Presented to OECD Short-Term Economic Statistics Working Party By: Thomas E. Zabelsky

1. The Impact of Classification Changes on Time Series ContinuityThe Case of U.S. Monthly Retail Sales Presented to OECD Short-Term Economic Statistics Working Party By: Thomas E. Zabelsky Chief, Manufacturing and Construction Division thomas.e.zabelsky@census.gov June 26, 2006

2. Importance of Time Series • Historical description of occurrence or phenomena • Analyzing and interpreting economic conditions • Basis for forecasting

3. Time Series Continuity • Requires – • Continuous series of observations • Standard methods and definitions

4. Changing Industrial Classifications • The dilemma - • Keeps pace with evolving industrial and business activities, but • Interrupts continuity of time series data

5. North American Industry Classification System (NAICS) • Clean slate revision to earlier system • First NAICS-based data published from 1997 Economic Census

6. Impact of NAICS on Industry Classifications • 1,170 industries – 15% increase over SIC • Industries • - 350 new • - 390 revised • - 422 substantially unchanged

7. Impact of NAICS on Retail Trade • Old SIC division split into two NAIC sectors • - retail trade • - accommodations and food services • Retail trade • - 15 industries; 10 new • - eating and drinking places accounted for 10% in retail SIC • - retail-wholesale boundary issues

8. Impact of NAICS on Retail Trade Data • Source: 1997 Economic Census

9. Sources of Change on NAICS-BasedRetail Data • Source: 1997 Economic Census

10. Restructuring Retail Time Series Data • Restated 1992 Economic Census sales on a NAICS basis • - assigned NAICS code to each employer establishment with an SIC that directly converted to NAICS (74%) • - Matched employer establishments by ID and SIC to 1997 to obtain NAICS (6%) • - Uncoded establishments of multi-establishment firms based on collective characteristic of all establishments (0.1%) • - Random assignment (20%) • - Exceptions

11. Restructuring Retail Time Series Data (cont.) • Restated monthly SIC-based estimates from January 1992 – March 2001 • Restated annual retail estimates from • 1992 – 1998 • Distributions based on SIC to NAICS links developed in 1997 census • Adjusted the restated monthly NAICS estimates prior to March 2001 to account for new (NAICS) and old (SIC) based differences

12. Computing Benchmarked Estimates • Restated annual estimates benchmarked to 1992 and 1997 Economic Censuses • Minimized differences between the year-to-year changes of the restated annual estimates • 1999 was computed using the published 1998 estimate by the ratio of the 1999 to 1998 estimates derived from the 1999 Annual Retail Trade Survey

13. Computing Benchmarked Estimates (cont.) • Monthly Retail Sales • For January 1992 through March 2001, restated estimates were changed in a manner that • - constrained the sum of the 12 months to equal the benchmarked, restated annual estimate for 1992 through 1999 • - minimized the difference between the month- to-month changes of the restated monthly and benchmarked series • Constant ratio applied to monthly estimates following December 1999