Relationship and Consistency between BEA’s

Industry and National Economic Accounts

Jiemin GuoOECD-NBS Workshop

Beijing, ChinaSeptember 21-24, 2007

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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

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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.

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

Mining ConstructionManufacturing

ProductsTrade

Transportation and Utilities

Services Other

Mining443 10 1 1 455

Construction1 670 671

Manufacturing1 1 3,703 39 36 4 3,784

Trade2 15 1,411 5 139 1,572

Transportation and Utilities 20 1 785 2 1 809

Services55 1 30 6,324 2 6,412

Other 6 1 4 75 24 1,050 1,160

445 754 3,730 1,486 865 6,526 1,057 14,863

COMMODITIES

TOTAL COMMODITY OUTPUT

INDUSTRIES

TOTAL INDUSTRY OUTPUT

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Input-Output Use Table (1997, billions of dollars)

Total Commodity Output = Intermediate Industry Purchases

+ Final Uses

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Input-Output Use Table (1997, billions

of dollars)

Total Industry Output = Intermediate Industry Purchases

+ Value added

Industry Output Commodity Output

Natural Resource

and Mining

Construc- tion

Manufac- turing

Transpor- tation and

Utilities Trade Services Other

Total Interme-

diate Uses

Personal Consump-

tion Expendi- tures

Gross Private Fixed

Invest- ment

Change in Business Inventory Exports Imports

Govern- ment GDP

Natural Resource

and Mining 96 6 270 60 9 57 12 510 36 23 4 32 -87 -1 445

Construc- tion 1 1 7 6 6 43 8 72 506 176 682 754

Manufac- tured Products 69 179 1,363 72 97 397 24 2,201 987 555 38 516 -765 199 1,529 3,729

Transpor- tation and Utilities 19 17 164 99 9 161 13 482 273 10 1 61 -13 51 383 865

Trade 14 59 216 19 37 82 4 431 840 107 5 62 20 21 1,055 1,486

Services 78 107 487 140 436 1,472 23 2,743 3,409 169 2 129 -260 84 3,783 6,527

Other 1 24 2 11 38 2 78 -18 -51 12 99 -6 943 979 1,057

Total Inter-mediate Inputs 277 370 2,531 398 605 2,250 86 6,517 5,572 1,320 62 899 -990 1,483 8,346 14,683

Employee Compen- sation 55 255 722 206 546 1,986 886 4,656

Indirect Business Tax 17 6 45 42 232 303 1 646

Other Value Added 106 40 487 162 190 1,871 187 3,043

Total Value Added 178 301 1,254 410 968 4,161 1,073 8,345

455 670 3,784 808 1,573 6,415 1,158 14,683

INDUSTRIES

TOTAL INDUSTRY OUTPUT

COMMODITIES

TOTAL COM-

MODITY OUTPUT

VALUE ADDED

FINAL USES (GDP)

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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

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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.

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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

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Example of Commodity Flow using Census Data (1997, in millions of dollars)

Personal Consumption Expenditure (PCE) = Domestic Supply * Commodity Flow

3548 = 3899 * 0.91

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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

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Benchmarking BEA’s 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

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Benchmarking BEA’s 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

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BEA’s 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

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Relationships Among BEA’s 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

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

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Conclusions

Importance of Benchmarking BEA’s 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)

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Questions or Comments

Jiemin.Guo@bea.gov

Erich.Strassner@bea.gov

George.Smith@bea.gov

Mary.Streitwieser@bea.gov