A Monthly Indicator of the Euro Area GDP

This technical report illustrates the methodology adopted for the estimation of a monthly indicator of the euro area real gross domestic product. We carry out the disaggregation of the chain-linked quarterly value added from the output side for six branches of the NACE Rev. 1 Level A6 classification and from the expenditure side for the main GDP components. With the sole exception of the agricultural branch, for which we use univariate disaggregation methods, due to the lack of related monthly indicators, we adopt a parametric dynamic factor model formulated at the monthly level, taking the temporal aggregation constraint into account. The multivariate models are cast in the state space form and computational efficiency is achieved by implementing univariate filtering and smoothing procedures. The chained-linked total GDP at basic and market prices results from the contemporaneous aggregation of the disaggregated estimates for the six branches (GDP at basic prices), plus taxes less subsidies (at market prices), via a multistep procedure that exploits the additivity of the volume measures expressed at the prices of the previous year. From the expenditure side we also proceed to the disaggregation of final consumption expenditures, gross capital formation, imports and exports by means of separate dynamic factor models; again, a multistep procedure is used to aggregate the estimates into a GDP measure at market prices. The final estimate of the euro area GDP at market prices is then obtained by combining the two estimates with optimal weights, reflecting their relative precision.