Application to specific flows
Flows of goods and market services
a) flows representing transactions actually carried out on the market at a
certain price;
b) flows representing output for own final use (e.g. own-account production of
agricultural products and services from owner-occupied dwellings);
c) flows whose value is defined as a balance between transactions in goods and
services (e.g. trade margins);
d) flows whose value is defined as a difference between distributive and/or
financial transactions (e.g. financial intermediation services indirectly measured
and insurance services).
10.36 . The flows in category a) are by far the most numerous and commonplace. Changes
in the values of these flows can, by their very nature, be split into volume
and price changes. The general method of deflating the current value of these
flows by price indices is applicable in all cases where goods and services can be
expressed in units, the majority of which are homogeneous from one year to the
next.
10.37 . The flows in category b), which are notional transactions, are typified by the
absence of an actual price for the transaction. This is the case for such
goods as agricultural products for own final use and goods for fixed capital
formation on own-account. For services, the most important type refers to
owner-occupied dwellings. Values for these imputed flows are to be obtained by applying
prices of similar products when marketed and the deflator should therefore be the
same. Since it is usually necessary to value output of own-account
construction by costs of production rather than prices, the deflator has to be adjusted in
this respect.
10.38 . The most important flows in category c) are those whose value at current
prices is obtained as a difference between the values of two flows of goods. This
arises in the case of trade margins, whose value at current prices is defined as
the difference between the actual or imputed price realised on a good purchased
for resale by the wholesale and retail trades and the price that would have to
be paid by the distributor to replace the good at the time it was sold or
otherwise disposed of. By one method, estimates of trade margins at constant prices
can therefore also be made by difference, by subtracting the constant-price
value of goods bought for resale from the constant-price value of goods resold by
these trades. An alternative method of measurement would be to extrapolate the
trade margins of the base year either by the volume of sales or by the volume
of purchases made by the wholesale and retail trades. To be correct, this
alternative has to take into account the fact that trade margins vary amongst
different products and uses. This is explicitly acknowledged in the supply and use
tables.
10.39 . Category c) also includes output of travel agency services measured as the
value of service charges of agencies and (fees and commission charges). These
services can also be measured as the difference between two flows the full payment
made by the purchaser and the expenditure made for transport and accommodation
by the producer. The volume measure can be obtained as the difference between
these flows calculated at constant prices. Alternatively, the fee or commission
can be defined as the price per unit of the type of transportation or
accommodation arranged and the volume indicator for the service charge would therefore
move in the same way as these flows.
10.40 . The flows in category d) consist of financial intermediation services, service
charges from insurance and pension funds are also included. Financial
intermediation services are provided by banks and other financial corporations and
consist of lending money to businesses or households, providing a safe and
convenient means of saving, safeguarding money and other valuables, buying and selling
foreign currencies, clearing cheques, providing general economic intelligence,
dealing in stocks and bonds, and offering investment advice. In some cases
these services are easily defined and specifically paid for, e.g. in the case of
renting space in bank vaults, or when fees are charged in connection with issues
of stocks, bonds or loans. The current value of transactions can then be
defined, as well as prices and quantities necessary for price and volume measurement.
However, a breakdown into price and volume components for financial
intermediation services indirectly measured and for insurance services can usually only
be made on arbitrary grounds and would have to be based on conventions.