Present

Monitoring exports A new approach

Floris van Ruth & Daan Zult Statistics Netherlands EU/OECD Annual Workshop on Business and Consumer Surveys: Brussels, 17-18 November 2011

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Why we need better trade monitoring? • Unforeseen behavior – ‘An analysis shows that when the Dutch bureau of policy analysis would have foreseen the magnitude of shrink in world trade, the GDP forecast for 2009 would have been quite accurate. However, we did not foresee this shrinkage. Here, we were not alone.’ (Dutch bureau of policy analysis , May 2010)

• It matters – In 2009 total Dutch exports was equal to 54.1% of total Dutch GDP while total Dutch imports was equal to 47.9%.

• Its connects the financial and real economy – ‘For most countries in the world, this is not a financial crisis – it is a trade crisis. In 2009, for the first time since 1982, global trade flows will not grow. The latest IMF projections expect global trade in goods and services to drop by 11% this year and stagnate next year.’ (World Bank, August 2009)

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And trade is of increasing importance

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Meaningful monitoring, ok, but how? Fore(now)casting?

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Present loads of data?

From data to insight, some principles • Economic meaning – Aim for statistical story telling and interpretation

• Stick to the data – Use existing data, there is enough

• Use simple techniques – Complex techniques can mystify users

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Export Demand-Pull Approach Country

• •

Step 1: Construct export portfolio Step 2: Select the major subflows

SITC code Description

Germany

7

Machinery and transport equipment

Belgium

3

Mineral fuels, lubricants and related materials

France

7

Machinery and transport equipment

Germany

5

Chemicals and related products n.e.s.

Germany

0

Food and live animals

Germany

6

Manufactured goods classified chiefly by material

United Kingdom

7

Machinery and transport equipment

Germany

3

Mineral fuels, lubricants and related materials

Germany

8

Miscellaneous manufactured aticles

Belgium

7

Machinery and transport equipment

Belgium Italy Germany France Spain Belgium United Kingdom United Kingdom Belgium United States France France Belgium France Italy

5 7 2 5 7 6 5 0 0 7 0 8 8 6 5

Chemicals and related products n.e.s. Machinery and transport equipment Crude materials inedible except fuels Chemicals and related products n.e.s. Machinery and transport equipment Manufactured goods classified chiefly by material Chemicals and related products n.e.s. Food and live animals Food and live animals Machinery and transport equipment Food and live animals Miscellaneous manufactured aticles Miscellaneous manufactured aticles Manufactured goods classified chiefly by material Chemicals and related products n.e.s.

Total *Equal for export value and volume

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Share* 6,9% 4,6% 3,4% 3,4% 3,3% 3,3% 2,9% 2,9% 2,6% 2,3% 2,0% 1,8% 1,8% 1,4% 1,4% 1,4% 1,3% 1,3% 1,3% 1,3% 1,1% 1,0% 1,0% 1,0% 1,0% 55,7%

Table 1: Result of step 1 and 2, the country-SITC combinations and their share of total.

Link the export portfolio to sentiments • •

Step 3: Look in use-tables to find the ‘consumers’ of the sub-flows Step 4: Collect appropriate sentiment indicators

Example: Dutch – German subflow Major 'users' sentiments German consumer sentiment German industry sentiment German manufacturers of motor vehicles, trailers and semi-trailers sentiment Manufacturers of machinery and equipment sentiment Construction sentiment

Users represent 51.6% of total Dutch export inflow

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Data analysis, 3 types of sentiments: We tested: • General confidence • Order book Assessment • Production expectations

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General confidence Industry Services Consumers Retail Construction Order assessment Industry Services Consumers Retail Construction Production expectation Industry Services Consumers Retail Construction

Question/indicator General confidence General confidence General confidence General confidence General confidence Question/indicator Assessment of order-book levels Expectation of the demand over the next 3 months Financial situation over next 12 months Orders expectations over the next 3 months Evolution of your current overall order books Question/indicator Production expectations for the months ahead Expectation of the demand over the next 3 months Major purchases at present Business activity expectations over the next 3 months Evolution of your current overall order books

Graphical representation

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Comparing some properties Indicator Max correlation Confidence indicator 0,80 Order assessment 0,78 Production expectation 0,82

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Lead/lag Coincidal 3 months lag 2 months lead

From data to insight: a visualisation during crisis • • • •

Green is strong demand Red is weak demand Orange is a warning in good times Yellow is hope in bad times

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2006 – 2008, rise in US subprime mortgage delinquencies and foreclosures increases pressure First signals of weakening

Grumpy consumers

Negative vibe in UK

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First half of 2008, Negative signals persist

Negativity spreads

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November 2008, first real decline

Some light in the dark

Negativity remains widespread

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March 2009, first sign of recovery

Widespread recovery

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April 2009, bottom reached November 2009, good prospects

Widespread strong demand

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December 2009, real recovery

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Positive conditions persist

Today?

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Bonus sheet: A comparison with the unrevised OECD leading indicator

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Thank you for your attention Questions?

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