Shortly after the outbreak of the Covid-19 pandemic, an experimental leading indicator of the short-term economic trend in the non-financial business economy was introduced, which is based on advance turnover tax returns. It provides early information on the development of turnover in the non-financial business economy before official results are available from surveys by economic sector. The data basis of the indicator are advance turnover tax returns, which are submitted to the official statistics agencies under the Act on the Use of Administrative Data.
To improve the informational value of the leading indicator, the underlying method was fundamentally revised in autumn 2024. The main change is that the indicator is now presented in price-adjusted form, which is standard practice for short-term economic statistics. This makes it easier to identify short-term economic developments in the data, especially in times of high inflation. In addition, the "Total non-financial business economy" aggregate has been adjusted to comprise Sections B to N, excluding E and K, of the German Classification of Economic Activities (WZ 2008).
Starting with the release for reference month October 2024, the revised leading indicator will be provided as a seasonally and calendar adjusted turnover index in real terms for the entire non-financial business economy. It will be updated monthly here on the "EXSTAT – Experimental statistics" pages on the website of the Federal Statistical Office.
According to the statutory deadlines, advance turnover tax returns must be submitted to the fiscal authorities no later than ten days after the end of the reference period (month or quarter). Roughly 70% of enterprises required to submit advance turnover tax returns (accounting for more than 80% of turnover) apply for a permanent exception which extends the submission deadline by one month. Therefore only limited data are available for evaluations of the current reference month that are carried out less than 30 days after the end of that month. Generally, data exist for approximately 20 to 25% of the turnover for the current month.
Evaluations based on largely complete datasets are only possible once the data of enterprises with a deadline extension become available in the subsequent months. Mixed models, for example, generally use the advance turnover tax returns of small and medium-sized enterprises that are available after 60 days for short-term economic statistics in trade, construction and services in addition to the primary surveys of large enterprises. To compile the leading indicator, evaluations are made of the advance turnover tax returns of the entire non-financial business economy that are available 30 days after the end of the reference month. Only administrative data are evaluated; data from primary surveys are not incorporated here, also not for past months.
The procedure for compiling the leading indicator according to the revised methodology can be simplified as follows:
- Determination of the unadjusted month-on-month rates of change: At the level of the sections of the German Classification of Economic Activities (WZ 2008), the change rates are determined based on the concept of data pairs. For an enterprise to be considered in the change rate, its data must be available for both the current reporting month and the preceding month.
- Extrapolation for the current month-on-month change rates: As not all the data are available, the turnover data that have been provided are extrapolated by economic sector (here: 2-digit items of the WZ) to determine the current month-on-month change rates. This is an extrapolation that uses auxiliary information and applies an extrapolation factor to adjust the turnover data available for an economic sector to the turnover level of the preceding month for which almost all the data have been provided. If, for example, the enterprises of a sector for which current data are available accounted for 20% of the total turnover of a given section of the WZ in the previous month, the extrapolation factor of this sector will be 5 (inverse of 20%). This approach ensures that, in the result for the respective WZ section, each economic sector is assigned the weight it actually had in the previous month, irrespective of the share of current turnover that is reported by early respondents in that economic sector.
- Index calculation: For each section of the WZ, indices on base 2021 (the year which replaced base year 2015) are calculated from the unadjusted month-on-month change rates. The change rates for the two most recent reference months are based on the data available 30 days after the end of each reference month (t+30), whereas t+90 values with a nearly complete data basis are used for earlier months. The change rates relying on t+60 data, which were used for earlier periods before the leading indicator was revised, distinctly exaggerated the development over the entire period under review.
- Price adjustment: The nominal indices are then adjusted for price changes for each separate section. To determine the individual price series required per section, a wide range of information from official price statistics is used (for example, producer prices of industrial products, producer prices of services, consumer price index etc.). This information is then adjusted by applying appropriate weightings and rebasing to 2021, if necessary. As the price information is not always available on a monthly basis and with the required level of timeliness, estimates and forecasts are made. When all relevant price information is available, the price series and therefore the entire leading indicator can be revised up to five months after the end of the reporting period.
- Calendar and seasonal adjustment: Calendar and seasonal adjustment is required to enable interpretation of the data for the purpose of short-term economic statistics and to ensure their comparability with well-established official short-term indicators of the Federal Statistical Office. It is carried out for each section in consultation with the German Bundesbank using the seasonal adjustment method X13 in JDemetra+.
- Aggregation for leading indicator: The resulting calendar and seasonally adjusted turnover indices in real terms are aggregated to obtain the overall result for the non-financial business economy by means of fixed weights that apply from the respective base year onwards. The weights are derived from results for gross value added from the cost structure surveys in the sections covered.