Lending Services Price Index (LSPI)

Detailed information for fourth quarter 2023

To measure price changes of Existing Lending Services.

Data release - March 18, 2024

• Description
• Data sources and methodology
• Data accuracy

Description

The LSPI measures monthly price changes over time for existing lending services in Canada; the estimates are produced on a quarterly basis. Prices are derived as the difference between annual percentage rates for existing loan products and weighted averages of yields on financial market instruments. The variables used to derive the prices are weighted annual percentage rates for existing lending services, outstanding balances by product, market rates, and the GDI (Gross Domestic Income) deflator. The primary purpose of this measure is to provide supplemental information to help inform the deflation of output in the Canadian System of Macroeconomic Accounts (CSMA) for BS5221A0 Banking and Other Depository Credit Intermediation. The index represents existing lending only, and as such has partial coverage in relation to the overall activity of the industry which includes services provided on deposits as well as other activities.

This index is part of the Services Producer Price Index program (SPPI) at Statistics Canada.

The SPPI program develops and produces price indexes for a number of business service categories. This initiative fills an important data gap in the area of economic statistics and has resulted in a more comprehensive set of service price indexes. These indexes allow Statistics Canada to produce more accurate estimates of real-value added (Gross Domestic Product) and changes in productivity.

Reference period: Month

Collection period: During the month following the reference month, by Bank of Canada.

Subjects

• Prices and price indexes
• Service price indexes

Data sources and methodology

Target population

The target population for the LSPI includes all chartered banks, foreign bank branches, trusts, and loan companies operating in Canada.

Instrument design

This methodology type does not apply to this statistical program.

Sampling

This survey is a census with a cross-sectional design and a longitudinal follow-up.

Sampling unit:

Establishments

Sampling and sub-sampling:

This is a survey with a cross-sectional design and a longitudinal follow-up. Judgmental sampling is used to select a representative sample. Collectively the chosen sample accounts for over 90% of all existing lending activities in the industry.

Data sources

Responding to this survey is mandatory.

Data are extracted from administrative files.

Data collected by Bank of Canada.

Report on new and existing lending (A4), data from Bank of Canada was made available to StatCan based on an MOU.

Monthly Financial Market Statistics published by the Bank of Canada which summarize the interest rates on government debt of various terms.

CSMA's (Canadian System of Macroeconomic Accounts) Quarterly Gross Domestic Product by Income and Expenditure Accounts, which is used to deflate output in the calculation of the LSPI.

The data used to calculate the prices and weights for the LSPI are derived from three sources: the Bank of Canada's Report on New and Existing Lending (A4), Monthly Financial Market Statistics published by the Bank of Canada which summarize the interest rates on government debt of various terms and the CSMA Quarterly Gross Domestic Product by Income and Expenditure Accounts, which is used to deflate output in the calculation of the LSPI.

Error detection

Error detection is conducted at the time of data collection and also during post collection processing, using a set of systematized error detection procedures to identify outliers and possible reporting anomalies. Records that fail these edits are reviewed for editing and correction when necessary or edit failure may trigger a follow-up with the respondent.

Time and effort is devoted to keeping the specifications constant such that only the pure changes in price are tracked. Some information are also collected in order to ensure, as much as possible, that the collected data correspond to the same specifications over time.

Imputation

Missing data are generally estimated by a systematized imputation process. In any given period, price data may not be available for estimation. In such cases, missing data are imputed using the average price movement of remaining units within the same stratum (overall mean or targeted mean imputation method).

Estimation

Prices
In order to calculate prices for each lending product, a reference rate was deducted from each product's lending rate (by bank and maturity). The reference rate was derived from data on Financial Market Statistics used in the preparation of the Bank of Canada Review and available on CANSIM. Certain market instruments were chosen and their yields were aggregated in order to produce the reference rate.

Since the value of money is eroded over time, a deflation factor is applied to the spread. The deflation factor is derived using the implicit price index for Final Domestic Expenditure from the Canadian System of Macroeconomic Accounts' Gross Domestic Product by Income and Expenditure Accounts.

Weights
In order to weight the prices at the microdata level to use for estimation, derived revenues are used. These revenues are derived by multiplying the annual percentage rates by the outstanding balances for each product at each maturity for each establishment. Basket weights are updated during a sample/basket update which typically occurs every year.

To calculate a reference rate for LSPI, a weighted average of the yields to maturity for each of the market instruments collected is used. The weight of each market instrument is the 12-month trailing outstanding balances for the corresponding loan term maturity. Weights used to calculate the reference rate for LSPI are updated with data collected during each collection cycle.

Indexes
Estimates are produced by calculating a weighted average of monthly price changes by product, which are chained together to form an index series. The LSPI is a Laspeyres chain linked index which uses derived revenues as its weighting source, available at the Canada level only.

Linking of indexes
With the introduction of a new basket, historical estimates are linked to the new basket by maintaining the same historical period-to-period changes. This is done by calculating a linking factor for each index series as the ratio of the new index series in the overlap period to the old index series. This linking factor is then applied to the old index series to bring it up or down to the level of the new index series.

For a more detailed explanation of the methodology please refer to the LSPI Methodology Summary Document.

Quality evaluation

An in-depth assessment of quality is conducted prior to the dissemination of estimates. This assessment is based on two key elements of quality (accuracy and coherence); as defined in Statistics Canada's guidelines for the validation of statistical outputs.

The quality of the index depends on price and weight data obtained from administrative data sources. Using Statistics Canada's Quality Assurance Framework to assess the fitness for use of administrative data, continuous monitoring of the data received and ongoing discussion with the data supplier, the analysts ensure that the targeted industry coverage rates are met every cycle. Analysts pay close attention to this metric and react appropriately to ensure that the coverage of the industry is thorough. Particular attention is also given to ensuring that sampled products or services are representative of actual transactions happening in the market place. These two activities, fundamental to the overall quality of the estimates, are done consistently.

Analysts also undertake additional validation activities every cycle to ensure the coherence of survey estimates. These include: analysis of price changes at the company, industry, subsector and sector levels; certification of key contributors to price change; and confrontation of estimates against other related data sources. Contextual analysis of survey results is also performed in light of prevailing economic conditions.

Engagements with relevant stakeholders are also undertaken periodically. Forums involving other Statistics Canada analysts, industry stakeholders and partners at other national statistical agencies provide valuable insights that inform the development and research agenda of the program.

Disclosure control

Statistics Canada is prohibited by law from releasing any information it collects that could identify any person, business, or organization, unless consent has been given by the respondent or as permitted by the Statistics Act. Various confidentiality rules are applied to all data that are released or published to prevent the publication or disclosure of any information deemed confidential. If necessary, data are suppressed to prevent direct or residual disclosure of identifiable data.

In order to prevent any data disclosure, confidentiality analysis is done using the Statistics Canada Generalized Disclosure Control System (G-Confid). G-Confid is used for primary suppression (direct disclosure) as well as for secondary suppression (residual disclosure). Direct disclosure occurs when the value in a tabulation cell is composed of or dominated by few enterprises while residual disclosure occurs when confidential information can be derived indirectly by piecing together information from different sources or data series.

Revisions and seasonal adjustment

Data for the most recent quarter are preliminary. The previous quarter of the series is subject to revision. The series is also subject to an annual revision released with first quarter data of the following reference year. The index is not seasonally adjusted.

Data accuracy

The imputation rate is usually under 2%.