Background Notes

Introduction  

The monthly services value index (MSI) monitors trends in output at current prices of enterprises in the non-financial traded services sector. This is the first step in the development of a Services Production Index that measures gross value added changes at constant prices, i.e. a volume index.

Sample covered

The sample size is approximately 2,100 enterprises. The sample comprises a census of all enterprises with an annual turnover value of more than €20m or enterprises with more than 100 persons engaged. The remainder of the target population is stratified using 2-digit Statistical Classification of Economic Activities in the European Community, i.e. NACE Rev. 2 classifications. Each of these 2-digit NACE sectors are further subdivided into strata based on turnover. A simple random sample is then drawn from each stratum. Retail and Motor Trade figures are taken from the separate Retail Sales Index sample of approximately 1,400 enterprises.

The response rates for the provisional results are typically 49% in terms of the enterprises surveyed which represents 70% of the value of total turnover. The corresponding figures for the final results are 59% and 88% respectively. These response rates are based on averages for the 6 month period ending March 2012.

Methodology

The business activity classifications used in this statistical release are based on the Statistical Classification of Economic Activities in the European Community i.e. NACE Rev. 2. For further information on the NACE Rev. 2 classification of services activity, visit the CSO website:

http://www.cso.ie/px/u/NACECoder/NACEItems/searchnace.asp

The index system is structured on the non-financial traded services sector covered in the 2010 Annual Services Inquiry (ASI). This non-financial traded services sector is further broken down as follows: 

• Wholesale and Retail Trade; Repair of Motor Vehicles and Motorcycles (NACE 45-47)
• Wholesale Trade (NACE 46)
• Motors (NACE 45) and Retail Trade (NACE 47) are published separately in the Retail Sales release
• Transport and Storage (NACE 49-53)
• Accommodation and Food Activities (NACE 55, 56)
• Accommodation (NACE 55)
• Food Services Activities (NACE 561, 562)
• Bars (NACE 563) is currently published separately in the Retail Sales release
• Information and Communication (NACE 58-63)
• Professional, Scientific and Technical Activities (NACE 69-75)
• Administrative and Support Service Activities (NACE 77-83)
• NACE 7735 – Aircraft leasing is excluded
• Other Business Services
• NACE 68 Real estate activities
• NACE 92 Gambling and betting activities
• NACE 93 Sports activities and amusements and recreation activities
• NACE 95 Repair of computers and personal and household goods
• NACE 96 Other personal service activities

To compile the MSI, each of the above published NACE sectors is separated into three distinct cells based on the constituent enterprises’ reported gross value added (GVA) for 2010. Using data taken from the 2010 ASI, GVA baseweights are then calculated for each of these cells and the baseweights are updated each month using a matched sample approach. 

An enterprise’s monthly GVA value is calculated as follows; respondents report their monthly turnover figures which are transformed into estimated GVA figures by applying a firm specific factor based on an individual respondent’s 2010 ASI return.  The factor is calculated for each firm by simply dividing their estimated GVA by reported turnover.  If an enterprise was not on the ASI sample then the relevant cell mean GVA/turnover ratio, calculated from the 2010 ASI, is applied. The reason for this change in methodology is to reduce the disproportionate impact that some enterprises (which report large turnover figures but have a relatively small GVA) can have on the overall series.

Seasonal Adjustment

Seasonal adjustment for each of the sectors is conducted using a direct seasonal adjustment approach. However, the overall MSI is estimated using the indirect approach, i.e. the MSI is derived by adding the weighted seasonally adjusted sub-components. The main reason for adopting the indirect approach for the MSI is to attribute the monthly and annual changes in the MSI to each of its sub-components. Seasonal adjustment models are developed for each series based on unadjusted data spanning from January 2009 to the current period. These models are reviewed on an annual basis; however seasonal factors are updated each month.

The seasonal adjustment of the MSI is conducted using the X-13ARIMA-SEATS software produced, distributed and maintained by the U.S. Census Bureau.  The ARIMA option in X-13ARIMA-SEATS is used to forecast and backcast the series in order to have sufficient data to run the seasonal adjustment, as currently we have less than five years of data. Due to the lack of a sufficiently long series the series are not adjusted for Easter and Trading effects.  The seasonal estimates do, however, take into account other factors that may impact on the quality of the seasonal adjustment, i.e. outliers, temporary changes and level shifts.

For additional information on the use of X-13ARIMA-SEATS see (Findley, D.F., B.C. Monsell, W.R. Bell, M.C. Otto, and B. Chen (1998), “New Capabilities and Methods of the X-12-Arima Seasonal Adjustment Program”, Journal of Business & Economic Statistics, 16, pp. 127-177.) and http://www.census.gov/srd/www/x13as/.

Rebase 2010 – Changes

The main reasons for differences in the new rebased and updated MSI series in comparison with the MSI (base year 2009 =100) are as follows:

• New cell baseweights were taken from the ASI 2010.
• A new cell structure/breakdown has been adopted for each sector.  Each enterprise is placed in a particular cell based on the following criteria:
• Cell 3 If annual GVA is greater than €80,000,000
• Cell 2 If annual GVA is between €2,500,000  and €80,000,000
• Cell 1 If annual GVA  is less than €2,500,000
• The new baseweights are now updated each month using changes to respondents’ monthly estimated GVA as opposed to changes in respondents’ reported turnover.
• To keep with the classifications adopted by ASI 2010 a number of NACE sectors have been excluded from the updated MSI, i.e.
• NACE 66 – Activities auxiliary to financial services and insurance activities
• NACE 90 – Creative, arts and entertainment activities
• NACE 91 – Libraries, archives, museums and other cultural activities
• NACE 77 - Rental and leasing activities are no longer in Other Business Activities. NACE 77 is now included in Administrative and Support Service Activities.
• The inclusion of new and revised micro data.

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