Frequently Asked Questions regarding Gross domestic Product (GDP) are listed here
The gross domestic product (GDP) is an aggregate of the national accounts which is frequently used to measure a country's economic performance. The GDP corresponds to the gross value added generated by an economy within a specific period (normally a year or a quarter). “Gross valued added” is defined as the difference between the value of produced goods and services within a particular period (output) and the value of goods and services entirely consumed in the production process of this output (intermediate consumption).
The Federal Statistical Office (SFSO) is responsible for the production and the diffusion of Switzerland’s Annual National Accounts (ANA) and as such calculates the yearly GDP figures. The ANA are published approximately eight months after the end of the respective year and are based on numerous statistics and administrative data. The State Secretariat for Economic Affairs (SECO) is responsible for the Quarterly National Accounts (QNA), which are published 60 days (GDP according to the expenditure and production approach) after the end of the respective quarter. The data used to calculate the QNA figures are less comprehensive than the one used for the ANA. About 70 days after the end of the quarter, the results of the GDP calculation according to the income approach is also released by the SECO.
The same definitions and the general framework are used for the annual and the quarterly national accounts. Only the methods used to calculate the accounts and the selected source statistics may differ. As soon as the annual figures are available the quarterly figures are adjusted to the annual data. Thus, for any particular aggregate, the total of the four quarterly figures for a year always corresponds to the reference annual figure, when these figures are available. As long as only the quarterly values are available, the first preliminary estimate based on the QNA will very often differ from the yearly estimate of the ANA.
Yes, there are three approaches which are commonly used to calculate the GDP. A distinction is drawn between the production approach (sum of gross value added per sector), the income approach (sum of income from production) and the consumption approach (sum of private and public consumption, investments and net exports).
The calculation of a production account over a period of several years shows the development of the gross value added for each economic sector. The gross value added of different sectors is estimated directly within the QNA, whilst the value of output and intermediate consumption are estimated separately within the ANA (gross value added is obtained by difference of output and intermediate consumption within the ANA). In Switzerland the quarterly production account is calculated for approximately 20 economic sectors. More detailed information (for approx. 50 sectors) is published by the ANA.
According to the more commonly used measure, GDP is calculated at market prices. However, the production of the individual sectors is estimated at basic prices. Taxes on goods are not taken into account in this estimate, whereas the subsidies paid are included. In other words, an adjustment has to be made in order to calculate the GDP “at market prices”. The corresponding figure is obtained by adding the taxes on goods to the gross value added and subtracting the subsidies.
The expenditure approach of GDP shows how the value added generated in an economy is used and consumed. The main components of the expenditure side of GDP are private and public consumption, investments in equipment and investments in construction, changes in inventories and net exports of goods and services (difference between exports and imports).
The income approach of GDP shows how the value added created by the production of goods and services is distributed within an economy. The GDP can therefore be broken down into the compensation of employees and the gross operating surplus that represents the return to capital employed in the production process. Traditionally the net operating surplus is released together with the compensation of employees. The net operating surplus refers to gross operating surplus less consumption of fixed capital of corporations (depreciation of fixed capital). Taxes and subsidies are also taken into account on the income side in order to calculate the GDP (at market prices). The GDP components estimated under the income approach are only calculated and published at current prices (the GDP components estimated under the production and the expenditure approach are calculated and published at current and constant prices).
Theoretically, yes. In practice however, this is unlikely due to the use of differing statistical data which are not harmonised. In addition, many statistics and administrative data which are included in the calculation of the various aggregates of the national accounts are subject to revision. These revisions are not harmonised and do not necessarily correspond to the timetable (revision calendar) of the national accounts. The values calculated therefore have to be harmonised (adjusted or balanced) for the national accounts in order to obtain one single GDP. Within the QNA (and to some extent within the ANA), changes in inventories remain very often a component that cannot be estimated with precision and that includes some statistical discrepancies. At least on a quarterly basis, changes in inventories are often affected by the balancing procedure (see also the next point for further comments on this issue).
In principle, yes, although the quality of the estimate is not the same for all aggregates. For example, GDP on a quarterly basis is mainly calculated on the basis of the production account. This situation is attributable to the fact that all the components of the production account can be estimated with a certain quality, this is not possible on the expenditure side of GDP (reliable estimates for changes in inventories are not available on a quarterly basis). In Switzerland (as well as in several European countries) gross value added can very often be estimated for a vast range of economic sectors, enabling the quarterly GDP to be estimated as the sum of the value added of currently about 20 sectors (in Switzerland). When calculating the GDP under the expenditure approach, it remains very difficult to estimate the change in inventories on a quarterly basis. Changes in inventories include changes in inventories of intermediate goods, semi-finished products and work in progress as well as inventories of finished products and traded goods. In Switzerland this component of GDP is estimated as a residuum within the QNA. Then, different controls with some indicators (in particular indicators from the industry, whole trade and external trade) are made to assess the plausibility of this measurement. Although no formal “balancing process” is performed on a quarterly basis (in the sense that the estimated quarterly components of the production, expenditure and income measures of GDP are not fitted into particular frameworks, such as a supply and use tables or symmetric input-output tables), different controls are made to end up with a single, definitive estimate of GDP and component series. In Switzerland the net operating surplus for the calculation of the GDP (income approach) is also difficult to estimate on a quarterly basis. Since GDP can be calculated as the sum of the value added of 20 sectors, the quarterly net operating surplus is estimated as a residuum.
The agreement between the Swiss Confederation and the European Community (today known as the EU) on cooperation in the area of statistics was signed on 26 October 2004 and came into force on 1 January 2007. The agreement formalises the cooperation between Switzerland and the EU in the area of statistics, the aim of the agreement being to create greater harmonisation between Switzerland’s statistics and those of the EU. Within the framework of this agreement Switzerland gave a commitment in particular to adapt its national accounts more closely to the European standards. Since 2005 Switzerland’s quarterly national accounts have been completed by the development of a quarterly production account (value added by sector) and since 2008 by the calculations of the quarterly GDP under the income approach. The published quarterly figures can be compared with the corresponding figures for the other European countries, the general framework and the definitions used are the same.
As long as annual data are not available, the quarterly national accounts for the current year provide “extrapolations” based on the available indicators for the current year. The first official data on the annual figure of GDP and its main components can be derived from the total of the four quarters estimated, normally available at the end of February, until the SFSO itself publishes an initial, official estimate (at the end of August/beginning of September). From the end of February to the beginning of September of a year, the published official GDP figure for the previous year is therefore calculated on the basis of the total of the four quarterly estimates. The annual estimate of the national accounts from the SFSO is normally subject to revision for the two subsequent years. Since the extrapolations of the four quarters, the initial figures of the annual national accounts and the revised annual values may differ, revisions are needed. Revisions also occur on a quarterly basis when some quarterly indicators are revised, even if there is no change in the annual figures. Seasonal adjustment represents an additional source of revisions of the QNA results.
Temporal disaggregation techniques are used to compile the QNA in Switzerland. The unknown quarterly values of the annual data are estimated with the use of various indicators.Temporal disaggregation methods ensure that the sum of the four estimated quarters of a particular year coincide to the annual value, as long as the annual values are known. These methods preserve as much as possible the short-term movements of the reference indicators in the generated and estimated quarterly time series under an temporal aggregation constraint. The use of temporal disaggregation techniques can be justified by theoretical (aggregation constraint) and by practical reasons (tight time schedule between the availability of the indicators and the publication of the QNA). As in other countries, the Swiss QNA are based on computerised and formalized procedures, that should ensure safety, fast processing and reproducibility of the results (transparency). As long as the annual figures are note available, the same temporal disaggregation techniques can be used to perform extrapolations.
Just as with the annual national accounts, numerous indicators are used for calculating the quarterly national accounts. In this context a distinction is normally drawn between “official statistics” (such as employment data, export and import statistics, sales and production figures etc.) and “administrative data” (public sector budgets, social security contributions, fiscal data etc.). Many of the indicators used for calculating the quarterly national accounts are freely available on the Internet. Some indicators by contrast are either not published or only published at a later date. The quarterly national accounts can therefore include data which has not or not yet been published.
The fluctuations of the various national account aggregates not only highlight changes in the economy, that can be explained by the business cycles arguments. In the short term, seasonal influences (rhythm of the seasons, institutional effects and regular changes in preferences) can also have a significant impact on the aggregates (for example on investments in construction or private consumption). With the help of statistical methods, adjustments can be made to eliminate the effect of the seasons on the national accounts aggregates, in order to facilitate their interpretation.
Fundamentally no there isn’t one because in the short term there is always the possibility of certain “anomalies” arising which are difficult to interpret. It should therefore not be forgotten that the calculated quarterly aggregates, after seasonal adjustment, do include a stochastic component (irregularities). The data which has been adjusted for seasonal fluctuations (and working day effects) still includes anomalies which cannot be easily identified, in particular for the last estimated quarter. It is therefore often tricky to talk of a “trend change” or an economic upturn purely on the basis of one single negative or positive quarterly rate of change. Thanks to statistical methods the seasonally-adjusted quarterly figures can be further smoothed to eliminate the irregular component (a “trend-cycle” component is then estimated). However, these trend-cycle estimates are often subject to strong revisions, in particular for the last quarterly values, that reduce their utility. Within the context of Swiss QNA, unadjusted data and seasonally adjusted data are made available.
The aggregates of the national accounts can be estimated “at current prices” or “nominal values” (sales or purchase prices) or at “constant prices” or “real values” (prices of the previous year), in order to identify movement in economic activity that are not price dependant. Nominal, price and volume measures are thus made available for a vast range of national account aggregates. Within the context of the quarterly national accounts the official and technical wording is “at the previous year’s prices, chained linked series, reference year 20xx” (the reference period is defined as the period for which the index series is expressed as equal to 100 or other particular values).
The different aggregates estimated within the national accounts can often be considered as the sum of subcomponents (e.g. food, clothing, housing, water, electricity, gas, health, transport, communication, etc, for households final consumption expenditure).Private consumption is in turn a component of the GDP, beside investments and net exports. The contribution made by a sub-component towards the development of an aggregate can be calculated in order to assess its relative importance. Growth contribution are linked to the relative weight of a sub-component and to its growth rate. For example, if a first sub-component of an aggregate accounts for 10% of the overall growth and a second sub-component 90% (relative weighting), the first would have to show growth of 9% in one year or quarter in order to make a similar contribution to growth as the second sub-component with an increase of 1%. As an instrument for interpreting the results of the national accounts, the calculation of the contributions to growth are very common. These contributions are made available in the same tables that include the other QNA results.
Last modification 21.05.2019