Jean-Claude Trichet: Euro area statistics and their use for ECB policy-making
Speech by Mr Jean-Claude Trichet, President of the ECB, at the Second ECB Conference on
Statistics, Frankfurt, 22-23 April 2004.
* * *
Colleagues, fellow central bankers, ladies and gentlemen,
I would like to welcome you most warmly to this the Second ECB Conference on Statistics.
I am particularly happy to see so many participants from the countries that will join the European
Union (EU) in just a few days time. This milestone in European history marks the successful
completion of intensive preparations in many fields, including statistics.
The goal of this conference is to review the statistical requirements for central bank
policy-making. In addition, it provides the statistical community with an opportunity to bid farewell to
Eugenio Domingo Solans, the Executive Board member responsible for statistics, who will leave the
ECB at the end of May 2004.
Although the emphasis of this conference will obviously be the future of statistics, I would also like to
take this opportunity to briefly review the current state of euro area statistics that are produced by the
European System of Central Banks (ESCB).
Let me first, however, underline the importance of euro area statistics for ECB policy-making.
The importance of euro area statistics
We should not underestimate
the importance of official monetary, financial and other economic
statistics for the ECB's monetary policy. As statistics provide the foundation for economic analysis
and policy-making, the availability of trustworthy and timely statistical time-series is a prerequisite for
an effective and correct assessment of the monetary and economic situation and future prospects.
Moreover, economic agents also use these statistics for their own decisions, which then drive the
developments of financial and other economic markets.
In this regard, I would like to stress that is used by all
the importance of a single set of statistics
economic and financial policy-makers, market participants and the public at large. The familiar credo
of the media, "facts are sacred, opinions are free", should also apply to statistics and the use of
statistics. An effective policy preparation process requires that public and private
decision-makers need not debate about the numbers, whatever the outcomes are. Instead they
can then focus their deliberations on the best possible policy assessment based on these statistics
and the forecasts derived from them.
Of course, this also places a heavy responsibility on the shoulders of those who are responsible for
the development, compilation and dissemination of the statistics. In this regard, I fully agree with the
content of the statement in the joint report on euro area statistics and indicators adopted by the
ECOFIN Council and the Commission and forwarded to the European Council in spring 2003. The
report states: "For the smooth functioning of the euro zone as a monetary union working under a
single monetary policy and decentralised but coordinated fiscal policies, macroeconomic statistics of
the highest quality are required. The principles of impartiality, reliability, relevance,
cost-effectiveness, statistical confidentiality and transparency must be fully applied".
The increasing importance of euro area statistics means that appropriate priorities should be set and
the corresponding resources made available for compiling the contributions to these statistics at the
national level. This may need to coincide with a continued shift in emphasis from simply compiling
national statistics to delivering a pertinent contribution to European statistics. This focus on the
euro area has already been largely achieved for statistics that are compiled and disseminated by the
ESCB, such as monetary and financial statistics, the balance of payments and international
investment position statistics, and quarterly financial accounts. However, for other economic statistics
too, reliable euro area aggregates should be published as soon as possible and preferably at
the same time as the data releases for at least the largest countries. This applies, in particular, to
the short-term, high-frequency statistics on prices and costs, national accounts, labour markets,
business developments and external trade, which are needed for business cycle analysis and for
monetary policy preparation.
This practice of publishing simultaneously area-wide and national data follows the "First for Europe"
principle. This principle implies that the statistics, at least the Principal European Economic
Indicators, are published on the same day for the euro area as for the fastest countries. These
countries should cover a sufficient proportion of the euro area to enable the computation of reliable
estimates for the area as a whole. In addition, the release calendar of these indicators should take
account of European policy needs, and revisions and seasonal adjustment practices of these
indicators should be coordinated. At present, this situation has not yet been reached. And as a
consequence, a number of European and national institutions, market participants, forecasters, etc.
are all second-guessing, on their own, at what the euro area aggregate will be as soon as the data for
one or more of the larger Member States have been released. Moreover, even when the euro area
aggregate has been published, based on sufficient country coverage, it can still be revised every time
another "larger" Member State publishes this statistic for the same reference period. The volatility of
the euro area aggregate is clearly a second-best solution both from a monetary policy perspective and
in terms of the effectiveness and efficiency of the statistics concerned.
Within the statistical community of the ESCB, a shift in emphasis towards a truly European
team spirit is already taking place. For instance, when the ECB releases its monthly statistics on
monetary developments in the euro area, the national central banks (NCBs) publish the results for
their respective country shortly afterwards. I am convinced that the European Statistical System
- comprising of Eurostat, the Statistical Office of the European Communities, and the National
Statistical Institutes (NSIs) - will want to follow suit.
The harmonisation of the methodologies used by the various countries for the collection and
production of statistics lies at the heart of a monetary union: it enables us, for example, to compile
meaningful area-wide aggregates. At the same time, the fruitful and fairly detailed statistical
harmonisation achieved in the euro area may inspire the further development of worldwide statistical
standards. Given that cross-country comparability of official statistics is key to their usefulness
and credibility, all countries across the globe should then want to implement such worldwide
standards in their official economic and financial statistics. Of course, this applies a fortiori to
external statistics, such as the trade balance, the balance of payments and the international
investment position, where we still have a lot of progress to make. Partner countries will only be able
to share a common analysis of their bilateral economic and financial relationships if their mutual
external statistics mirror each other. In turn, this is only feasible if these statistics are compiled using
the same concepts and definitions, and similar methodologies. In view of their importance for
policy-making, it may be worthwhile embarking on more intensive coordination among the
statisticians involved, particularly those within the euro area and in the other major economic blocs
of the world, to minimise the present "asymmetries" in external statistics.
Besides monetary policy, which is certainly the main user of our statistics, the central bank's
statistical department should provide services to other central bank functions (financial stability,
payment systems, operations, etc.) and, of course, to users outside the central bank (market
players, researchers and the general public). The different tasks of a central bank are clearly related,
and statistical information required for policy actions in these different areas has related or even
shared sources, it requires similar methodological treatments, and it benefits from being embedded in
an integrated statistical framework.
Going beyond the use of ECB statistics by the ECB itself, these statistics may also be able to play
a role as a neutral and trustworthy benchmark for market participants and the public at large. In
this context, I would like to give three examples.
•
First, the European Financial Markets Association (ACI) recently published the final report on
the "Short-term Paper (STEP) Market in Europe - Recommendations for the development of
a pan-European market". This report recommends, among other things, that the ECB, as a
neutral party, should publish statistics on volumes and prices covering the STEP market.
•
Second, since last November, the ECB and the NCBs have released every month
harmonised euro area and national statistics on interest rates on deposits and loans by
households and corporations. These and other ECB statistics are also suitable for assessing
progress in financial integration in the euro area.
•
Third, the ECB, together with colleagues from NCBs and other experts, is developing a
European standard classification of financial instruments which may eventually be of use to
market participants as well.
As a last example of the importance of euro area statistics, I would like to mention the indicator that
lies at the heart of the ECB's quantitative definition of price stability, namely the Harmonised
Index of Consumer Prices (HICP) for the euro area. This index is compiled and disseminated every
month by Eurostat, in close cooperation with the national statistical institutes. It is made available with
a reasonable degree of detail and timeliness. In addition, a very timely "flash estimate" is published at
the end of the reference month.
However, for some time now, survey results have indicated that a number of euro area citizens have
the impression that the inflation is higher than the moderate levels that are evidenced by the
HICP development.
• A first explanation of this phenomenon may be the lasting memory of some (or a few) price
increases, mainly for personal services, that occurred when the euro was introduced. These
increases had no lasting impact on inflation because fortunately there were not many of
them. But, in certain cases, they may have left a psychological mark.
•
A second reason may be the need for some consumers to adapt to the euro as the new
yardstick for price tags. This effort may be associated with some suspicion about actual price
developments.
• A third cause for the discrepancy between the inflation "feeling" of some people and the
actual inflation is the fact that the prices of products that are bought "out of pocket" and
at a high frequency have tended to rise faster than the average. By contrast, the prices
of several products that are bought only occasionally, such as household appliances or
package holidays, or the prices of services that are paid by giro transfers, for example
telephone subscriptions, have typically increased much less or have even decreased.
Understandably, if you are confronted daily by somewhat higher prices for relatively small
purchases and you only benefit occasionally from more substantial price advantages for
some expensive products, you may well perceive inflation to be higher than it actually is.
Taking all this into account, I can assure you of the quality of the HICP estimate and I have invited
the consumers in the euro area to fully trust the figures which show that inflation is moderate.
Households and all other economic agents can be assured that the ECB will preserve the purchasing
power of the euro and that future price stability will continue to be ensured in line with our definition.
Some achievements of euro area statistics
When looking at the current state of euro area statistics, it is worth recalling that less than a decade
ago, we had not even established the statistical requirements for Monetary Union, let alone that
euro area statistics existed. As the ECB's former Director-General of Statistics, Peter Bull, describes
in his record of the euro area's statistical history, the approval of the statistical requirements in July
1996 was a landmark in the statistical preparations for Economic and Monetary Union (EMU). A lot
has been achieved since then, which may perhaps be best illustrated by the fact that in 2003 the ECB
issued 48 statistical press releases and Eurostat many more. The ECB now publishes every month,
among other things:
•
the most recent monetary aggregates, their components and counterparts;
•
the balance sheets of all banks and similar institutions in the euro area, and a list of all the
Monetary Financial Institutions;
•
a full balance of payments, including the Eurosystem's international reserves;
•
the effective exchange rates of the euro (which are updated daily);
•
new issues, redemptions and outstanding amounts of almost all debt securities and quoted
shares in the euro area;
•
average interest rates paid and received by households and corporations on all kinds of
loans and deposits (including loans for house purchases and for consumption).
In addition, quarterly press releases are published on investment fund statistics, specified by the
investment policy of the fund concerned, and on the financing and financial investment of
households, non-financial corporations, insurance corporations and pension funds, and the
government. Finally, the ECB regularly disseminates the international investment position of the euro
area, various financial soundness indicators, a range of government finance statistics, a variety of
financial market statistics, a residential property price index, statistics on payments and statistics on
the international role of the euro. Only five years ago, most of these statistics did not even exist at the
euro area level.
Of course, all these statistics, the methodologies applied, the release calendars, etc. are available on
the ECB's website. In addition, they are published in the euro area statistics section of our Monthly
Bulletin and in our monthly Statistics Pocketbook. The Pocketbook was launched in August 2003
and aims to provide euro area citizens, the media and other institutions with relevant, up-to-date euro
area economic and financial statistics and publishable indicators in a user-friendly format. It also
contains several tables comparing the euro area with other main economic regions, such as the United
States and Japan, and it contains various national statistics.
These achievements have only been possible because of intensive and fruitful cooperation
between the statistical departments of the NCBs and the ECB, as coordinated by the Statistics
Committee. In addition, the division of tasks between Eurostat and the ECB's Directorate-General
Statistics has been laid down in an update of their Memorandum of Understanding. This update was
signed in March 2003 and has recently been re-examined in certain areas, such as the compilation
of euro yield curves and annual financial accounts. In those and other areas of statistics, the ECB also
stands ready to serve the needs of the European Commission and other users.
At the national level, the distribution of statistical tasks between a country's central bank and its
statistical institute is not the same across Europe. Solving the coordination issues at the European
level is one of the main tasks of the Committee on Monetary, Financial and Balance of
Payments statistics (CMFB), which brings together the senior managers responsible for statistics at
Eurostat, the ECB, and the NSIs and NCBs of the EU Member States. This Committee not only has a
pivotal coordination function for European statistics, but also must play a key role in one of the most
sensitive and crucial areas of statistics in Europe, that is, the statistics as part of the Excessive
Deficit Procedure (EDP). These statistics should be compiled in strict conformity with the European
Regulation for compiling national accounts, the European System of Accounts 1995 (ESA 95), and the
related Manual on Government Deficit and Debt.
The Code of best practice on the compilation and reporting of these data, which was endorsed by the
ECOFIN Council in February 2003, states that the actual data of the ESA 95 government accounts
must be compiled by the National Statistical Institutes, and where applicable by the national
central banks. The NSIs must act in full scientific independence and the government must ensure
that accurate basic data and other information needed for compiling reliable ESA 95 accounts are
made available to the compiling authorities in time and with sufficient detail. All current and new EU
Member States are encouraged to fully implement these statements in the Code of best practice and
to build up the statistical capability in both the NSIs and NCBs that is needed for an adequate
fulfilment of these tasks. The Code of best practice also refers to the procedure for resolving
methodological issues and states that Eurostat must consult the CMFB in cases which are not
adequately covered by the ESA 95, or cases that are particularly complex or of general interest.
Eurostat must, as a general rule, publish its decision together with the CMFB opinion. Clearly, the
CMFB should then form its opinion strictly in the framework of the ESA 95 Regulation and solely on
the basis of its professional expertise in national accounts, in line with a transparent procedure, which
is available on the CMFB website (www.cmfb.org). Obviously, this procedure requires all CMFB
members to contribute a high level of professional expertise in national accounts. Improving the
credibility of fiscal figures and the effectiveness of the monitoring and auditing process is still
needed and can be done without altering the current fiscal framework.
As far as other areas of euro area statistics are concerned, the Action Plan on EMU Statistical
Requirements, which was endorsed by the ECOFIN Council in September 2000, has stimulated
substantial improvements in the timeliness and availability of crucial economic indicators. Major
progress has been made in, for example, main aggregates derived from the quarterly national
accounts, the HICP, quarterly government finance statistics, several short-term business indicators
and foreign trade statistics. By contrast, the situation is not yet fully satisfactory for the quarterly
national accounts for institutional sectors and labour market statistics.
Future priorities for euro area statistics
Looking ahead now at the future orientation of euro area statistics, our short-term priority should be to
help the new Member States to fully catch up with the current euro area countries in terms of the
quality and availability of economic and financial statistics. In this context, I am delighted to announce
that the ECB, together with the Commission, will shortly publish, for the first time, long-term
interest rates for the acceding countries. At the same time, I am aware that any enlargement of the
EU and, subsequently, the euro area creates particular statistical challenges for the ECB, Eurostat and
all of the countries concerned. For example, adequate resources must be available to re-create all
euro area time-series each time one or more countries joins EMU. Among these statistics, the
indicators that will be used to assess the convergence of these Member States towards EMU deserve
particular attention.
Currently, the ECB's Governing Council monitors twice a year the progress of the current pre-ins and
the new Member States in their statistical preparations for EMU. Many countries have made very
significant progress in a very short space of time, but full compliance with all legal requirements
has not yet been reached. Since the compilation of statistics is an activity that is typically
characterised by significant economies of scale, the situation in the smallest Member States,
particularly those with sizeable financial sectors, deserves specific attention.
More generally, possibilities for economies of scale in the compilation of European statistics
should be regularly re-assessed and exploited when appropriate. A good example in this context is the
current creation of a Centralised Securities Database at the ECB, which should become available on
line to the NCBs as well. Similarly, more comprehensive corporate data for conducting balance
sheet analysis are widely considered as a priority in the period ahead, but organising a new data
collection for this purpose at the national level would be very costly and would create high
administrative burdens on businesses. The best way forward appears to be to integrate and expand
the national Central Balance Sheet Offices (CBSO) that already exist within various NCBs and to set
up a more comprehensive European CBSO. A last example of possible economies of scale at the
European level refers to more international concentration of the data collection from
multinationals. Obviously, progress in this area also depends on the interest expressed by the
European multinationals themselves.
Among the other important new statistics that are in the pipeline, I would like to single out the
forthcoming geographical breakdown of counterparties in the euro area balance of payments
and international investment position. The ECB intends to launch these statistics within the next
12 months, and it is hoped that they may give some important new insights into the external economic
relations of the euro area. Also over the next year, the frequency of the statistics on the international
investment position will be increased from annual to quarterly. These statistics provide an overall
picture of the euro area's claims on and liabilities to the rest of the world. In the near future, the
monetary presentation of the balance of payments will also be published monthly instead of
quarterly, while work is already under way to update the trade weights of the ECB's effective exchange
rate statistics. In that way, the analysis of the euro area's competitiveness remains up to date. Finally,
the investment funds statistics will be enhanced by separating the changes in the outstanding
amounts into two: the changes due to transactions on the one hand, and those due to valuation and
other changes on the other.
All these statistics will become available on a much enhanced, easily accessible statistics section of
the ECB's website. Also, a statistical information service has been set up to answer specific queries
from both external and internal users.
The priorities for ECB statistics in the medium term are very well reflected in the themes of this
conference:
1. A full system of euro area quarterly accounts for institutional sectors, integrating both
financial and non-financial accounts, would provide an integrated statistical basis for the
ECB's monetary and economic analysis.
2. More comprehensive statistics for the monitoring and analysis of financial stability,
with explicit links to the statistics for monetary policy purposes, would make it possible to
deliver a more thorough analysis of interactions between these policy goals.
3. Further development of external statistics (e.g. on the international role of the euro or
concerning the details of the international investment position) would enable better
monitoring of the continually increasing, global economic intertwining.
4. Better interplay between business accountants and statisticians would enable
cross-fertilisation of the considerable expertise in these adjacent fields. This has an
enormous potential for decreasing the administrative burden for businesses, while at the
same time improving the quality of statistics.
5. An increasing focus on the various quality dimensions of European statistics as
reflected, for instance, in the ECB's intention to regularly publish quantitative output quality
indicators (on revisions, consistency, etc.) and more comprehensive quality reports on its
statistics.
At the same time, the ECB attaches great importance to improving further the availability, timeliness
and other qualities of the Principal European Economic Indicators and to receiving more elaborate
and consistent euro area statistics for assessing and analysing productivity changes, for service
activities and for housing, including house prices. Moreover, incorporating price developments of
owner-occupied housing in the HICP would be an important achievement. In any case, Member
States may want to consider giving more prominence to national HICPs and less to their specific
national Consumer Price Indices (CPI). By way of a supplementary measure, the analysis of any
inflationary pressures would be served by the regular availability of an HICP-variant that excludes the
direct effects of tax changes and, possibly, other administrative measures.
However, implementing the necessary improvements to European statistics can only be achieved if
sufficient resources are made available. It may therefore also be useful to regularly review the
need for existing statistics that were agreed upon many years ago.
Concluding remarks
To conclude, let me say that I wish to reflect today the importance that the ECB attaches to timely
and reliable euro area statistics as a basis for policy-making. Statistics are like the glasses through
which policy-makers and all other economic agents view macroeconomic reality. If the glasses are
totally reliable, well polished and easy to handle, we may hardly notice that we are wearing them and
we do not realise how vital they are for our clear view of reality. Surely, we only start to complain when
the glasses are out of focus and we want to have a new pair when glass-making technology proceeds.
This conference may be a good opportunity to put our glassmakers into the limelight, for a change,
and to tell them, at the same time, how we would like our glasses to be even better polished in the
future.
In any case, it is clear that producing euro area statistics is all about teamwork: time and time again,
from the preparatory stage to publication. Over the past six years, Eugenio Domingo Solans has ably
steered the statisticians of the European System of Central Banks: both quietly and persistently,
directly and indirectly - but always in the right direction. I am convinced that the ground has now
been laid for further excellent work to complete the provision of euro area statistics in the
future.
Ladies and gentlemen,
I wish you all very fruitful discussions. It gives me great pleasure to declare the conference open.
Thank you very much.