COMMUNICATION FROM THE COMMISSION JOINT HARMONIZED EU PROGRAMME OF BUSINESS AND CONSUMER SURVEYS

1. Introduction

The Ecofin Council's report, an "Economic policy co-ordination", to the Helsinki European Council underlined the point that for effective monitoring and co-ordination of economic policies, an improved understanding of economic developments is of major importance. Moreover, as regards the euro area, there is a need to enhance the visibility of this relatively new economic entity.

The Commission co-ordinates regular harmonised business and consumer surveys in different economic sectors in the EU. In recent years, the service sector has been included in the programme and the surveys have been extended to the applicant countries. The results are used as such or summarised in synthetic indicators (confidence indicators). They are published in a press release at the beginning of the month following the data collection according to a fixed time schedule.

2. The Need for a Joint Harmonised EU Programme

Business and consumer surveys are qualitative economic surveys, intended for short-term economic analysis. While conventional econometric models of the economy perform reasonably well when the economy is on a stable growth trend, their performance is not so good for signalling changes of direction in the economy. There is an increasing interest in the use of economic surveys for predicting turning points in the economic cycle. Therefore, business and consumer surveys are a necessary complement of quantitative statistical surveys, from which they differ in methods and use. The frequency, rapidity and continuous harmonisation of the surveys in the framework of the Joint Harmonised EU Programme of Business and Consumer Surveys are some of their main qualities.

The harmonised business and consumer surveys in the European Union were initialised in 1961 by the Commission. The first survey was the harmonised business survey in industry conducted in 1962. Since then, both the scope and the sectors covered by the surveys have expanded considerably.

The national institutes work with harmonised questionnaires elaborated in co-operation between the national experts and the Commission. Harmonisation is essential to allow the comparison of business cycles in the different Member States, and to make possible the calculation of a meaningful business cycle index for the euro area and for the EU as a whole, in order to inform the EU authorities, the Member States and the various economic agents of the present economic situation.

Today, business and consumer surveys following the EU harmonised scheme are carried out in more than 40 countries world-wide, including the applicant countries of Central and Eastern Europe. Integration of their surveys in the EU programme will be in line with their integration into the Union.

3. Implementation of the Programme

The surveys are addressed to managers in the following sectors:

*industry,

*construction,

*retail trade,

*services,

*as well as to consumers.

All surveys are monthly surveys, except for the investment survey, which is conducted twice a year. The data is collected by the national institutes in the first half of the month and the results are published by the Commission at the beginning of the next month. Some 50 000 firms and 20 000 consumers are surveyed each month in the Community; the samples vary according to the size of the Member Countries. The industry survey covers 56 sectors whereas the other surveys include 5 to 9 different sectors. 4 to 6 monthly questions are addressed to the managers in each sector. The consumers are split in 25 socio-economic categories and asked for their opinion on 12 different topics.

A quarterly world-wide survey addressed to economic experts, the Economic Survey International, is also included in the programme.

In addition, 'ad hoc' surveys are conducted on issues of particular interest. As an example, 'ad hoc' surveys concerning the labour market have been carried out in 1985, 1989, 1994 and 1999. The results of the most recent survey will be published by the end of this year with special focus on labour flexibility and the impact of new technologies on the performance of the EU labour market.

Meetings of business survey experts take place twice a year in order to evaluate the results of the surveys. All questionnaires are constantly updated to meet the requirements of the economic analysts.

Due to the rising importance of services in the European economy, the coverage of the programme has recently been extended to the service sector.

The integration of the applicant countries into the programme is necessary in order to provide reliable and comparable data to follow their economic evolution at present, and for the elaboration of an aggregate of the EU when these countries are granted accession. A joint project between the OECD and the Commission was started in 1991 aiming at the implementation of the harmonised EU programme of consumer and business surveys. The results are now regularly published in European Economy, Supplement B.

4. Source of Information

The fact that the business and consumer survey results are available rapidly and that they contain information about economic agents' expectations makes them valuable for forecasting purposes. The Commission has been using an econometric model, the BUSY model, based on the survey results since 1982. In 1996 a new model, BUSY II, incorporating recent developments in modelling techniques, was constructed to forecast GDP and its main components.

The results of the surveys are intensively used by the Directorate General for Economic and Financial Affairs as an indispensable tool of economic surveillance inside and outside the EU.

In addition, these surveys have become a fundamental source of information for monitoring the evolution of the European Monetary Union. The European Central Bank uses these results as significant input for the implementation of monetary policy in the Euro area.

The results of the programme are published each month in "First Results" by means of a press release and a mailing (electronic mail and fax) to a selected group of news agencies and clients. Later in the month "European Economy, Supplement B" is published with a more complete set of data, graphs and comments. Both publications are also available as on-line versions on the homepage of the Directorate General for Economic and Financial Affairs:

http://europa.eu.int/comm/economy_finance/document/eesuppb/firstresults.htm

http://europa.eu.int/comm/economy_finance/document/eesuppb/eebidxen.htm

5. Indicators

The presentation of survey results needs to be easily accessible, preferably by means of a single measure, a confidence indicator. For the economic sentiment indicator and other sector indicators to be useful, they must possess a series of properties such as consistency, timeliness, comparability, etc.

The tracking quality of the indicators is proven by the very high values obtained for the correlation between consumer confidence and the growth in private consumption, between construction confidence and the growth in construction investment, and between industrial confidence and the growth in industrial production.

Given the new set of data available at present, the indicators have to be evaluated and improved in order to enhance their usefulness. Therefore the Commission has placed a contract for a study to evaluate the existing indicators and to develop an alternative Economic Sentiment Indicator and leading indicators, including those for the retail trade sector and the service sector. Various research projects are being undertaken to develop new sector indicators or improve the existing ones in order to better follow the economic evolution.

6. Conclusion

The results of the harmonised business and consumer surveys in the EU are useful for all those concerned with economic trends: government departments, management, researchers, and all decision-makers. They have become an indispensable tool of economic surveillance in the EU, and for monitoring the evolution of the European Monetary Union as well as the development of the applicant countries' economies.

Annex I: Indicators of Economic Sentiment

Graph: Indicators of economic sentiment -European Union (s.a.)

- EU -- EUR-11

Economic sentiment indicator EU: Sep. 103.2

1995 =100 EUR-11: Sep. 103.2

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Industrial confidence indicator EU: Sep. 4

Balances % EUR-11: Sep. 6

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Construction confidence indicator EU: Sep. -1

Balances % EUR-11: Sep. -1

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Consumer confidence indicator EU: Sep. -3

Balances % EUR-11: Sep. -3

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Retail trade confidence indicator EU: Sep. -1

Balances % EUR-11: Sep. -1

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85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00

ANNEX II: List of Institutes Participating in the Programme

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