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2.1 Under the SOP concept, flows of commodities (goods and services) are categorised according to their economic destination on a sequential basis along the production chain. The basis for the categorisation is the Australian Input-Output tables. The primary categorisation is between final commodities (i.e. commodities destined for final consumption, capital formation or export) and non-final commodities (i.e. commodities that flow into intermediate consumption for further processing).
2.5 Under such a framework, preliminary (Stage 1) commodities are used in the production of intermediate (Stage 2) commodities; in turn, intermediate (Stage 2) commodities flow into the production of final (Stage 3) commodities. For each of the three stages, commodities can be categorised into domestic production and imports. The final (Stage 3) commodities can be further divided between capital, consumption and exports.
2.6 The framework allows for analyses of price change as commodities flow through production processes. Price indexes for earlier stages of production may be indicators of possible future price changes for later stages.
2.7 The scope of the SOP framework is broadly analogous with that of gross output under the production approach to the measurement of Gross domestic product (GDP(P)) in the national accounts system.