Price Indices on Domestic and on Non-domestic Market in Industry

National Statistical Institute

“Short-term Business Statistics and Transport Statistics”  Department

Bilyana Kamenska

Chief expert

2, P. Volov Str.; Sofia, Bulgaria

[email protected]

+359 2 9857 105

Three Producer Price Indices are calculated in NSI:

· Total producer price index;

· Producer price index on the domestic market;

· Producer price index on the non-domestic market.

Producer Price Index (PPI) is one of the main short-term business indicators; it is regarded as one of the important measures of the economic situation in the Country. Indices for particular economic activity measure the average change in the prices of industrial products, which are produced and sold by Bulgarian enterprises. This is done on the bases of constant sample of groups of products, produced by the activity and sold on the domestic market or directly exported on non-domestic market and that sample is representative for total industrial production.

PPI do not measure the actual price levels, they are limited in measuring of the average price changes between two points of time.

· Classification of economic activities (CEA-2008, for international use NACE.BG-2008);

· Nomenclature of industrial production (PRODCOM.BG);

· Main industrial groupings (MIGs).

The PPI survey covers mining and quarrying, manufacturing, electricity, gas, steam and air conditioning supply and water supply (Sections B, C, D and Division E36 of NACE.BG-2008). Excluded are Groups 07.2, 25.4, 30.1, 30.3 and 30.4 and Class 24.46.

Indices are calculated by economic activities at division level (2-nd digit level of NACE.BG-2008), at section level, for Main Industrial Groupings (MIGs: Intermediate products, Investment products, Consumer durable products, Consumer non-durable products, Energy products) and for total "Industry" level.

The Producer Price Indices measure the monthly change in prices of industrial products produced by Bulgarian enterprises and sold on the domestic market or on non-domestic market.

The producer price is the ex-factory price and it includes discounts and other reductions. Excise duties and VAT are excluded. In most cases prices correspond to the prices stated at the moment of the contract.

Each specific product is precisely described when first selected and is very carefully identified each month when its price is reported. The products are specified with all price-determining characteristics: (brand, content, material used, nature of customer). When taking into account discounts, reporting units are asked to specify also the quantity, in order not to have fluctuations due to changes in customer's prices.
The producer price indices measure the average of the actual prices received for a fixed basket of products that remains the same from one month to the next and also it attempts to take account of changes in quality by means of price changes. The surveyed prices take account of changes in quality that can be caused by a change in either the physical characteristics of a product or a change in the transaction characteristics.

Prices have to be reported on a fixed date around the 15th day of the reference month.

The surveyed unit is enterprise (Legal unit considered as enterprise).

The frame for identifying observation units for the population is the PRODCOM survey, which covers exhaustively all non-financial enterprises manufacturing industrial commodities and/or rendering industrial services with a specified threshold of receipts from sales of industrial production and industrial services. The sample model ensures 90% coverage of sold production in terms of value at the national level for each NACE.BG-2008 class.

The number of units in the population of interest (PRODCOM survey) encompasses about 27 000 units.

At national level: The indices are calculated and published total for the territory of Bulgaria.

At European level: Eurostat calculates and publishes aggregated data for EU Member States countries and for the euro area countries. Eurostat publishes data received from the EU Member States, Norway and the candidate countries.

Producer price indexes on domestic market are published as time series from January 2000.

Producer price indexes on non-domestic market and Total producer price indexes are published as time series from January 2005.

2021

Indices (%)

Month

National Legal basis: The Law on Statistics (Article 20) states that all persons that manage or represent legal persons, are obliged to provide the National Statistical Institute and the Bodies of Statistics with reliable data when filling-in forms and questionnaires on surveys included in the National Statistical Programme, for which mandatory participation is provided.

Obligation on units to provide data: The survey is included into the National Statistical Programme – it is compulsory.
The Law of statistics includes provisions relating to fines, which can be imposed for refusal, non-response and delay. They are laid down in specific Chapter 9 “Administrative and liability provisions” in article 52.

EU Legislation: Regulation (EU) 2019/2152 of the European Parliament and of the Council on European business statistics, repealing 10 legal acts in the field of business statistics (EBS-Regulation)

PPIs are published on the NSI website and the data are available to the users.

Indicators are transmitted to Eurostat at the same time with their national publication.

Producer price indices are provided to UN and to IMF.

Regulation (EC)  223/2009 on European statistics (recital 24 and Article 20(4)) of 11 March 2009, stipulates the need to establish common principles and guidelines ensuring the confidentiality of data used for the production of European statistics and the access to those confidential data with due account for technical developments and the requirements of users in democratic society.

The national Law on Statistics includes provisions relating to data confidentiality and protection of secrecy, which are in compliance with the EU legislation and standard European practice. In the Law is stated that individual data received and collected at the time of statistical surveys shall be statistical confidentiality and shall be used only for statistical purposes. Individual data, obtained for the purposes of the statistical surveys, shall not be used as evidence to the bodies of the executive powers and the judicial authorities. Requirements, obligations and measures for data protection, as well as fines that can be imposed, are treated in separate chapters, namely Chapter 6 on "Protection of secrecy" and Chapter 9 on "Administrative penal provisions".

Article 25 of the Law on Statistics specifies the criteria, according to which certain data cannot be made public or released individual data, data which could be indirectly identified, as well as aggregations of less than three statistical units and/or when the relative share of one parameter is more than 85% of the total volume of this parameter for all population units.

Data, which according to the Law on statistics are confidential, are not published.

The date for publication of statistical information is listed in the Release Calendar presenting the results of the statistical surveys carried out by the National Statistical Institute.

Release calendar. 

Data are simultaneously disseminated to the public through a news release on Producer price indices in industry. Producer price indices are posted on the NSI website, after which those data are simultaneously accessible to all users here.

Monthly

NSI publishes regular monthly press release on Producer price indexes (Total PPI, PPI on domestic market and PPI on non-domestic market) 30 days after the end of the reference month and it can be found here.

· Statistical Yearbook;

· Statistical Reference book;

The Producer price indexes on domestic market time series (from January 2000),  Total producer price indexes and Producer price indexes time series (from January 2005) at 2-nd digit and higher level of aggregation of NACE.BG-2008 are available on the website of NSI – in the on-line database INFOSTAT.

Micro data are neither distributed nor provided to the users.

Dissemination on request: Special tables may be obtained from  "Relations with users and e-services" Department of NSI.

· Methodology "Producer price indexes in industry";

· Eurostat Methodology papers on of short-term business statistics;

Quality indicators for Domestic and Non-domestic PPIs are prepared and published on the NSI website under Metadata and methodology of the surveys.

The legal framework which regulates the production of data from Short-term business statistics states that statistical data compiled within the EU system must be of satisfactory quality and produced data are comparable between Member States. Verification of data is done through the process of conducting a statistical survey - from respondents, from experts in the regional statistical offices and from national experts in NSI. Identified inaccuracies and errors are removed timely and comparable data of good quality are provided.

The quality of statistical information and its production process is ensured by the provisions of the European Statistics Code of Practice. The documentation on quality management is available on the Internet.

The quality assessment of the PPIs is based on quality requirements of the ESS (relevance, accuracy, timelines and punctuality, accessibility and clarity, coherence and comparability). The monitoring of the quality of the indicator, updating survey methodology, self-assessment of survey manager are carried out. The response rate is near to 100 per cent.

The main quality problems concern the pricing of one-off products, pricing the products with long production cycle and in some cases pricing of industrial services.

Main users of the information:

· Institutions at European level and Multi-national organizations Eurostat and other main Departments (Directorates-General) of EC; ECB; UN; IMF; WB; etc.;

· Presidency, National Assembly, Ministries, National Bank and other representatives of central and local government;

· Research institutes, universities;

· Media, professional organizations, business;

· Internal users: Directorate Macroeconomic Statistics.

Producer price indices have several main uses:

· As a main short-term business indicators that predict the tendencies in inflation rate; PPI can be considered as an early measure of the current inflation process in the economy;

· As a deflator for calculation the values at constant prices. Example for deflation in National accounts, or for deflation of industrial production and then for compilation the industrial production index;

· As an impartial measure of prices for contractual purposes;

· As a short-term indicator required from different international organizations like Eurostat, International Monetary Fund, European Central Bank, that use PPI for international comparisons and economic supervision.

Not available

All levels of aggregation required by the Regulations on STS concerning Producer price indexes (Total producer price index, Producer price index on domestic market and Producer price index on non-domestic market) are calculated, published nationally and transmitted to Eurostat.

PPI (domestic and non-domestic market) satisfies the principle of accuracy as it describes development of producer prices.

Information for calculation of PPI is received on the bases of monthly surveys on producer prices of industrial products, sold on the domestic market and on industrial products sold on the non-domestic market. The aim of Producer price surveys is: (1) To be compared prices of specific products with equal quality in the two surveyed time periods; (2) In the case of quality change of the surveyed specific products this quality change to be taken into account.

Non-probability sampling is applied, so the sampling error is not measured.

The sampling method used in the PPI survey on domestic market involves a three stage sampling process: first PRODCOM-2015 groups, second reporting units and then specific products (transactions) are sampled. The sample includes 1600 industrial enterprises 920 PRODCOM groups and 7100 specific products (specifications).

The sampling technique applied in the PPI survey on the non-domestic market has two stages – sample of enterprises, and sample of representative products/transactions. The sample includes 630 industrial enterprises (direct exporters of industrial products) 550 PRODCOM groups and 2500 specific products (specifications).

There were negligible non-sampling errors concerning coverage, measurement and processing errors.

Sampling error is not measured due to complexity of price indexes and due to the use of non-probability sampling.

The main source of non-sampling errors are the missing reports (non-response).

Non-respondents are treated very carefully because the bias due to non-response has negative effect on the final estimates. Actions to reduce the non-response include:

• Sending the informative reminder letters to the respondents;
• Depending on the relative importance of non-respondents in terms of their size or representativeness in the activity, the postal survey is supplemented by telephone calls and/or direct contact and collection of data for enterprises.

The Producer price indices (Total PPI, PPI on the domestic market and PPI on non-domestic market) are firstly released 30 days after the end of the reference month.

Regulations, concerning Short-term statistics require Producer price indices to be presented 30 days after the end of the reference month. NSI transmits the short term indicators to Eurostat at the day of the national publication.

Producer price indices in industry are representative for the whole country; they are not representative for the regions of the country.

To calculate the producer price indices on the domestic and on non-domestic market NSI apply methodology, which is in line with international standards. In this sense, the comparability of the indicators across countries can be considered as very good.

The monthly indices are presented as time series from January 2000.

Regulation (EC) № 1165/98 requires “Every five years, Member States shall rebase the indices using as base years the years ending with a 0 or a 5. All indices must be rebased on the new base year within three years after the end of the new base year“. Since July 2021, all short-term indicators presented in the form of index are calculated and published at 2021 as a base year. The time series has been recalculated according to the new base year and are posted on the website of NSI.

Internal consistency of the indicators within the questionnaires is checked by reference to ratios between specification prices. The consistency of results relative to previous years' results is also checked.

The Producer price indices are checked with the annual average prices changes calculated from PRODCOM survey; Comparisons with the CPI are made where it is possible.

All NACE levels is consistent as Producer price indexes on domestic market and Producer price indexes on non-domestic market at higher levels of aggregation (2-nd digit level and higher) are calculated as weighted average - indexes at lower levels are weighted respectively with the turnover value on domestic market and on non-domestic market in the base year. PPI sub-indices - PPI on domestic and PPI on non-domestic market are consistent and coherent with Total PPI as Total PPI is calculated from PPI on domestic market and PPI on non-domestic market weighted with the turnover structure on domestic and on non-domestic market to the total value of turnover at each level of aggregation.

The online information system for data collection, data editing and data processing “Short-term statistics” reduces the time needed for collecting data from enterprises and ensures more efficient data processing.

Producer price indices in industry are usually considered to be final when first released.

Producer price indices in industry are considered to be final when first released.

Information for calculation of Producer price indices in industry is received on the bases of monthly surveys on producer prices of industrial products, sold on the domestic market and on industrial products sold on non-domestic market. The aim of Producer price surveys is: (1) To be compared prices of specific products with equal quality in the two surveyed time periods; (2) In the case of quality change of the surveyed specific products this quality change to be taken into account.

Data collection is based on a representative sample of products (specifications).

Producer price indexes on domestic market: According to the methodology the sampling method used for domestic producer price index compilation involves a three stage sampling process: first PRODCOM groups are selected, as a second step - reporting units are selected and then specific products (specifications) are selected. The sample method used is probability proportional to size.

On the base of the annual survey on production and sales of industrial products - PRODCOM survey the sample of product groups is made. After that for each of the selected PRODCOM groups, the sample of reporting units is made. These units (enterprises) will participate in the price survey. A probabilistic method - proportional to size is used to ensure sufficient coverage. The number of the units selected in the sample depends on the degree of industrial concentration of the enterprises from each sampled PRODCOM group.

For each enterprise with the corresponding PRODCOM group that was sampled for price survey, the Price index estimation is based on the sample of specific product (specifications). For each enterprise the selected PRODCOM product groups are desegregated into group of product that show equal price changes and from these groups representative specification (specific products) are selected. The selected specifications reflect in the best way the price changes of the whole group. At that stage of sampling so called ‘purposive sampling’ or ‘expert choice’ is applied. The experts from the selected enterprises choose the price quotations, in other words products with the highest sales volume are selected and long presence on the market.

Producer Price Indexes on Non-domestic Market: The sampling technique applied has two stages – sample of enterprises, and sample of representative products (specifications). The sample of enterprises is made on the bases of annual information on receipts of export sales of industrial enterprises. Enterprises with significant amount of export sales are selected for price survey. The basic concepts relating to determination of priced products relating to export prices are the same as those applying to domestic prices.

For Domestic producer prices survey the sample includes 1600 industrial enterprises 920 PRODCOM groups and 7100 specific products (specifications).

For Non-domestic producer prices survey the sample includes 630 industrial enterprises (direct exporters of industrial products) 550 PRODCOM groups and 2500 specific products (specifications).

Monthly

Two questionnaires are used:

• Questionnaire on Producer price index on domestic market;

• Questionnaire on Producer price index on non-domestic market.

Data collection media:

• Online through Information system “Business cycles”;

• Paper questionnaire. The questionnaires are sent out to the respondents and collected by regional statistical offices, where the information is entered into IS BC.

Validation of the data in the report:

When recording the data, the Information system “Business cycles” carries out obligatory and recommended controls according to set with validation rules. In case there are errors, the system displays a warning dialog error in the report. The system does not allow completion of the report until these errors have been corrected.

Data editing is carried out at the level of specification prices, if monthly price movements (compare to the previous month) are outside the range of -15% to + 15% the electronic system automatically warns the responsible expert and these movements must be especially conformed by the enterprises with explanations.

Validation of the output data:

Output data is verified at group level with regard to the previous month, the same month of the previous year and also with regard to extreme values, if necessary data is validated at the level of statistical units.

Treatment of missing prices:

Prices for temporarily missing products are handled by one of following methods: (1) asking the enterprise to estimate the missing price, (2) imputing the missing price by the price change for the prices that are available from the same enterprise from the same PRODCOM group (3) imputing the missing price by the price change for a particular comparable product from similar enterprise, (4) imputing the missing price by the price change for the prices that are available in the elementary aggregates, or (5) repeating the last reported price.

When a specific product subject to price monitoring, stop producing, is replaced with a new product in the same product group, which will replace approximately oldest product on the market. The replacement of specifications basely is made through the chain of elementary indexes of the old and of the replacement products.

Calculation of the producer price indexes on domestic and on non-domestic market:

Producer price indexes are base weighted (Laspeyres) indexes - that is to say they are weighted according to the turnover in the base year. After specification’s price collection from the enterprises, elementary indexes (price relatives) are calculated for each specification (price relative – specification price in the current month divided by average price of that specification in the base year). After that price relatives are weighted with the turnover structure in the base year.

Producer price indexes at different levels of aggregation are calculated from successive aggregations in which each level of aggregation uses the arithmetic mean of indexes at the level below, duly weighted with sales structure in the base year following the structure of the NACE.BG-2008.

In the weighting system, there are two categories of weights, which depend on the level of aggregation:

• At group level – 3-th digit of NACE.BG-2008 indexes are calculated as price relatives are weighted with sales structure on domestic or on non-domestic market by PRODCOM groups. These weights are received from annual PRODCOM survey in the base year.
• Producer price index calculation at higher levels of aggregation is base weighted Laspeyres indexes that is to say they are weighted according to the turnover structure on the domestic and on non-domestic market in the base year.

Calculation of Total Producer Price Index:

Total producer price index is calculated from Producer price index on domestic market and Producer price index on non-domestic market weighted with the turnover structure on domestic and on non-domestic market to the total value of turnover at each level of aggregation.

Adjustment for seasonal products: When selecting the product samples, it is ensured that there are some price data available for each month of the year. This is achieved through working closely with respondents. When the price for a particular seasonal specification is not available, an imputation is made using the short-term price change of the products from the same PRODCOM group that are in the season.