respectively related
to Δyt-l and to a set of k predictors xjt, j=1, …, k, ;
ut is a mean zero disturbance with variance σ2.
general specification adaptable to the case of cointegration among implied variables imposing suitable coefficient restrictions error correction (EC) terms.
Eurostat – Unit C4 Key indicators for European policies
PEEIs' nowcasts: the Eurostat BM approach (2)
BM approach in 3 steps:
a)xit are projected over a forecast horizon by means of a univariate time series technique;
b)the indicator is temporal aggregated at the same time span of the target variable;
c)parameter estimation of model (1) is carried out to determine the coincident indicator over the full sample period t=1,2, …, T.
Variable selection is carried through the least angle regression (LARS) algorithm by Bai and Ng (2008) able to selecting a set of targeted predictors to obtain the most accurate nowcasts.
Eurostat – Unit C4 Key indicators for European policies
BM specification: GDP, Employment and IPI
Δln(GDPt) Δln (Emplt) Δln(IPIt)
GDP ln(yt-1) - -Employment - ln(yt-1) -IPI Δln(xt) ln(xt-1) Δln(xt-1), Δln(xt-2)
Retail Sales ln(xt-1), Δln(xt) - -Exports ln(xt-1), Δln(xt) - -Construction output Δln(xt) - -Unemployment rate Δln(xt) Δln(xt) -Exchange rate euro/$ Δln(xt-1), Δln(xt-2) - -
Business and consumer surveysPresent business situation Δ(xt) - -Major purchases over next 12 months xt-1 - -
Industrial confidence - Δ(xt)xt,
Δxt-h·|Δxt-h|with h=1,2,3
Construction confidence - Δ(xt-1) -Construction opinion on activity - Δ(xt) -Construction employment expectation - xt-2 -Note: Δ denotes the difference operator, ln the logarithm and Δx t-h·|Δxt-h| the squared difference with sign transformation
Eurostat – Unit C4 Key indicators for European policies
Real time experiment and error statistics
2011q1
2011q2
2011q3
2011q4
2012q1
2012q2 MAE RMSE
GDP0.63
(-0.20)0.44
(0.27)-0.02
(-0.17)-0.40
(-0.10)0.00
(0.00)0.00
(0.20)0.26 0.30
Employment0.22
(0.17)0.13
(-0.18)-0.01
(0.11)-0.07
(0.15)-0.08
(0.11)-0.16
(-0.19)0.18 0.19
2012Febr.
2012March
2012 April
2012 May
2012 June
2012 July MAE RMSE
IPI0.50
(-0.01)0.05
(0.34)0.07
(0.89)0.15
(-0.41)-0.43
(0.22)-0.49
(-1.09)0.57 0.73
Note: Nowcasts are in growth rates with, in parenthesis, errors computed as difference from respective first official Eurostat release. MAE is the mean absolute error and RMSE is the root mean squared error over the quarters from 2010q1 to 2012q2 for GDP and Employment and over the months from January 2010 to July 2012 for IPI
EuroMind: an overview
Monthly indicator of economic activity Proxy of GDP Combining Stock and Watson approach with temporal
disaggregation in the state-space framework Monthly EuroMind estimates calculated by aggregation
of all output and expenditure sides component: recnciliation obtained by weigthed averages of the two monthly estimates
Eurostat – Unit C4 Key indicators for European policies
EuroMind: main characteristics
1) use of a disaggregate approach output and expenditure breakdowns of quarterly GDP;
2) for each component, selection of indicators;
3) monthly and quarterly indicators modelled into the Stock and Watson single index model;
4) state space form allowing for temporal disaggregation;
5) use of a computational efficient procedure;
6) chain-linking is taken into account;
7) final estimate combining the estimates from the output and expenditure sides optimal weights;
8) benchmarking to official quarterly accounts
9) explicit measure of uncertainty around the indicator available.
Eurostat – Unit C4 Key indicators for European policies
EuroMind extensions
EuroMind-S: more coincident version of EuroMind based on a two factor Stock and Watson model where one factor models the effects of qualitative information
EuroMind-C: medium size factor model simultaneously modelling euro area and largest countries
EuroMind-B: back calculated version of EuroMind to 1970 – No back calculation of components available
EuroMind-Gap: euro area output estimates derived from EuroMind by means of a state-space modelling of trend and cycle
Eurostat – Unit C4 Key indicators for European policies
EuroMind-S: last 13 releases
Eurostat – Unit C4 Key indicators for European policies
EuroMIND-S: ME, MAE and RMSE statistics (revisions errors over the quarters 2010q2-2012q2)
Eurostat – Unit C4 Key indicators for European policies
1 step 2 steps 3 steps
ME 0.04 0.01 0.11
MAE 0.12 0.11 0.15
RMSE 0.14 0.13 0.17
Growth rates: comparison among indicators------------------- 2011
------------------------------------------------------------- 2012
--------------------------------------
Aug Sept Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sept
------------------------------------------ variations over previous period ------------------------------------------------
Quarterly GDP - 0.1 - - -0.3 - - 0.0 - - -0.2 - - -
EuroMind 0.1 -0.4 -0.1 0.0 -0.2 0.1 -0.2 0.2 -0.4 0.2 0.0 0.2 0.2 -
EuroMind-S 0.0 -0.3 0.0 -0.1 -0.2 0.2 -0.1 0.2 -0.3 0.0 0.1 0.1 0.1 0.1
---------------------------------- variations over same period of previous year ----------------------------------------
Quarterly GDP - 1.3 - - 0.3 - - 0.3 - - -0.9 - - -
EuroMind 1.5 1.0 0.7 0.6 0.5 0.3 -0.3 0.0 -0.6 -0.5 -0.3 -0.4 -0.2 -
EuroMind-S 1.4 1.0 0.7 0.6 0.5 0.3 -0.3 -0.1 -0.5 -0.5 -0.3 -0.4 -0.3 0.1
Eurostat – Unit C4 Key indicators for European policies
The system of euro area turning point detection (1) Euro area dating: business, growth, and
acceleration cycle– non-parametric dating rule
Euro area system for turning point detection: three coincident indicators– BCCI: Business Cycle Coincident Indicator– GCCI: Growth Cycle Coincident Indicator– ACCI: Acceleration Cycle Coincident Indicator
Eurostat – Unit C4 Key indicators for European policies
The system of euro area turning point detection (2) BCCI: averaging probability recessions returned by univariate
Markov switching models fitted to each of the three component series: unemployement, industrial production index, new car registrations
GCCI: averaging probability recessions returned by univariate Markov switching models fitted to each of the five component series: industrial production index, conctruction confidence indicator, financial situation of households during the last 12 months, imports of intermediate goods, employement expectations
ACCI: recession probability returned by the Markov switching model fitted to the Economic Sentiment Indicator
Eurostat – Unit C4 Key indicators for European policies
MS-VAR GCCI and MS-VAR BCCI MSIH(4) – VAR(0) model fitted on 4 variables
1) Industrial Production Index (differenced over 6 months)
2) Unemployment Rate (inverted diff. over 1 month)
3) New Passenger Car Registrations (diff. over 3 months)
4) Employment Expectations (diff. over 1 month) Both indicators jointly obtained as a by-product of model
parameters estimation:
MS-VAR BCCI filtered probabilities of the first regime of the state-variable (regimes of the latent Markov-chain are sorted in ascending order of the state-dependent intercept);
MS-VAR GCCI sum of filtered probabilities of the first and second regimes.
Eurostat – Unit C4 Key indicators for European policies
The αABβCD sequence
Eurostat – Unit C4 Key indicators for European policies
Classical cycle
trend
series in level
A
B
DC
α
β
B
Growth cycle
AC
A
D
Acceleration cycle
AC
α
β
Summary of most recent turning points
Economic Cycle Coincident Indicator Peak Trough Peak
Acceleration Cycle
Provisional Dating 2006 Q1 2008 Q1 2010 Q2
ACCI June 2006 March 2009 December 2010
December 2010 December 2011 March 2012
Growth Cycle
Provisional Dating 2008 Q1 2009 Q3 2011 Q1
GCCI March 2007 July 2009 August 2011
Multivariate December 2007 September 2009 May 2011
Classical Business Cycle
Provisional Dating 2008 Q1 2009 Q2 2011 Q3
BCCI August 2008 October 2009 January 2012
Multivariate April 2008 September 2009 December 2011
Eurostat – Unit C4 Key indicators for European policies
Some comments
Euro area growth cycle persists in slowdown phase started in middle 2011
Euro area business cycle entered in recession phase at the end of 2011
After a long deceleration phase the acceleration cycle entered in a new acceleration phase since January 2012
Synthesis the already achieved trough of the acceleration cycle
could be a positive signal for a quite fast recovery from the new recession
Eurostat – Unit C4 Key indicators for European policies
Thank you for your attention!
Eurostat – Unit C4 Key indicators for European policies