University – Higher School of Economics
Institute of Statistical Research and Knowledge Economics
Conjuncture Research Centre
Practice of business tendency surveys in Russia:
methodology aspects and possibilities for early
warning of economic activity changes
Third International Seminar on Early Warning
and Business Cycle Indicators
17-19, November 2010
Conjuncture Research Centre
1
Outline
1. Practice of business tendency surveys in Russia

Methodology

Organization

Developments
2. Relevance for warning of economic activities changes

Application surveys results for economic analysis and shortterm forecasting

Focus on recent economic crisis
3. Pilot services survey

Methodology

Results
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2
Business climate monitoring in Russia based on
business tendency surveys

With a view of expansion of traditional statistical measurements
possibilities there is a necessity to use alternative sources of the
information on economic development

Business climate surveys which are based on revealing of
businessmen opinions about current and future business
tendencies, provide a short-term qualitative information

Methodology strategy of the Conjuncture Research Centre (CRC)
in the field of organization of business climate monitoring is
formation of the Complex Harmonized System of Business
Tendency Surveys in various sectors of Russian economy, adapted
to the international standards
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3
Business climate surveys
Sectors
Starting
year
Sample sizes, number
of enterprises
Groups of enterprises
Surveys
frequency
about 4000, including
600 basic
Economic activities
Patterns of ownership
Organizational and legal forms
Regions
Monthly
1993
about 7000
Patterns of ownership
Number of employed
Regions
Quarterly
Trade
1998
retail –
more than 4000
wholesale –
about 3000
Size of daily turnover
Number of employed
Regions
Quarterly
Financial leasing
2002
about 900
Economic activities
Regions
Quarterly
Investment
2001
more than 10000
Economic activities
Yearly
Services
2010
more than 4000
Economic activities
Regions
Yearly
Industry
1995
Construction
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4
Methodology principles
of business climate surveys organization








Adequacy for current economic conditions and national economics
peculiarities
Comparability with statistical instruments of national economics analysis
Comparability with international analogues, particularly with the information
of Harmonized EU Programme
Abilities of receiving short-term reliable data
Representativeness of samples
Stability of constant indicators blocks and actualization of variable blocks
Harmonization and partial unification of the questionnaires for comparability
of the sector survey results
Possibilities:
 processing and generalization of quality information
 organization of monitoring
 indication of business cycles and turning points of business climate
 integration in macroeconomic analysis and short-term forecasting
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5
Potential of the business climate surveys


Strengths:

adequacy for current economic situation

methodology harmonization with Eurostat and OECD

timely of monthly surveys; all surveys information is received before similar
statistic data

representative samples

no revisions

long-term database

width of coverage: regions, economic activities, questions

abilities of business cycles indication, integration in macroeconomic analysis and
short-term forecasting
Shortcomings:

rather inflexible to changes due to harmonisation and collecting information
through state statistical system (Rosstat)

lack of monthly construction and trade surveys
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6
Organization of surveys
CRC
Rosstat
Methodology improvement: questionnaires, sampling methods, methods for
processing information and using it in economic practice
Sampling design
Conducting pilot surveys
Adaptation of surveys to the statistical practice, collection and transfer
information to CRC ISSEK HSE
Information analysis :
1. Processing – aggregation, weighting, seasoning adjustment, identification of
periods of contraction, recession, expansion and peaks
2. Calculating of composite confidence and business climate indicators
3. Database support (source and summary)
Issue of press releases, other information and analytic papers
Data dissemination and publication (national and international)
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7
Business tendency surveys indicators system:
structure and principles of building

First block contains a constant set of questions for all surveys,
including harmonized questions, recommended OECD and European
Commission

Second block contains special questions, regularly replicating during
several surveys and concerning stable specific tendencies in Russian
economy

Third block contains special questions about phenomena either
incipient or inertial in progress
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8

Questions about characteristics of surveying organization activity

Questions concerning indicators changes should be exactly connected with
time lag of survey (month, quarter, etc.)

For questions concerning changes of indicators answers are usually given
according to a 3-option ordinal scale:



increased (improved) (+)

remain unchanged (=)

decreased (deteriorated) (–)
Questions concerning current situation assessment include comparison of
the real situation with a “normal” situation (usual for economic conditions
and period) in spite of subjectivity of answers:

more than sufficient (+)

sufficient (=)

not sufficient (–)
All information is qualitative excepted some quantitative indicators. Number
of employed in all surveys is used as statistical weight of unit
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9
Information possibilities of business climate surveys
Industry:

branch situation “demand-output”

actual and expected price tendencies

level of fluctuation in stock of raw material and products

investment possibilities and intentions of the industrialists

level and tendency of capacities use

dominants among sources of financing and factors limiting development of production

structure of the debts

employment strategy

tendencies of export abilities and import needs

general economic situation in a sector
Construction:

dynamics of orders book

actual and expected modifications of physical volume and cost tendencies of construction works

situation with financial resources and debt receivable

strategy of employment in the construction sector

distribution of the factors limiting building activity on a degree of significance

priority of objects in construction

economic situation in a sector
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10
Retail and wholesale trade:
actual and expected modifications of trade turnover, volume of stock of goods
and assortment, number of employed
 condition of resource and financial basis
 distribution of trade organizations on sources of receipt of documentary
resources, variants of accounts with the suppliers
 factors limiting trade activity and priority directions of its development and
extension

Investment:
current and expected volume of investments into a fixed capital
 main purposes and sources of investments in the current and the next years
 factors limiting investment activity
 condition, implementation and retirement of capital assets

Financial leasing:
level and dynamics of demand for leasing activity, cost and physical volume of
concluded contracts
 priority sources financing of leasing activity and major restrictive factors
 business situation and competitive position of organizations

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11
Key areas of analysis of qualitative short-term
information - surveys results

Processing of time series of business activity indicators (seasonal
adjustment, identification of recessions, expansions and peaks in
cyclical component)

Calculation of various coincidence types business climate
composite indicators on the base of results of cross-correlation
analysis of survey and statistical indicators time series

Calculation of weight coefficients for composite indicators
components using principle components method (at a
development stage)
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12

Approaches to the integration of survey results and statistical
quantitative indicators, in particular:

cross-correlation analysis of connection closeness and synchronism of
compared indicators cycle profiles (for example, time series of industry
surveys indicators and industrial production index)

short-term GDP forecast based on correlate-regression analysis results

Identification of structural-temporal correlation of indexes and
groups with uniform quality on the basis of cluster analysis

Approaches to the non-response problem decision, considering
character of probability assessment distribution and organization
size

Assessment of business information quality and responses
coordination

Calculating of Economic Sentiment Indicator summarizing results of
real sector, services and consumer surveys
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13
Confidence indicators
 Industry:



current order books
current stocks of finished products (with inverted sign)
production expectation over next 3 months
 Construction:


current order books
expected change of firm’s total employment over next 3 months
 Retail



and wholesale trade:
present business situation of organization
future business situation of organization
level of stocks (with inverted sign)
 Services:



recent evolution of business situation
recent evolution of demand
expected evolution of demand
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14
Sample design of business surveys
Requests
to sample:

territorial approach of sample (as a whole on Russia)

representation of sample at the level of regions, and in an industry - at
level of each leading industry branch

minimal sample size (at the level of regions)
Determination
of a necessary sample size:

minimum and allowable for a regional level of development of survey
materials (without a further grouping of parameters)

sufficient for deriving an authentic evaluation of a parameter
The
minimum and allowable sample size for generalized
information about quantitative parameters of business activity of the
enterprises at a regional level accepts volume in 60 observation
units
Thus,
it is applied multivariate stratified sample with random or
mechanical selection of observation units in stratum
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15
Data dissemination
1. Timetable
Economic activities
Reporting to Rosstat
Reporting from Rosstat to
CRC
Industry
10 numbers of current month
14 working day of current
month
Construction
10 numbers of the 2nd month
of current quarter
20 working day of the 2nd
month of current quarter
Wholesale trade
10 numbers of the 3rd month
of current quarter
8 working day after current
quarter
Retail trade
15 numbers of the 2nd month
of current quarter
6 working day of the 3rd month
of current quarter
Investment
On October, 20th current year
On December, 3rd current year
Financial leasing
On February, 10th current
year
On March, 12th current year
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2. Publications

Press releases are sent to mass-media on the 3rd – 4th day after receiving
information from Rosstat

Information and analytic materials (including indicators of confidence) and
quarterly newsletter “Business Climate in Russia”:

available on the site of HSE:
http://www.hse.ru/org/hse/monitoring/del

are submitted to government bodies, mass-media, scientific community,
employers' organizations

Revues of business climate tendencies in various economic sectors based on
business tendencies surveys data are regularly broadcasted by TV-channel
“Russia-24”

Parts in international yearbooks of Federal State Statistic Service:

“Russia and Countries of the World”

“Russia and Countries-Members of the European Union”

“Great Eight” in Figures”
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17
Methodological aspects of the analysis and processing
of business surveys results

Analysis basis is quantification of the qualitative indicators,
including quantitative representation and measuring procedures of
the analysis of the qualitative information on a level and shortterm tendencies of the business climate indicators

The first stage of quantification: measurement of qualitative
characteristics (scaling) — the formalized definition quantified
characteristics (level or change of analyzed survey indicators)

The second stage of quantification: the analysis of indicators
connections within the limits of each survey — formalization of
indicators relations

The purpose: "compression" of survey results, information
consolidation to all characteristics in groups coherent as high as
possible for simplification of interpretation and analysis; creation of
the composite indicators
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18
Key areas for second phase of quantification
1. Integration of business tendencies survey results
Horizontal
Calculating
of simple indicators of a level
or changes of business climate measures
– opinion balances, average rates (for
example, capacity utilization, competitive
position)
Vertical (“indicator approach”)
Identification
of structural and temporal relations
– provisional calculating of statistically admissible
composite indicators (method of principle
components)
Consolidation
of organizations in various groups
with uniform quality (by cluster analysis methods)
2.
Assessment of quality of surveys data — estimation of answers coordination
depending on scaling method and surveys data co-variation
3.
Non-response problem solving — counting full and partial “non-response”
according to character of probabilities distribution of respondents estimations and
an indicator of the enterprises size
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19
The third stage of quantification — the dynamic analysis of survey
results for the purpose of their integration into the macroeconomic analysis
and the short-term forecast
Building of composite indicators of
cyclic character in the presence of
short time series of quality
surveys indicators
CRC
Building of composite indicators of
cyclic character in the presence of
sufficient length time series of
quality surveys indicators
20
Key areas
of information and analytical activity development

Creation of the Complex Harmonized System of short-term
indicators of a business climate in various economic sectors,
including indicators generalizing character

Creation of the National Harmonized Economic Sentiment
indicator generalizing results of real sector, services and
consumer surveys

Formation of a uniform policy of distribution of business
climate monitoring results taking into account the international
standards, information representations in the international
organizations (European Commission, OECD, etc.)

Expansion of sectoral coverage and adaptation of the
methodology of business tendencies research on regional
monitoring level
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21
Specific targets:

Regular studying of updated methodological and practical aspects

Adaptation of the European experience of questionnaires design,

Adoption in surveys practice of the updated international
standards of information collecting and dissemination

Actualization of business climate surveys programs:
of the European Union business tendencies researches
information collecting and processing to the Russian conditions

questionnaires unification

harmonization of non-quantitative short-term indicators


comparability of surveys results on various aspects of respondents
activity taking into account specificity of regional development of
Russian economy
Identification of structural-temporal correlations of business
climate indicators, revealing of qualitative-homogeneous groups of
economic agents, including on various aspects of their activity
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22

Development of program, methodological and technological
instruments of business surveys in various sectors of economics,
including services and consumers, their adaptation to the
international standards (to Eurocommission and OECD
recommendations)

Preparation of all necessary methodical, practical materials and
conducting of pilot regional surveys for the organization of
regular business tendencies surveys in various sectors, including
services and consumers for use of their results in a complex
estimation of a business climate of Russia

Adoption of the updating methods of a generalizing estimation of
business tendencies by means of composite business climate
indicators, including the European Harmonized Economic
Sentiment Indicator with separation of seasonal and cyclic
components

Identification of leading cyclic components and composite
indicators for expansion of possibilities for early warning of
economic activities changes
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23
Relevance business climate surveys results
for economic analysis
and short-term forecasting
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24
Indication of economic activity changes
over a period of crisis 1998 (Industry)
Balances, %
40
Industrial confidence indicator - left scale
Production expectations (component of the industrial confidence indicator) - left scale
Order books (component of the industrial confidence indicator) - left scale
Stocks of finished products (component of the industrial confidence indicator) - left scale
Index of industrial production - right scale
Change by relevant
period of previous
year, %
140
Good correlation (0.86) of monthly Industrial confidence
indicator and Index of industrial production
30
120
20
10
100
0
80
-10
-20
-30
-40
60
April - October 1998
Changes of Order books
and Stocks of finished
products correlation
40
-50
June 1998 - synchronous decline of ICI and IIP
September 1998 - increase of ICI
October 1998 - increase of IIP
-60
20
-70
0
1997
1998
CRC
1999
2000
25
Indication of economic activity changes
over a period of crisis 2008 – 2009 (Industry)
October 2008
sharp decline of
ICI and IIP
Balances, %
Change by relevant
period of previous
year, %
10
115
110
5
105
0
100
December 2008
minimum ICI
-5
95
90
-10
-15
Average leading of Industrial confidence
Indicator - 1-2 months witn correlation (0.88)
1 - 2 месяца с корреляцией (0,88)
-20
85
80
January - February 2009
minimum IIP
75
-25
2004
70
2005
2006
2007
Industrial confidence indicator - left scale
CRC
2008
2009
2010
Index of industrial production - right scale
26
Industry and Gross Domestic Product (quarterly information)
2nd quarter 2008
maximum
GDP, IIP, ICI
Balances, %
10
Change by relevant
period of previous
year, % 115
2nd quarter 2009
minimum GDP
5
110
105
0
100
-5
-10
-15
95
High correlation of quarter GDP and Index of
industrial production (0.94)
Good correlation of time references and
Industrial confidence indicator (0.86) with
leading for 1 quarter relatively GDP
90
85
1st quarter 2009
minimum
IIP and ICI
80
-20
2004
75
2005
2006
Industrial confidence indicator - left scale
Index of industrial production - right scale
CRC
2007
2008
2009
2010
Real Gross domestic product - right scale
27
Retail trade
Balances, %
20
Quarterly Retail trade confidence indicators and Retail turnover time series
demonstrate acceptable correlation (0.78) and average leading 1 -2 quarters
Change by relevant
period of previous
year, %
130
15
120
10
110
5
100
0
90
-5
80
Crisis 1998:
decline of confidence indicator – 1st quarter
decline of turnover – 3rd quarter
increase of confidence indicator – 3rd quarter
increase of turnover – 1st quarter 99
-10
-15
-20
1998
Crisis 2008 - 2009:
decline of confidence indicator – 2nd quarter 08
decline of turnover – 3rd quarter 08
increase of confidence indicator – 1st quarter 09
increase of turnover – 3rd quarter 09
70
60
50
1999
2000
2001
2002
2003
2004
Retail trade confidence indicator - left scale
CRC
2005
2006
2007
2008
2009
2010
Retail turnover growth - right scale
28
Construction
Balances, %
Change by relevant
period of previous
year, %
140
1st quarter 2008
maximum
10
2nd quarter 2009
minimum
5
130
120
0
110
-5
100
-10
90
-15
Construction confidence indicator
and Construction value added
are changed synchronously
-20
-25
2004
80
70
60
2005
2006
2007
2008
2009
2010
Construction confidence indicator - left scale
Construction value added growth - right scale
CRC
29
Investment expectations
in comparison with previous year
Balances, %
2007
2008
2009
50
45
49
40
35
47
46
45
46
43
39
38
30
34
25
28
27
20
15
17
10
5
0
Industry, total
CRC
Mining and quarrying
Manufaturing
Electricity, gas and
water supply
30
Services business tendencies surveys




Premises and actuality
 strengthening of the role of businessmen opinions at the formation of a favorable
business environment
 activization of requirements of various categories of users, including the
international organizations, in estimations of short-term tendencies of all of
economic sectors development
 essential and constantly increasing contribution of services to Russian economy
(more than third of gross value added)
 necessity of creation of the integrated Economic Sentiment Indicator, generalizing
estimations of short-term development of real sector, sectors of services and
consumers for the purpose of early indication of possible changes of GDP
General purpose – expansion of monitoring of business tendencies for the
formation of the Complex Harmonized System of short-term indicators of a business
climate in Russia
Current purpose – approbation of the unified program of services business climate
survey and its further introduction in statistical and economic practice
Specificity of services surveys
 necessity of unification: activity indicators, samples, methods of processing and
the analysis for service organizations, essentially differ according to specific
features of each type of services, their results, technologies, sizes, consumers
 absence in Russia of experience in services business tendencies surveys
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31
Pilot services surveys

For harmonization of services surveys and achievement of comparability of
their results the following complex of works has been spent:

the list of the economic activities covered by survey is defined

criteria of a choice of sampling observation methods and observation units
selection methods are defined

the unified system of business climate monitoring indicators in the services,
harmonized with the surveys spent by CRC ISSEK HSE and the international
analogues, is developed

coordination of methodological and technological works on the pilot survey
organization by regional statistical divisions is provided

Survey was spent by the Information and publishing center «Statistics of
Russia» under the order and methodology of CRC ISSEK HSE in August,
2010

Survey format

self-filling of the questionnaire or carrying out of personal interview with heads of
the organizations

not less than 10% the selective control of a survey conducting

visual and logic control of the source information
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32
Pilot services surveys – coverage of economic activities
Economic activities
Sections
Subsections
Total
Number of units
4230
Hotels and restaurants
H
55
237
Land transport
I
60
170
Travel agencies and tour operators
I
63.3
505
Financial intermediation
J
65, 66, 67
348
Real estate activities
K
70
597
Computer and related activities
К
72
490
Research and development
К
73
265
Other business activities
К
74
125
Education
M
80
375
Health and social work
N
85
468
Recreational, cultural and sporting activities
О
92
350
Other services activities
O
93
300
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33
Pilot services surveys – sample design

Sample size – 4230 observation units

Organizations realizing commercial activity only

Organization size were no limited (for reason of there being a lot of
small-scale enterprises in services)

Sample:

zoned on 8 federal districts

multivariate

stratified

representative at every level

probabilistic method observation units selection in everyone
stratum

sample basis – an information file of the Uniform state register of the
enterprises and the organizations conducted by Rosstat
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34
Pilot services surveys – indicators system

Unified questionnaire for all organizations

Basic indicators (level, tendencies and expectations) include
harmonized indicators recommended by Eurostat and OECD and
used for confidence indicators calculating

Special questions blocks about specific activities in questionnaires
for:


Travel agencies

IT-sector organizations

Education institutions

Health organizations
Major factors negatively influencing organizations activity
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35


All information is qualitative
A 3-option ordinal scale is used for the estimation of indicators of
changes:
increased (improved) (+)
 remain unchanged (=)



decreased (deteriorated) (–)
For estimation of current condition, the actual situation is compared
with a “normal” (usual) level:
more than sufficient (+)
 sufficient (=)
 not sufficient (–)


Services confidence indicator is calculated in main kinds of
economic activities as the arithmetic average of the balances of
answers to the questions:

recent evolution of business situation
recent evolution of demand
 expected evolution of demand

CRC
36
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Balances, %
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CRC
in January - June, 2010
25
25
20
18
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7
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-3
1
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3
3
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37
Factors negatively influencing services activity
Share of the organizations from their total number, %
51
Financial assets lack
36
Taxation level
Insufficient demand
33
Qualified personnel lack
25
24
High rent
22
Unfair competition of other organizations
Equipment lack
19
Insufficient standard-legal base
18
Premises lack
18
16
High percent of the commercial credit
Difficulties with credit reception
9
Corruption of authorities
5
0
CRC
10
20
30
40
50
60
38
 Thank
you
 for the attention!
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39