Relationship and Consistency between BEAs Industry and National Economic Accounts Jiemin Guo OECD-NBS Workshop Beijing, China September 21-24, 2007

2 Highlights Benchmarking National Accounts to Economic Census Data is fundamental step in preparing BEA estimates BEA has made significant steps toward a more fully integrated set of National and Industry Accounts U.S. statistical system has rich economic data sets on income and expenditures to prepare current-period National Accounts

3 Benchmark I-O Accounts Benchmark I-O accounts prepared in four broad steps Step 1. Estimate output controls Step 2. Estimate inputs and value added Step 3. Estimates final uses and domestic supply Step 4. Balance the make and use tables.

4 Input-Output Make Table (1997, billions of dollars)

5 Input-Output Use Table (1997, billions of dollars) Total Commodity Output = Intermediate Industry Purchases + Final Uses

6 Input-Output Use Table (1997, billions of dollars) Total Industry Output = Intermediate Industry Purchases + Value added Industry Output Commodity Output

7 Estimate Output Commodity and industry output controls form perimeter of table Primarily economic census based BEA augments data Areas not covered by Census Imputations Misreporting Non-filers

8 Estimate Intermediate Inputs and Value Added Intermediates based on input category controls Census data on groups of commodities purchased by each industry (e.g., materials consumed) Variety of additional data from other Federal statistical agencies, trade associations, and other sources Value added estimates Compensation and taxes on production and imports, less subsidies based on economic census data Gross operating surplus is a residual estimate in benchmark (initially); it is reconciled with data on industry- distributions of business income from National Accounts.

9 Estimate Final Uses and Domestic Supply Final uses are estimated using two methods Direct method from economic census data Indirect method: commodity flow method used when direct information is not available; based on ratios of domestic supply Finalize expenditure estimates through reconciliation with National Accounts comparison of National Accounts time series with best-level from benchmark

10 Example of Commodity Flow using Census Data (1997, in millions of dollars) Personal Consumption Expenditure (PCE) = Domestic Supply * Commodity Flow 3548 = 3899 * 0.91

11 Balance the I-O tables Initial estimates do not necessarily lead to a balanced table (i.e., industry and commodity output do not necessarily equal) The make and use tables are balanced by adjusting free cells (i.e., cells that are not based on Census data) Traditionally, the benchmark use table balanced with a bi-proportional scaling procedure The 2002 benchmark table incorporates a generalized least squares approach

12 Benchmarking BEAs National Accounts The balanced benchmark I-O use table is incorporated into the National Income and Product Accounts (NIPAs) Benchmark I-O estimates helps set the levels for Personal Consumption Expenditures (PCE), Private Fixed Investment (PFI), and government consumption expenditures and investment Benchmark I-O provides weights for preparing estimates of changes in private inventories and the type-of-product detail for state and local government consumption expenditures and gross investment

13 Benchmarking BEAs Annual Industry Accounts (AIAs) Estimates from the Benchmark I-O accounts and NIPAs are incorporated into the AIAs Balanced make and use tables form the basis for preparing the annual I-O accounts Annual I-O accounts control to major expenditure components in the NIPAs Industry distributions of Gross Domestic Income are used as initial extrapolators for annual value added NIPA price deflators are used to prepare quantity and price indexes in the GDP-by-industry accounts

14 BEAs Annual Feedback Loop Investigation into differences between final use estimates from the Annual I-O accounts and NIPAs Balanced annual I-O framework provides a cross-check on NIPA annual extrapolations of final uses Objective is to inform NIPAs on the levels of final expenditures during non-benchmark years

15 Relationships Among BEAs National and Industry Accounts. GDP-by-industry accounts Revised 1997 Benchmark I-O accounts NIPAs Annual I-O accounts Distribution of VA based on revised 1997 BM; VA growth based on GDI growth GDP based on Expenditures and income approaches only. Early info from 2002 Econ Census will be incorporated into relationship 7. VA consistent with that of GDP-by-industry. 1a

16 Conclusions Importance of Benchmarking BEAs National and Industry Accounts BEA has taken important steps toward fuller integration; however, we recognize limitations in moving too quickly in this area (e.g., better current-period income and expenditure data v. industry data)

17 Questions or Comments