Preliminary estimates of CP GVA have been produced with selected industries presented below. The results highlight some of the practical differences between the production and income measures of GDP. Due to the nature of the two approaches, it is not expected that the results for each industry should align, and distinct variations between the results are seen. Some of the more significant variations between the CP and CVM estimates can be seen in industries where there are large and regular price changes, resulting in variations between the production volumes in the CVM estimates and the varying incomes reflected in the CP GVA estimates. Industries such as Mining and Agriculture are examples where there are regular and often large price fluctuations, and where the resulting movements between the CP and CVM GVA can often diverge significantly. Differences can also arise as the result of timing variations between the components of the two estimates. For example production may occur in one quarter contributing to CVM GVA, while the resulting profits may be reported in a proceeding or following quarter. Although these variations are expected and accounted for during the compilation process, a difference in the movements between the CP and CVM GVA can highlight a discrepancy between the income and production measures and may reflect an issue with the source data.
These discrepancies are highlighted through the comparison of the industry GVA IPDs to other known price indicators. While there should be some correlation, there are a number of possible reasons why the derived GVA IPD may not necessarily align with the comparable price indicators. Some of these reasons include:
- The composition of output will not always be homogeneous from one period to the next. For example if a commodity in one period is of a lower quality than the previous, then this will result in lower prices for the same level of output. This might also occur in margin industries such as Retail and Wholesale trade in which the composition of output sold may shift from low margin to high margin in one period to the next.
- Where a business increases its GOS by reducing operating expenses and vice versa. This will result in an increase in the current price measure of GVA, but will result in no change in the CVM measure due to the use of the “output indicator method”.
- The different ways in which industries manage accounts for their output. For example, industries such as construction where the payment of lump sums for output that is produced over several periods may result in an increased GOS without a matched increase in the volume of output produced.
This new approach will provide a greater level of confidence in identifying and addressing issues such as those mentioned.