Measuring the Volume of Services Industries Output: An Audit of Services Producer Price Indices

This paper discusses measurement of Services Producer Price Indices, which are important in estimating the volume of the output of services sectors. Price Indexes for 31 individual services activities were downloaded from the websites of National Statistical Institutes for 15 OECD countries and compared to those for the UK. The results show that UK services prices tend on average to have either lower or equal price growth than in other countries, suggesting that an underestimate of services output growth is not likely to be an explanation of why productivity growth slowed more in the UK than in other countries after the financial crisis. Nevertheless, there may be common biases across countries due to inadequate adjustments for quality. Further analysis of measurement methods suggests a small but significant positive bias in price inflation for one commonly employed method based on time spent on the provision of services. This means that the growth in the volume of services activity may be understated in general in the group of countries considered in this report.