1. Flexible Annual Revisions Overview and Status Robert E. Yuskavage National Economic Accounts Data Users’ Conference April 13, 2007

2. www.bea.gov 2 What are Flexible Annual Revisions?  Approved changes are incorporated into both the national and industry accounts on a flow basis rather than waiting another five years  Major definitional and statistical changes can be incorporated for historical periods  Annual revisions are not necessarily limited to the three most recent estimate years

3. www.bea.gov 3 Motivation for Flexible Annual Revisions  Advantages for BEA  Better planning and spreading workloads  Reduced pressures on staff  More flexibility for introducing changes  Advantages for data users  More timely delivery of revision results  Fewer changes to digest at one time  More up-to-date sets of accounts

4. www.bea.gov 4 Timing of Flexible Annual Revisions  Scheduled to begin after the comprehensive revisions of the NIPAs in 2008 and the Annual Industry Accounts in 2009  New procedures are now being put in place prior to 2008 to smooth the transition to flexible annual revisions  Steering committee  Off-line testing

5. www.bea.gov 5 Examples of Possible Proposals  Potentially implement before 2013  Integrated BEA-BLS production account  Capitalize video and sound recordings  Implement with 2007 benchmark I-O  Capitalize R&D expenditures  Classification of government enterprises by sector

6. www.bea.gov 6 Background on Integration  Industry-National Integration Team (INIT) established in early 2005  Two major objectives  Improve the process for incorporating revisions into both the national and industry accounts  Establish feedback procedures that improve the estimates from both sets of accounts  Early estimates of the gains from feedback between the accounts are promising

7. www.bea.gov 7 Examples of Gains from Feedback  PCE for Shoes  Nominal growth for 1997-2004 would be revised down from 4.2% to 3.0%  Due to change in sales mix by kind of store  PCE for Televisions  Nominal level for 2002 would be increased by $3 billion (about 20 percent)  Also reflects change in sales mix due to strong growth of imports captured in the I-O accounts

8. www.bea.gov 8 Issues for Flexible Annual Revisions  Trade-off between more years subject to revision vs. receiving revisions on a flow basis  Revisions to the reference year for chained- dollars and indexes could trigger revisions to real estimates for long historical periods.  Synchronizing revisions between the annual industry accounts and the NIPAs for long periods.