External trade monthly statistics [Monthly external trade bulletin] 7-8/1987/Commerce exterieur statistiques mensuelles [bulletin mensuel du commerce exterieur] 1987.

Abstract

The evolution of the value of trade over time is affected by changes in prices and exchange rates, and by changes in quantities transacted. Indices are used to disentangle these two effects. Usually an index system is chosen so that the change in the volume index multiplied by that of the price index gives the value change between two periods. There are several good systems of index numbers in common use which have this property. The results from one system will as a rule be slightly different from those of another. For various reasons Member States do not use a common index system, and the degree to which they break down their indices by product group and partner zone also differs. For these reasons, Eurostat has constructed its own external trade indices to obtain Community indices calculated for each country on a strictly comparable basis. In principle there are two ways of obtaining price information. One is by means of direct price surveys of importers and exporters, and the other is to use the value and quantity data collected by customs. At present only the latter is available for all countries. Because of this, Eurostat's price indices are calculated from unit values, customs values divided by customs quantities. Unit value indices have the advantage of being cheap to produce, since they use data collected for other purposes. In addition unit values are available for most items that are traded, and they refer to those that are actually passing through customs thus avoiding problems of fictitious prices and time lags. On the other hand the customs data, especially the quantities, may be subject to error from rounding, estimation, or the unavailability of the most appropriate units. Moreover unit values can be calculated only for the product categories distinguished by customs, and thus mav be the average price of several distinct products. Whenever the composition varies, be it randomly in the short run or systematically in the long run, the result will be that changes in a unit value can occur which are unrelated to genuine price movements, though in the former random variation case, one might hope that the effect of averaging over large numbers of items would reduce the variability considerably. In order to minimize these disadvantages, Eurostat has heeded two guiding principles in calculating unit value indices. The first is to use the most disaggregated data available to it, namely the detailed harmonized Nimexe data for each Member State's trade with each of its individual partner countries. The second principle is to remember that the aim is for a decomposition into price and volume. Individual unit value changes which move in a way that would imply an implausible underlying price movement are not used. Two rules are used to exclude implausible price behaviour. The first is that, relative to the general level of inflation, the price of an item will not differ enormously from its price over the previous full year. Any changes of a factor of 5 or more are treated as suspect. The second more restrictive rule is that price changes from the nearest available month for which there is information will not differ too much from the median price change tor similar items. The application of these rules filters out extreme changes due to non-price factors, which would otherwise distort the unit value index. Items whose unit values are rejected or are missing because of no trade in them have their unit value changes imputed from those of similar items. Eurostat calculates annually-chained Fisher 'Ideal' indices. A Fisher index will normally be lower than a Laspeyres index but above a Paasche one. The 'basket of goods' traded internationally changes rapidly over time, so annual chaining keeps the index weights up-to-date. Each month, the unit value changes for the finely detailed product categories are weighted together to give unit value changes for various broad product categories. These are unit value indices with the previous year as base year ('index links'). They cover goods imported into or exported from free circulation. The corresponding volume index link is derived by dividing the unit value link into the change in value from the monthly average of the previous year for relevant products, whether in free circulation or not. The published monthly indices are calculated by multiplying the above-mentioned links by the annual indices for the previous year with reference year 1980. The annual unit value links are found by weighting together by volume the monthly links, and the annual volume links are derived by dividing the annual value changes, using the latest revision of the data, by the annual unit value links.