NSCB - First Semester 2002 GNP - Technical Notes on the 2nd Quarter 2002 Estimates

Questions have been raised on the Second Quarter-First Semester 2002 estimates of the PSNA. In our continuing efforts to provide quality service to our stakeholders, the NSCB provides the following clarificatory notes to our users, hopefully for a better appreciation of the GDP/GNP numbers.

Sources of Growth of Industrial Sector, particularly, the Manufacturing sub-sector

Issue: Incomplete GDP data: MISSI Data used are only for the first two months of the quarter

(Source: Q2 growth: possible errors. Reyes, Noel G. Business World. September 4, 2002)

NSCB Clarification:

The Monthly Integrated Survey of Selected Industries (MISSI) is only one of the data sources used by the NSCB in the estimation of the Gross Value Added (GVA) of Manufacturing, although it is the major source. The sample establishments of the MISSI cover largely the key players in the industry. It is these key players that dictate the trend for the industries. The list of data sources is in Appendix Table 1

In most, if not all cases during quarterly estimation, except for the fourth quarter estimates when the data support is not as strong, the NSCB is provided by the National Statistics Office (NSO) with data in the form of Value of Production Index (VAPI) and Volume of Production Index (VOPI) by subsector and the overall MISSI response rate for each of the first two months of the quarter. For the third month, only the overall VAPI and VOPI (not by subsector) are normally available to the NSCB and barely beat the deadline during estimation time, although the details are usually released by the NSO about the same time that the PSNA quarterly estimates are released by the NSCB.

Thus, it is true that the preliminary quarterly estimates for manufacturing are based on incomplete data. These estimates are later revised with the availability of more complete data arising from increased response rates to the survey data sources. These response rates vary by subsector and are lower during the preliminary releases than for succeeding revisions. For the second quarter 2002 estimates, the MISSI data used had response rates ranging from 82 to 85 percent. A list of the MISSI response rates is given in Appendix Table 2.

In all cases where data are incomplete, e.g., when only two months are available, or when the necessary details by subsector are not available, we apply standard statistical methodologies to come up with estimates for the whole quarter. This approach is used in other components of the GDP/GNP with similar data support limitations such as exports and imports of services which use data from the Balance of Payments (BOP) being compiled by the Bangko Sentral ng Pilipinas (BSP). In fact, this is standard practice among compilers of national accounts all over the world including the developed countries. The alternative is to wait for more complete data, but the timeliness of the PSNA estimates will surely suffer. We consider the present practice a reasonable compromise to balance the accuracy and timeliness dimensions of the quality of the PSNA estimates.

Issue : “GDP growth based on 1994 samplings”

(Margin of Error. Macasaet, Amando. Malaya Newspaper. September 3, 2002)

NSCB Clarification:

It is not really clear to us what the statement means.

While the latest available results from the Census of Establishments are for 1994¹, for purposes of quarterly/annual GDP estimation, we make use of the quarterly surveys provided by the NSO. Specifically, these are the MISSI as already discussed earlier, the Quarterly Survey of Philippine Business and Industry (QSPBI) and the various Price Surveys. The QSPBI samples are based on the Annual Survey of Philippine and Business Industry (ASPBI). According to the National Statistics Office, the sampling frame for these surveys is updated annually. The preliminary results of the QSPBI become available 45 days after the end of each quarter and updated 60/90 days after the end of the quarter.

On the other hand, other data sources for manufacturing like the reports of the Sugar Regulatory Administration (SRA) on milled and refined sugar production, Department of Energy (DOE) on crude oil production and prices, Philippine Cement Corporation (PhilCEMCOR) on cement production, are submitted to the NSCB even on a preliminary basis and covering reporting companies during the period. The final reports are provided to the NSCB in the next set of quarterly reports.

Issue: Manufacturing growth not supported by Manila Electric Co. franchise‘s power sales

(Source: Q2 growth: possible errors. Reyes, Noel G. Business World. September 4, 2002)

NSCB Clarification:

While Manila Electric Co. (MECO) reported only a 2.2% increase in KWh sales, in estimating the output for electricity distribution, only the trade margin (electricity sold less electricity purchased) is measured which registered a growth of 5% according to the MECO data. To come up with the total output for the electricity sector, we also include the contribution of the power generating plants such as the National Power Corporation (NPC), Independent Power Producers (IPPs) and other electricity distribution companies such as the Rural Electric Cooperatives (RECs), and the Private Electric Utilities (PEUs).

While it was mentioned that MECO covered the largest industrial establishments in the country, in terms of contribution to GVA for electricity, electricity generation from Meralco only accounts for 12%. The remaining 88 per cent comes from electricity generation of the NPC and the IPPs, and electricity distribution from the RECs and the PEUs.

Growth in Expenditures

Issue: NEDA’s failure to explain the growth in expenditures

(Source: Margin of Error. Macasaet, Amando. Malaya Newspaper. September 3, 2002)

Issue: Large drop in business inventories hints surge in demand

(Source: Q2 growth: possible errors. Reyes, Noel G. Business World. September 4, 2002)

NSCB Clarification:

Gross Domestic Expenditure (GDE) grew by 3.6%, which was largely contributed by the 3.8% growth in personal consumption expenditure (PCE). In particular, food consumption which accounts for 52.13% of the PCE was the major contributor to this growth, with a 3.1% increase this year. Other available indicators such as the retail sales of Jollibee Food Corporation (figures available from their website) with registered sales of P6.8 billion, an increase of 14% from its sales during the same period of the previous year, attest to the rise in food consumption. Food manufactures likewise posted a higher growth of 8.6% from a 1.8% increase in the same period last year.

Another major component of GDE, exports grew by 7.3% after exhibiting declines for four consecutive quarters. This was due to the surge in demand for semiconductors and electronic microcircuits which grew by 20.1%, and finished electrical machinery by 21.4%.

The fixed capital formation grew by 0.4% from a decline of 1.3% for the same period last year. In spite of a further decline in investments in durable equipment from 0.9% to 2.1%, construction, the major component of fixed capital formation, went up by 2.1% from a 2.5% decline recorded in the previous year. In addition, breeding stocks and orchard development also grew by 3.8% this year. Meanwhile, changes in stocks for the whole economy posted a total of P3.69 billion withdrawals for the second quarter of 2002. Change in inventories for the whole economy covers agriculture, petroleum, industry, trade and government stocks. Industrial establishments drew down from their inventories by P1.07 billion, part of which were supplies and materials which are inputs in production. The agriculture sector reported the highest withdrawal in inventories, particularly for rice and sugar. Such withdrawals do no automatically mean a surge in demand for the period.

On the other hand, government expenditures went up by 2.0% while total imports grew by 3.9% this year. Imports of machinery other than electrical machinery went up by 0.3% from a 17.6% decline posted last year, while imports of electrical machinery, apparatus and appliances grew by 16.7%.

Other clarificatory notes on National Accounts Estimates:

A. Basic guidelines on the compilation of the Philippine System of National Accounts(PSNA)

The methodology applied is based on a set of internationally accepted standards developed by experts from all over the world thru the joint efforts of the United Nations (UN), International Monetary Fund (IMF), World Bank (WB) Organization for Economic Cooperation and Development (OECD), and the Commission for European Communities (CEC). The members of the NSCB staff that compiles the PSNA are trained statisticians who have undergone trainings here and abroad and have attended international conferences where methodological issues are extensively discussed. In this regard, the NSCB has benefited from the assistance of donor institutions like the UN Statistics Division, the UN ESCAP Statistics Division, the United Nations Development Program (UNDP), the ADB, the IMF, the OECD, the CIDA (Canada), the SIDA (Sweden), the government of New Zealand and the AUSAID (Australia) and the cooperation of Statistics Sweden, Statistics Canada, Australian Bureau of Statistics, Statistics New Zealand and Institute for Development Economics (IDE). In recognition of the expertise of the NSCB in the compilation of national accounts, NSCB has been tapped by international organizations such as the ADB to provide technical assistance to countries like Vietnam, Cambodia, Indonesia, China, and Bhutan among others, in order to develop their quarterly National Accounts. Particularly, for this year, statisticians from Brunei and Micronesia came for a study visit in the
Philippines to consult the NSCB technical staff regarding the compilation of National Accounts. In fact, the recently retired UN ESCAP Regional Adviser for National Accounts who is acclaimed in the region for her professionalism and expertise came from the NSCB. We also would like to assure our public that we in the NSCB value and safeguard the integrity of our work and that we uphold the Fundamental Principles of Official Statistics
Given the various sources of our data, we apply a validation process where we check our estimates against available industry indicators not to mention consistency checks between demand and supply as well as between outputs and inputs.
National Accounts estimates are available in current and constant prices. The current price estimates are expressed in nominal terms, that is, estimates are stated at prices for the present period. On the other hand, constant price estimates are expressed in terms of the base year prices with 1985 as the current base year. Basically, the constant price estimates remove the effects of prices. In accordance with the SNA 19933, we are moving soon from constant price estimation to the use of Chain volume measures.

B. Additional information on NFIA (Net Factor Income from Abroad)

Net Factor Income from Abroad (NFIA) consists of two components, net receipts on compensation and net payments on property income. Net receipts on compensation covers earnings of landbased and seabased Overseas Filipino Workers (OFWs) less payments of compensation to the rest of the world (ROW). Data used in estimating compensation came from the deployment data of OFWs based on the report of POEA’s Labor Assistance Center (LAC) on the actual departures at the international airport and the estimated average earnings of OFWs from the POEA which provides tabulation of OFW salaries by type of skills.

Data on net payments on property income, on the other hand, are based on net payments on investments from the Balance of Payments (BOP) of BSP. Net payments on income consist of Property Income and Property Expense. Property Income includes inflow of profits, earnings, interest income and dividends as its sub-items while Property Expense includes the outflow of profits, earnings, dividends, reinvested earnings and interest.

C. Growth rate based on the expenditure estimates

The growth rates published by the NSCB are based on the estimates using the production approach because we consider the data support to these estimates to be stronger than that using the expenditure approach. Countries like the United Kingdom, India, Indonesia, among others adopt the same practice.

Data for the production side of the accounts come from established surveys that are regularly conducted and whose sampling frame is updated regularly (see item #1 Issue: GDP growth based on 1994 samplings). On the other hand, most of the data for the expenditure accounts rely on administrative-based data except for PCE. Estimates of the PCE which accounts for about 76% of the GDP rely primarily on indicators since at present there are no quarterly or annual expenditure surveys.

On the expenditure side, the GDP (GDE) constant growth rate for the second quarter of 2002 was 3.6%, lower compared to the growth rate from the production side of 4.5 %. For the current price estimates, the production approach yielded a GDP growth rate of 9.5%, lower than that of the expenditure approach (GDE) which showed 10.5%.

For inquiries, please contact Mr. Raymundo J. Talento at (632) 895-2425 or email him at rj.talento@nscb.gov.ph.

¹ The latest Census of Establishments (now called the Census of Philippine Business and Industry) was conducted in 2000 with 1999 as the reference period. The results of the 1998 Annual Survey of Establishments became available towards the end of 2001 but they have not been incorporated in the PSNA estimates. Normally, this would be incorporated in the May round of estimates but because the NSCB is in a transition period towards the implementation of the 1993 SNA, we decided to incorporate all the revisions during the overall revision of the accounts.

² Adopted by the UN Statistical Commission in April, 1994.

³ The international guidelines on national accounting prepared under the auspices of the Intersecretariat Working Group on National Accounts composed of the Commission of the European Communities – Eurostat, the IMF, the OECD, the UN and the World Bank.

APPENDIX

Table 1
DATA SOURCES

MANUFACTURING	AGENCY	DATA
1. Food Manufacturing	National Statistics Office	MISSI Data: VAPI, VOPI (Monthly)
Sugar	Sugar Regulatory Administration (SRA)	Production & Prices (Monthly)
2. Beverages
3. Tobacco
4. Textile
5. Footwear & Wearing Apparel
6. Wood & Cork Products
7. Furniture & Fixture	National Statistics Office	MISSI Data: VAPI, VOPI
8. Paper & Paper Products
9. Publishing & Printing
10. Leather & Leather Products
11. Rubber Products
12. Chemical & Chemical Products
13. Petroleum Products	Department of Energy (DOE)	Production & Prices (Monthly)
14. Non-Metallic Mineral Products	National Statistics Office	MISSI Data: VAPI, VOPI
Cement	Philippine Cement Manufacturers' Corp. (PHILCEMCOR)	Production (Monthly) 40 kg.bag
15. Basic Metals
16. Fabricated Metals
17. Machinery except Electrical
18. Electrical Machinery	National Statistics Office	MISSI Data: VAPI, VOPI
19. Transport Equipment
20. Miscellaneous Mfg.

Table 2
MONTHLY INTEGRATED SURVEY OF
SELECTED INDUSTRIES (MISSI) RESPONSE RATE

Period	PRELIMINARY	REVISED
2001	81.4	85.0
JAN	69.4	69.4
FEB	75.7	75.7
MAR	78.7	78.7
2001Q1	74.6	74.6
APR	82.2	82.2
MAY	82.9	82.9
JUN	86.3	94.4
2001Q2	83.8	86.5
JUL	85.4	91.0
AUG	83.4	91.4
SEPT	84.2	89.8
2001Q3	84.3	90.7
OCT	80.6	87.0
NOV	79.3	91.3
DEC	88.1	86.7
2001Q4	82.7	88.3
2002	84.9	90.7
JAN	82.5	94.0
FEB	87.2	94.0
MAR	90.0	95.5
2002Q1	86.6	94.5
APR	85.4	89.4
MAY	82.0	89.1
JUN	82.0	82.3
2002Q2	83.1	86.9


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