Eurostat, the statistical office of the European Union

Eurostat, C1, National accounts methodology. Indicators

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Functional mail box: ESTAT-MIP@ec.europa.eu

Unit labour cost (ULC) measures the average cost of labour per unit of output. It is calculated as the ratio of labour costs to labour productivity. ULC represents a link between productivity and the cost of labour in producing output.

Input data are obtained through official transmissions of national accounts' country data in the European system of accounts - ESA 2010 - transmission programme.

Nominal ULC (NULC) is calculated as: [ D1 / EEM] / [ B1GQ / ETO], where:
     D1 = Compensation of employees, all industries, in current prices
     EEM = Employees, all industries, in persons (following the domestic concept)
     B1GQ = Gross domestic product at market prices in millions, chain-linked volumes
     ETO = Total employment, all industries, in persons (following the domestic concept).

The MIP scoreboard indicator is the Nominal unit labour cost - 3 year % change.

In the MIP domain, annual figures are also published for:

• NULC - 1, 3, 5 and 10 year % change and index 2015=100
• Real labour productivity - 1, 3, 5 and 10 year % change and index 2015=100
• ULC performance related to the euro area – 1 and 10 year % change

and quarterly data:

• NULC – 1 year % change and index 2015=100
• Real labour productivity – 1 year % change and index 2015=100

The classification system follows the European System of Accounts 2010 edition (ESA2010).
For the calculation of the NULC, employees and employed persons are counted according to the domestic concept used in national accounts. The same applies to the auxiliary indicators for employment.
The ESA 2010 distinguishes two employment concepts depending on geographical coverage: resident persons in employment (i.e. national scope of employment) and employment in resident production units irrespective of the place of residence of the employed person (i.e. domestic scope).

Annual national accounts refer to the whole economy. For further information on institutional sectors and sub-sectors, see European System of Accounts 2010 edition (ESA2010).

The MIP scoreboard indicator is the percentage change over three years of nominal unit labour cost (NULC). The indicative threshold is 9% for the euro area countries and 12% for the non-euro area countries. The scoreboard indicator is calculated using the formula: [ (ULC_t – ULC_t-3) / ULC_t-3 ] * 100.

The annual national accounts domain encompasses the main aggregates on national accounts. Its main variables are: GDP and its components, employment, final consumption aggregates, gross capital formation aggregates, income, exports and imports. These variables are calculated on an annual basis but the majority of them is available on a quarterly basis, as well as certain breakdowns.
The key concepts captured by National accounts and related to the calculation of the NULC cover the definition of the Gross domestic product (GDP) and employment. More detailed explanations on methodology can be found in Annex A of Regulation (EU) No 549/2013.

Gross domestic product (GDP) at market prices is the final result of the production activity of resident producer units. GDP is defined in three ways:

a. GDP Output (production) approach
From the production point of view, GDP can be measured as the sum of the following components:
GDP = Total Gross Value Added (B.1G) + Taxes (D.21) - Subsidies on products (D.31),   
          where Gross Value Added (GVA) = Output (P.1) - Intermediate consumption (P.2)

b. GDP Expenditure approach
GDP = Household and non-profit institutions serving households final expenditure (P.3 in S.14_S.15)
          + Government final consumption expenditure (P.3 in S.13)
          + Gross Fixed Capital Formation (P.51)
          + Changes in inventories (P.52)
          + (Acquisition - disposal of valuables) (P.53) 
          + Exports (P.6) - Imports (P.7).

c. GDP Income approach 
GDP = Compensation of employees (D.1)
          + Gross operating surplus and mixed income (B.2g + B.3g)
          + Taxes les subsidies on production and imports (D.2 + D.3) 

The employment variables are widely used in the national accounts context. Employment covers all persons engaged in some productive activity (within the production boundary of National accounts). Employed persons are either employees (working by agreement for another resident unit and receiving remuneration) or self-employed (owners of unincorporated enterprises).

Employment and its components are important economic indicators in their own right. They serve in the construction of derived indicators, turning monetary aggregates from absolute into relative indicators, thus allowing for the comparison of economies of very different size.

More detailed explanations on methodology are provided in the dedicated section on the European System of Accounts (ESA 2010) and in the Annex A of Regulation (EU) No 549/2013.

National accounts aim to capture economic activity within the domestic territory. They combine data from a host of base statistics, and thus they have no common sampling reference frame. The elementary building blocks of ESA 2010 statistics are statistical units and their groupings. ESA 2010 defines two types of units, institutional units and local kind-of-activity units.

National accounts combine data from many source statistics. The concept of statistical population is not applicable in a national accounts context.

The MIP scoreboard presents data for each EU Member State, as well as euro area (EA) and the European Union as a whole. 

Time coverage (i.e., length of the historical series) is different for European series and for national series. Coverage is given for EU and euro area aggregates starting from 1995, with some exceptions in the case of the New Member States and derogations. The coverage for national data varies from country to country, partly due to derogations provided for in the transmission and back-projection programme, and can, in some cases, be substantially longer than for the European aggregates.

Details on time coverage under the links:
tipslm10 Nominal unit labour cost - 3 year % change;
tipslm20 Nominal unit labour cost - annual data, % changes and index (2015 = 100);
tipslm40 Nominal unit labour cost (NULC) - quarterly data;
tipslm50 Unit labour cost performance related to the euro area - annual data;
tipsna70 Real labour productivity per person employed - annual data;
tipsna71 Real labour productivity per person employed - quarterly data. 

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Data are expressed as 1, 3, 5 and 10 year % change and index 2015=100.

The reference period is the calendar year.

National Accounts are compiled in accordance with the European System of Accounts (ESA2010) implemented as from September 2014: from that date onwards all data transmission from Member States to Eurostat follow ESA2010 rules. Compilation rules are further explained in the following document: European system of accounts - ESA2010 - Transmission programme of data (multilingual).

The indicator Nominal unit labour cost is part of the Macroeconomic Imbalance Procedure (MIP) Scoreboard indicators set up under Regulation (EU) No 1176/2011 of the European Parliament and of the Council.

Data received via the transmission programme are shared with other institutions in accordance with specific agreements, notably with the ECB and the OECD. A Protocol for co-operation between Eurostat and the OECD in the area of National Accounts signed in June 2013 specifies agreed data exchange and data validation arrangements. These data are published in Eurobase in the naid_10 collection. 

Regulation 2015/759 of 29 April 2015, amending Regulation (EC) No 223/2009 on European statistics of 11 March 2009 [recital 24 and Article 20(4)], stipulates the need to establish common principles and guidelines ensuring the confidentiality of data used for the production of European statistics and the access to those data with due account for technical developments and the requirements of users in a democratic society.

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Data are released on Eurostat Reference Database as soon as received from national authorities. The rules for basic data transmission are defined in:

• Regulation (EU) No 549/2013 of the European Parliament and of the Council of 21 may 2013 on the European system of national and regional accounts in the European Union – Annex B
• European system of accounts - ESA 2010 - Transmission programme of data (multilingual)

Annual accounts data also covered by quarterly accounts are usually updated on the occasion of new quarterly releases (which are released according to a pre-announced calendar). Figures for a new year usually become available with the first release of quarterly accounts for the fourth quarter of the reference year. 

A release calendar for MIP scoreboard indicators is not available. The release calendar for European quarterly national accounts data are published in accordance with the Eurostat release calendar.

The MIP Regulation stipulates that “the Commission shall make the set of indicators and the thresholds in the scoreboard public” (Art. 4, para. 6, Regulation (EU) No 1176/2011 of 16 November 2011 on the prevention and correction of macroeconomic imbalances) and that “the Commission shall update the values for the indicators on the scoreboard at least on an annual basis” (Art. 4, para. 8).

In line with the Community legal framework and the European Statistics Code of Practice Eurostat disseminates European statistics on Eurostat's website (see §10 'Accessibility and clarity') respecting professional independence and in an objective, professional and transparent manner in which all users are treated equitably. Detailed arrangements are governed by the Eurostat protocol on impartial access to Eurostat data for users.

MIP related indicators are updated and released in accordance to the dissemination of the underlying data.

News releases on-line

The indicators are part of the MIP Scoreboard used to identify emerging or persistent macroeconomic imbalances in the EU countries. The Scoreboard is part of an annual exercise, where the first step is the compilation of an Alert Mechanism Report (AMR).

See data availability for the different tables: tipslm10; tipslm20; tipslm40; tipslm50; tipsna70; tipsna71

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European legislation and guidelines are explained in European System of Accounts 2010 edition (ESA 2010) - for details see §6.1.

Eurostat's mission is to provide the European Union with a high-quality statistical information service – see: Eurostat quality framework.

Moreover, the statistics underlying the Scoreboard indicators are subject to a specific quality assurance framework developed within the MIP context.

Quality is assured by strict application of European System of Accounts 2010 edition (ESA2010) concepts and by thorough validation of the data delivered by countries. Additional checks are performed on MIP indicators.

Data are collected from reliable sources applying high standards with regard to methodology and ensuring high comparability. Eurostat conducts an annual compliance exercise for all the Member States.

Member States are to provide the Commission with a report on the quality of the transmitted data on national and regional accounts. The modalities, structure, periodicity and assessment indicators of the quality reports on data transmitted have been specified in a Commission Implementing Regulation 2016/2304 of 19 December 2016. The implementation of the quality reporting and assessment exercise started in 2017 and is carried out annually. As part of the annual exercise, Eurostat assesses the results, prepares and publishes an overall assessment based on the national quality reports and other available information. The Commission also, on a 5 year basis, reports to the European Parliament and the Council on the application of the ESA 2010 Regulation, including the quality of data on national and regional accounts.

The quality assurance framework for the Macroeconomic imbalance procedure (MIP) follows a three-level structure:

The first level assesses the reliability and comparability of MIP underlying statistics and addresses relevant quality issues; it also enhances the communication on quality assurance of MIP statistics towards the European Parliament and Council, policy makers and the public at large. This level draws on the information gathered in levels two and three (see below).

The second level consists of domain-specific quality reports produced by Eurostat and the ECB summarising the main findings for the euro area or the EU Member States. Reports assess the underlying compilation process and its robustness, describe its legal basis and evaluate whether the statistics are in line with international statistical standards.

The third level consists of national quality reports (self-assessments) produced by the institution compiling the national statistics. Most of these reports are voluntarily published by Members States on the CMFB’s website and their availability depends upon the statistical domain.

The indicator Nominal unit labour cost is one of the headline indicators of the MIP Scoreboard. The MIP Scoreboard is used as an early warning system in the context of the macroeconomic surveillance of the EU Member states. The MIP Scoreboard consists of a set of fourteen indicators, covering the major sources of macroeconomic imbalances. The aim of the scoreboard is to trigger in-depth studies, which will analyse whether potential imbalances identified in the early-warning system are benign or problematic.

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Annual national accounts data provide detailed breakdowns on production, consumption, investment and income.

The Introduction of the Statistical annex of each Alert mechanism report provides detailed information on data completeness.

The indicators are associated with a high level of overall accuracy. Eurostat publishes Euro area GDP revision triangles with all vintages of quarter-on-quarter growth rates and year-on-year growth rates for the Euro area 12 (EA12) seasonally and working day adjusted volume GDP as published by Eurostat since May 2003 until September 2014. Quality reports on national accounts, including revision analysis are also published by some Member States.

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Member States are required to transmit their data to Eurostat in compliance with the European System of Accounts ESA 2010 transmission programme, subject to derogations.

Punctuality depends on the delivery of basic data used for the calculation of the MIP indicators. Member states' data are revised according to national schedules, and revisions are applied to Eurostat’s online database as soon as they become available to Eurostat.

Comparability is assured by the application of common definitions: see European System of Accounts ESA 2010.

By using a common framework, the European System of Accounts 2010 edition (ESA 2010), data are comparable over time.

Unit labour cost belongs to an integrated set of national accounts. Therefore, consistency checks are possible with the component data and with other national accounts tables submitted to Eurostat.

In between Eurostat releases, Member States may revise their figures; Eurostat publishes the new Member States' accounts shortly after reception.

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Annual national accounts are produced from a large variety of data sources with varying degrees of timeliness, taking up to three years or more in the case of structural sources. As users need national and international data as fast as possible, particularly on certain key aggregates, data are produced using data sources that are more readily available. As more complete source data are obtained, the statistics are updated to incorporate the new information.

Revisions of macroeconomic statistics are necessary to improve data quality. To minimise the inconvenience for data users, the European Statistical System (ESS) and the European System of Central Banks (ESCB) try to strike the right balance between incorporating the necessary statistical revisions and maintaining an acceptable degree of consistency across domains and countries. To this end, the two systems have worked together to draw up a Harmonised European Revision Policy (HERP) for Macroeconomic Statistics issued by the CMFB in October 2017. 

According with the HERP, a distinction should be made between 'routine' revisions and 'major' or 'benchmark' revisions.

• Routine revisions refer to the changes made to the economic data published initially and to its subsequent releases for a particular reference year.

According to the guidelines laid down in HERP, annual estimates are usually revised retrospectively for up to four years to incorporate annual data sources as well as changes following Excessive Deficit Procedure and Own Resources notifications, although the policy allows unlimited revisions for transmissions at t+9 months.

• Benchmark revision is carried out at much longer time intervals. Its purpose is to incorporate the main new data sources and major changes in international statistical methodology (such as ESA 2010 or BPM6). In benchmark revision, many years are open for revision in order to create the longest possible consistent time series.

National Statistical Offices and National Central Banks agreed to gradually implement the HERP. The level of adherence to the guidelines of Member States' revision policies is regularly monitored through the ESA 2010 quality reporting.

National accounts data at country level are subject to continuous routine revisions as new input data becomes available. Countries’ data are revised according to country schedules, and revisions become visible in Eurostat's online database as soon as new data is transmitted to and validated by Eurostat.

Countries’ revisions will typically also entail revisions of the European aggregates, which are derived from these data, but updated estimations of the European aggregates are only released on specific dates. Annual data may be revised twice every quarter with the release of quarterly figures (65 days and 100 days after the end of the quarter). The dates are pre-announced in the release calendar on Eurostat's web-site (see 8.2). On these occasions, previously published figures are subject to revision for all variables and all years.

Major or benchmark revisions

Information on benchmark revisions carried out in 2019 is available in this document:

https://ec.europa.eu/eurostat/documents/737960/9861115/Benchmark_revisions_2019.pdf

Data published in the MIP domain are national accounts data for EU Member States, where all data are produced by statistical offices of the respective countries then transmitted to Eurostat.
Countries use many sources to compile their national accounts, among them administrative data from government, population censuses, business surveys and household surveys. No single survey can hence be referred to. Sources vary from country to country and may cover a large set of economic, social, financial and environmental items, which need not always be strictly related to national accounts. In any case, there is no single survey source for national accounts.

Member States should transmit national accounts data to Eurostat upon national publication and/or in line with the deadlines specified in the European System of Accounts (ESA 2012) transmission programme. Member State's annual main aggregates are generally transmitted at t+2 and t+9 months.

Data are collected from national sources. As the breadth of the sources varies, so does the frequency of collection, from monthly to annually, and in the case of population censuses they are mostly collected every decade.

Data in ESA2010 are transmitted via SDMX which introduced standardised codes.

National Accounts combine data from many source statistics. Techniques of data collection vary widely, depending on the compilation approach, the source statistics available, the particular account in the system of accounts, the timeliness of data release and other factors.

Source data undergo a sequence of checks within NSIs. Eurostat checks national data mainly for completeness (coverage of reference periods and variables) and consistency (accounting consistency, time-consistency between quarterly and annual accounts and consistency over time) and follows up with NSIs on any lack of quality in this respect.

Validation against data from other domains and validation of the statistical tools used are done on an ad-hoc basis.

The rules on data compilation are established according to ESA 2010.

To avoid data discrepancies when calculating European annual accounts, Eurostat uses some variables to adjust for any possible lack of additivity between the total and the sum of its components, i.e. these variables are effectively used as balancing items. NSIs may provide explicit balancing adjustments for their national accounts. These are recorded as "discrepancy items" in the appropriate tables.

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