1. 13th OECD-NBS Workshop on National Accounts
Measuring U.S. GDP within the Input-Output Framework Comments on “Interrelationship Between China’s Input-Output Estimation: Production-based GDP and Expenditure-based GDP”
Brian C. Moyer
13th OECD-NBS Workshop on National Accounts
Haikou, China
November 30 – December 4, 2009

2. U.S. Industry Accounts Benchmark I-O Accounts Annual I-O Accounts
Prepared every five years
400 industries/commodities
Annual I-O Accounts
12 months after close of year
65 industries/commodities
GDP by Industry Statistics
4 months after close of year
22 industry groups

3. Three ways to measure GDP
Expenditure Approach
GDP = C + I + G + (X-M)
Income Approach
GDP = Compensation + Gross operating surplus + Taxes on production
Production Approach
GDP = Gross output - Intermediate inputs

4. Data from various sources …
Census Bureau annual survey data
Monthly/quarterly Census survey data
Data from the tax authority
Labor Dept. employment and wage data
Administrative data
Trade association data
Data from other government agencies

5. Balanced I-O framework: Use table
-second table in the input-output accounts shows which inputs an industry “uses” in its production process
-arranged just a little differently, with the industries across the top and the products down the left side, correspond to the industry and product output values in the make table
-So, the make table shows what industries are making, and one purpose of the use table is to show what happens to that output.
Here in the center we have the intermediate use section of the use table. This section shows that much of the output that industries produce is consumed by other industries. And by looking at an actual use table we could see how much of each product the different industries were buying from each other.
This section to the right, the final use section, captures the portion of output consumed by final users. This includes purchases by consumers (you and me), investment purchases by businesses. Some output is not purchased at all in a given year, but is stored as inventory until a later period. That is captured here. Some output is shipped over seas, and we also see here the portion of output purchased by the government.
Now I’ll just point out here that the sum of the cells in the final use section equals total GDP for the economy. This section should look pretty familiar to most of us. These columns capture the basic economic accounting identity that many of us learned in our undergraduate macroeconomics course—Y (or GDP) = C + I + G + NX. This is the expenditure-based approach that is used in preparing the NIPA measure of GDP.
Now, moving back to the other side of the table. Recall that the blue section shows how industries depend on each other to produce their output. This section shows the intermediate inputs to an industry’s production process. These intermediate inputs are also sometimes referred to as secondary inputs, implying that there must be some primary inputs as well.
The primary inputs to the production process are labor and capital. And this section down at the bottom, the value added section, shows the amount of labor and capital that each industry requires to make its products. I’d like to note here that the cells in the value added section also sum up to GDP.
Recall that there are three ways to calculate GDP, one is to some up expenditures as in the final use section, one is to some up incomes as in the value added section, and the last is the production approach—or to take total output less total intermediate inputs. All three of these measures are visible in the use table, and so the use table provides an important framework for understanding differences between the different approaches to measuring GDP.

6. Results show small differences
[Percent changes and percentage-point contributions]
2004
2005
2006
2007
Gross domestic product
3.6
2.9
2.8
2.0
Construction
0.0
-0.2
-0.6
Manufacturing
0.7
0.1
0.3
Other goods-producing industries
Trade
0.8
0.4
Transportation
Finance
0.6
0.9
Health care
0.2
Other services-producing industries
1.3
1.0
Government
Addenda:
Not allocated by industry
0.16
-0.24
-0.01
0.06

7. Building the annual accounts
Output by industry and commodity
Intermediate purchases and final uses
Value added by industry
Balancing
Quantity and price measures

8. Industry and commodity output
Industry output: most recent benchmark I-O estimates extrapolated with appropriate indicators; consistent with expenditure-based GDP indicators
Commodity output: composition of industry output retained from benchmark I-O, except in manufacturing

9. Intermediate and final uses
Initial input estimates prepared in two broad steps
Base-year inputs extrapolated with quantity change in output by industry
Inputs “reflated” with appropriate input prices
Initial final use estimates prepared using commodity-flow method; controlled to expenditure-based GDP categories

10. Value added by industry
Initial estimates based on gross domestic income by industry
Compensation and Taxes on production obtained from income-based GDP measures
Gross operating surplus extrapolated from “combined” benchmark-year values; company-to-establishment adjustments applied

11. Balancing Based on RAS procedure—scaling of transactions
Outputi = Inputsi + Value addedi
Total commodity output = Total industry output
Total final uses = total value added = GDP
Primarily adjustments to inputs; controls for value added by industry (Gross operating surplus) relaxed, as necessary

12. Quantity and price measures
Outputs and inputs deflated separately
Primarily BLS Producer Price Indexes
Consistency with expenditure-based GDP
Value added quantity and price measures computed using Fisher-Ideal, double-deflation procedure
“Not allocated by industry” reflects differences with expenditure-based GDP

13. Further improvements to consistency
“Feedback” between production and expenditure approaches
Time-series consistency of benchmark I-O accounts
Quarterly GDP by industry

14. Improving consistency

15. Feedback Focused on consumer spending
Annual I-O accounts: commodity flow method
Expenditure-based GDP: Retail control method based on retail sales data
Requires evaluating data quality and timing of alternative methods

16. Example: PCE for shoes