coverage of services in bls price programs presentation to the department of commerce /...
TRANSCRIPT
Coverage of Services in BLS Price Programs
Presentation to the Department of Commerce / International Trade
Administration / Department of Labor sponsored conference:
Measuring and Enhancing Services trade Data and Information
September 14, 2010
Mike HorriganAssociate Commissioner
Office of Prices and Living Conditions1
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Outline of Talk
Why data on services are so important
Data produced by BLS
Expansion of service coverage in PPI
IPP coverage of services
Measurement Challenges: Globalization Health Care reform
Why data on services are so important
U.S. economy increasingly driven by the service sector
1/3rd of U.S. exports
78% of U.S. private sector GDP
82% of U.S. private sector employment
Critically important for calculating real GDP
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Price data on services from BLS
PPI indexes
By detailed industry
By line of service wherever provided
By line of service within industry
Stage of Processing*
All Economy PPI*4
Price data on services from BLS
Import and Export Price indexes
End use classification from BEA
NAICS classification
Harmonized classification system
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PPI Services Historical Perspective
1980 1990 2000 today
Research begins
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PPI Services Through the Years: 1980s
Development of the service sector industry indices began in the mid 1980s
with the publication of several industries in the transportation sector.
Railroad, Line Haul Operations Scheduled Passenger Air Transportation Scheduled Freight Air Transportation Deep Sea Freight Transportation Pipeline Transportation of Crude Oil
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PPI Services Through the Years: 1990s
In the early 1990s research began on more complex industries.
Some examples include:• Information service
- Telephone Communication - Prepackaged Software - Broadcasting
• Professional services - Lawyers - Architects - Accountants - Real Estate Services
• Health care - Hospitals - Physicians
• Administrative services - Employment agencies - Temporary help
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PPI Services Through the Years: 2000s
In 2000 the PPI achieved another milestone with the publication of the first Retail Trade Industry indices, Grocery Stores.
By 2001 the PPI introduced price indices for industries that represented 50% coverage of the in-scope services sectors as measured by 1992 GDP.
FY 2001 the PPI received funding to continue the services sector expansion. Banking Wholesale Trade Information Technology industries
– Internet Service Providers– Web Search Portals
Where are we now?
Over 77.4% of in-scope service industries.
Over 140 6-digit industries.
Over 1000 indexes within service industries representing different lines of service.
Over 350 where-ever provided indexes representing lines of services regardless of the industry providing the service.
Selected high revenue export industries
Covered by PPI 4811 Scheduled air transportation 4812 Non-scheduled air transportation 483111 Deep sea freight transportation 511210 Software publishers 523110 Investment banking and securities
dealing 541610 Management consulting
Not covered by PPI 51211 Motion picture and video production 524130 Reinsurance carriers 5417 Scientific Research and Development
services11
IPP coverage of services
Coverage Export Air Freight and Air Passenger 7% Import Air Freight and Air Passenger 10%
Discontinued series Export travel and tourism 21% Export Post secondary education 3%
Import Crude Oil Tanker Freight 3% Import Ocean Liner Freight 8%
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IPP Coverage
Discontinued planned expansion Export Ocean Port 3% Import Travel and Tourism 22% Import Reinsurance 9%
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Measurement Challenges
Globalization
Health care reform
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Do BLS import/export price indexes overstate U.S. real GDP growth?
Mike Mandel
Measuring price change in the era of globalization
As producers switch from internal or domestic sourced supply to foreign sourced suppliers for inputs, BLS fail to capture the associated price drops.
If we don’t account for these falling prices, then we are overestimating the rate of price inflation for imports, and underestimating the value of real imports.
Real GDP = C + I + G + (X-M)
If we underestimate real M, we are overestimating real ‘domestic’ GDP, and by default the productivity of the U.S. economy.
Measuring price change in the era of globalization
The PPI is an output based price index. We measure the payments received by producers for the production of output or the provision of services. To the extent that falling input prices are
reflected in falling domestic output prices, then we do capture that impact in domestic inflation – both for PPI finished goods and CPIs.
Measuring price change in the era of globalization
In terms of deflators for imports, our import indexes do not reflect price drops as the sourcing of imports switches from domestic to foreign based. When the sourcing of an input switches from
one foreign country to another, however, we do capture this price drop
The prices paid for an input is not part of our current methodological approach.
Measuring price change in the era of globalization
One way to capture these price drops is to develop an input price index.
Such indexes would reflect price drops for inputs regardless of source.
These indexes would provide more direct measures of input inflation for the BEA input-output tables.
Measuring price change in the era of globalization
Challenges still remain: The distinction between manufacturing and
wholesale trade
Classification of goods and services is not seamless between PPI and IPP
Prices at the border do not capture global supply or value chains
Is BLS overstating the rate of inflation in medical care? A
perspective on health care reform
Goal of reducing out of pocket costs. Role of CPIs and PPIs. Pricing medical care services by
provider does not track the treatment of an episode of illness or disease.
Protocol shifts such as replacing ulcer surgery with a pharmaceutical agent are not captured.
The magnitude of this impact is unknown, although preliminary research at BLS suggests it may not be very large.
Is BLS overstating the rate of inflation in medical care? A
perspective on health care reform
The 2007 Census of Establishments for the medical care industry included the collection of revenue by Disease category. Doctor’s office (ICD-9), Hospitals (DRG) and
MRI Centers (ICD-9), and Pharmaceutical agents can be aggregated up to a disease based classification system
BLS / PPI plans to produce disease based price indexes that capture the effect of changing revenue weights across provider classes as disease protocols change
Contact Information
Mike HorriganAssociate Commissioner
Office of Prices and Living Conditionswww.bls.gov/202-691-5735