Main Changes in the Structure/Content and Future Improvement of the Euro-IND Database And

Recent changes and future improvement of the Euro-IND database and the planned extension of Eurostatistics section 1

By Rosa Ruggeri Cannata

1.Recent changes and future improvement of the Euro-IND database

The Euro-IND database did not undergo substantial changes during the current year; more relevant improvements are planned for 2007. Changes in 2006 concerned mainly data coverage, data availability was enlarged with the addition of new breakdowns for the Labour Cost Index and the Business ClimateIndicator.

Following the changes in Labour Market data published on the Eurostat website, breakdownsavailability for quarterly labour cost index in the Euro-IND database was enlarged. Labour Cost Index data is now broken down by cost items and by economic activity.Index numbers and growth rates are availablefor fourteen NACEeconomic activities.

Indexes are presented as real and nominal values, and working day adjusted (WDA) or seasonally and working day adjusted (SWDA). The growth rate with respect to the same quarter of the preceding year is available as working day adjusted and as nominal and real values. Finally variations with respect to the preceding quarter are available as seasonally and working day adjusted figures both as nominal and real values. Labour cost index data are no longer available for the geographical aggregate EU-15.

The second enlargement of data coverage concerns the Business Climate Indicator produced by the Directorate General for Economic and Financial Affairs (DG ECFIN). This indicator has been designed to analyse the information contained in monthly business surveys undertaken in the framework of DG ECFIN's Business and Consumer Surveys. The indicator uses, as input series, five balances of opinions from the industrial surveys and separates out the information that is common to each of the series. Its movements are clearly linked to the industrial production of the euro area.

Looking forward to 2007, relevant changes are in the pipeline; main improvementsto theEuro-IND database will follow the following lines:

• Extend the coverage to new aggregates following the European Union and euro area enlargements
• Extend the set of available indicators
• Improve the quality monitoring
• Compare Euro-IND with other economic indicators databases
• Analyse a possible extension with longer time series

The first extension of Euro-IND is foreseen for the 1st January 2007; following the accession of Bulgaria and Romania into the European Union, and the enlargement of the euro area to Slovenia, new aggregates will be available: EU-27 for the European Union with 27 Member States and EA-13 for the euro area including Slovenia; note that EU-25 and EU-12 aggregates will still be availablefor a transitional period and that the evolving composition aggregates will be adapted to the two enlargements.

In order to further improve data coverage, the possibility of extending the set of indicators to other relevant ones in business cycle analysis is under evaluation; the first extension will concern the Ifo Economic Climate for the euro area, produced by the institute of Economic Research at the University of Munich. This indicator is based on responses from the World Economic Survey (WES), which is designed to give an accurate picture of the economic situation and forecasts for important industrial, emerging and developing economies on a quarterly basis. Aiming to extend the offer of useful information for the estimation of short-term movements in the economy, a set of leading and coincident indicators such as the EuroCOIN, the SZ-Eurolandand others will be assessed in order to further enlarge Euro-IND. Such indicators will be also presented in section one of Eurostatistics, you will find below the complete list of indicators under assessment.

Concerning the improvement of Euro-IND quality management via the revision of existing procedures and a better management of incremental information, please see Doc n°177/06.

In order to better assess Euro-IND relevance, a project to compare it with other economic indicators databases is currently ongoing. The first comparison will be done with the Main Economic Indicators (MEI) of OECD, focusing on a statistical data comparison based on correlations and a metadata comparison. Successively the comparison could be extended to other relevant databases containing infra-annual statistics such as the IFS of IMF, the BIS of the Bank of International Settlements, etc.

Finally Eurostat aims to provide indicator series that span more than 15 years, so that data cover at least two complete economic cycles. In order to increase the length of the series, backward recalculation of euro area data and EU-15 has become a priority for Euro-indicators. A set of back recalculated series will be soon available. The possibility of creating new domains in Euro-IND to make available to the public such longer time series is under evaluation. Clearly, series in such domains will have a different, less frequent, updating with respect to the not back recalculated ones.

2.Eurostatistics: planned improvements of section one

Section one of Eurostatistics aims to an economic analysis of main euro-indicators, showing their recent evolution and offering forecasts of economic activity movements via, for example, the forecasted gross domestic product growth, and predictions of business cycle's turning points (peaks and troughs) in aggregate economic activity. Some relevant coincident and leading indicators are illustrated, accompanied by methodological notes in order to facilitate their interpretation. Indicators are produced not only by the European Commission, DG ECFIN, but also by international research and financial institutions, such as the DGZ Dekabank and the French "Observatoire Français des Conjonctures Economiques".

Currently this section consists of:

• relevant Euro-indicators releases and comments, with data for the euro area and the European Union (EU-25) twenty-fiveMembers;
• euro area and EU-25 GDP data and forecasts with graphical representations;
• the euro area business climate indicator evolution over the last 13 months;
• a comparative analysis of indicators to depict and forecast short term movements in the euro area economic activity.

Section one of Eurostatistics is undergoing substantial changes in order to enlarge significantly its content and to enhance its readability. Improvements will focus on the last part of the first section, going from the actual four to (about, depending on availability) twelve coincident and leading indicators. Indicators will be classified in qualitative leading indicators, able to give a qualitative signal on the future status of the economy (i.e. turning points, recessions) and quantitative indicators aimed to predict directly the future value of a variable of interest (i.e. GDP growth).

The coincident and leading indicators refer either to GDP or industrial production; they aim to anticipate turning points and recessions, or to assess the euro area business climate in the qualitative case, and to forecast GDP growth in the quantitative one. We are looking at a range of both monthly and quarterly indicators, mostly free available on institutions' websites, using a variety of methodologies such as, for example, dynamic factor analysis, Markov switching models, or regression analysis.

Selected indicators to be included are:

• Euroframe
• Handelsblatt indicator
• OFCE
• DG-ECFIN indicators based forecast of GDP
• EuroCOIN
• OECD Composite Leading Indicator
• Ifo Economic Climate for the euro area and for the World Economy
• SZ-Euroland
• DZ-Euroland indicator

The work will continue with the assessment of the indicators capability to achieve declared aims. In the case of qualitative indicators, accuracy measures would be more difficult to define since indicators data are often revised and no direct comparison of turning points is feasible in real time. It would then be necessary to start the analysis on historical data taking into account revisions. Graphical representations, comparative tables, methodological notes, are currently in progress.

For the first time, a wide variety of up-to-date information will be available to the user at a glance, giving him anoverlook on economic activity's short term movements in the euro area.

Other ongoing projects will soon reach a productive phase supplying interesting analysis and data that will be integrated in Eurostatistics section one. One of them is the production of flash estimates for some Principal European economic Indicators (PEEIs) for the euro area (see Doc n°188/06and Doc n°187/06). A second one is that of alternative trend cycle decompositions aiming at producing estimates both for the trend and growth cycle for the euro areaand the European Union (see Doc n°190/06).

Last but not least, Eurostatistics' subscribers could appreciate a styling change: the paper version of Eurostatistics will be soon produced in colours, enhancing thus the publication readability and user friendliness.