Quarterly National Accounts of the Czech Republic

Introductory note

The publication presents quarterly estimates of GDP and other indicators of national accounts at current prices, at previous year average prices and at constant prices of 1995 (obtained by chain-linking) for the period of the first quarter of 2003 to the third quarter of 2004. The data are both raw and seasonally adjusted.

In comparison with the data published on 10 September 2004, the preliminary GDP growth estimate for Q2 2004 (+4.1%) has been updated to 3.9%, while that for Q1 2004 (+3.5%) remains unchanged. At the same time the quarterly estimates for 2003 have been adjusted and reconciled with figures of preliminary annual accounts for the same year being published on 3 December 2004. A separate table shows a numerical comparison of GDP estimates before and after the reconciliation for the period of the first quarter of 2003 to the second quarter of 2004.

The quarterly time series of GDP and other indicators were revised, following up the revision of the annual national accounts published in September 2004 (see the publication “Revised National Accounts 1995 – 2002” that is going to be placed at http://www.czso.cz/eng/edicniplan.nsf/p/5008-04). The latter revision takes account of the methodological principles requested by the European System of Accounts (ESA 95). At the same time the methodology for the conversion of indicators from current to constant prices was also harmonized (see the methodological note on the constant prices data calculation).

Available for users at the website /produkty/hdp_ts are quarterly time series of GDP expenditures and gross value added by the kind of activity (including indices and deflators) for the period from the first quarter of 1995 to the third quarter of 2004. The presentation of these time series represents the final period of the historical revision of the quarterly national accounts.

The publication also shows quarterly accounts for the households sector for the period of the first quarter of 2003 to the third quarter of 2004 at current prices, not seasonally adjusted.

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Methodological note on the historical revision of the Czech Republic national accounts:

The quarterly national accounts were revised in the same way as annual national accounts were. The adjustment represents a GDP increase about 6 – 8 % (at current prices) in individual years. The most significant adjustments in terms of volume were:

estimating the stock and consumption of fixed capital at replacement costs (e.g. this revision represents a GDP increase of 3.4 % in 2000 year);
moving to the user cost approach to calculate imputed rent (+1.9 % in 2000 year);
making estimates for units not included in the business register due to late updates (+1.7 % in 2000 year).

The other methodological improvements were not so large. They make up together a GDP increase about 1 %. They were:

applying the time shift approach to eliminate taxes that will never be paid,
estimating the output of units that avoid registering on purpose,
making more accurate estimates of intentional data distortion,
making more accurate estimates of wages in kind,
estimating tips,
making more accurate the calculation of insurance services,
making more accurate the estimate of gross capital formation (for non-tangible fixed assets, valuables, and destructive military equipment),
making more accurate holding gain/loss,
making the more accurate estimate of household consumption expenditure (a higher weight to upper decil, commodity flow balances, application of administrative sources).

Methodological note on the constant prices data calculation:

The methodology of converting quarterly national accounts data from current prices into constant prices was harmonized with the procedure used in annual national accounts. Unlike the concept used before for converting the time series into base year prices (so far 1995 in the CR), another approach is taken. As a rule, the indicators are converted at first into the previous year’s average prices (the previous year is always the basic year, the base is changed for every year). Year-on-year index is so independent on the choice of reference year (1995 year in our case) and is far less biased by the gradual out-of-dating of the chosen basic year’s weights. The chain-linking of data at the previous year’s average prices into reference year prices is provided by means of annual average price indices. The publication includes the data at current prices, at previous year’s average prices and at constant prices of 1995. The time series at 1995 constant prices were obtained by chain-linking y-o-y indices of physical volume.

a) Comments to the data at the previous year’s average prices:
These data were obtained from the data at current prices by deflating with the price indices “the previous year’s average = 100”. It follows that price bases in individual years differ and quarterly data are comparable only in the frame of one year. Aggregates are additive, they are obtained as sums of appropriate individual items at the previous year’s average prices. E.g. the total final consumption expenditure at the previous year’s average prices is equal to household final consumption expenditure + government institutions final consumption expenditure + NPISH final consumption expenditure that were separately deflated by various methods into the previous year’s average prices.

b) Comments to the data at the constant prices of 1995:
These data were obtained by chain-linking from the data at the previous year’s average prices. The chain-linking includes compiling long-term price indices and volume indices by means of the same short-term characteristics based on different and actual weights. E.g., the volume index of the particular indicator between 2004 and 1995 years is calculated as a product of individual year-on-year volume indices for the whole period 1995-2004. As a result of using this method of chain-linking (annual overlap technique which is one of methods recommended by Eurostat) aggregates are not additive. It means that values of aggregates at constant prices do not agree with sums of individual components at the same constant prices.
When estimating GDP levels for the first and second quarters of 2004 (in June and September 2004), however, we only chain-linked individual indicators and GDP. Subtotals (e.g. final consumption expenditure in total) we obtained as the sum of individual chain-linked components (expenditures by households, general government and non-profit institutions in this case). After the consultations with OECD experts we stopped using this approach and each aggregated indicator (on every aggregation level) is chain-linked separately. This also applies to value added which arises as the difference between output and intermediate consumption at both current and previous year’s prices

Methodological note on seasonal adjustment:

The publication includes current price and 1995 constant price values of GDP and GDP components, as they were used, which are adjusted for seasonal variation. The seasonal adjustment is carried out with the help of the TRAMO/SEATS method, which consists in decomposing the time series into trend, cyclical, seasonal and irregular components. The seasonal component is excluded and the remaining three are put together to make up a seasonally adjusted time series. The total of seasonally adjusted values corresponds to the total of original values for each year. The influence of a different number of working days in individual quarters does not seem to be significant statistically, which is why no adjustment for the influence was made. The seasonally adjusted time series are retrospectively recalculated every quarter with regard to extension and revision of the original non-adjusted time series.

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GDP estimate for the fourth quarter of 2004 is to be released on 10 March 2005.