pennState UNIVERSITY LIBRARIES THE PENNSYLVANIA STATE UNIVERSITY LIBRARIES GNP* An Overview of Source Data and Estimating Methods e, Cross National Product in Current and Constant Dollars x 8 ^ iv ^ Fixed investment Jf , '*»> &jf Nonresidential JT 4v//< Structures ... r o^,» ^.v^-v. ,p Producers' durable equipment ° rfjPJP ■■■■' ■■' Residenl ' •*x^V$ ■>"*•#"' ' Nonfa ^f^l^^e Producers' d . „i,i ,,,„,,. «*-«•<; rfi . 6* «.v- c - Change in business inventories «*5> Nonfn . fP . Net exports of goods Bn> ^°<*V Exports Imports Government purchases of good Federal Nntionnl defense Nondefense State nnd locnl METHODOLOGY PAPERS^ US. National Income and Product Accounts U.S. DEPARTMENT OF COMMERCE '•*£,* ^ / Bureau of Economic Analysis September 1987 BEA-MP-4 Digitized by the Internet Archive in 2012 with funding from LYRASIS Members and Sloan Foundation http://archive.org/details/gnpoverviewofsouOOcars GNP: An Overview of Source Data and Estimating Methods METHODOLOGY PAPERS^ U.S. National Income and Product Accounts September 1987 U.S. DEPARTMENT OF COMMERCE Clarence J. Brown, Acting Secretary Robert Ortner Under Secretary for Economic Affairs BUREAU OF ECONOMIC ANALYSIS Allen H. Young, Director Carol S. Carson, Deputy Director For raIp by the Superintendent of Document*, U.S. Oovernment Printing Office, Washington. D.C. 20102 Acknowledgments This paper was prepared by Carol S. Carson. Robert P. Parker coordinated the assembly of information about source data and estimating methods, Tracy R. Tapscott provided research assistance, and Teresa A. Williams provided secretarial assistance. The papers in this series on the methodology of the national income and product ac- counts were designed and planned by Helen Stone Tice with the assistance of Dannelet A. Teske. Allan H. Young, Robert P. Parker, and Carol S. Carson provided direction and guidance. Comments about the paper are invited. Comments, as well as questions about the material in the paper, should be directed to: Associate Director for National Economic Accounts, Bureau of Economic Analysis, U.S. Department of Commerce, Washington, DC 20230. Suggested Citation . U.S. Department of Commerce. Bureau of Economic Analysis. GNP: An Overview of Source Data and Estimating Methods. Methodology Paper Series MP-4. Washington, DC: U.S. Government Printing Office, September 1987. I u Contents Page Introduction 1 Measures of production 3 Components 4 Part I. Source Data and Estimating Methods 5 Current-dollar estimates 5 Preview of source data and the estimating cycle 5 Notes to the sources and methods table 7 Illustrative methods 16 Observations 18 Constant-dollar estimates and associated price indexes 19 The implicit price deflator and price indexes 20 Part II. A Directory to Information about GNP 23 »? Joseph IV. England Libraiy I Jiladelphia College of Pharmacy a $ 42nd & Woodland Avenue Philadelphia, Pa 19104 Tables Page 1. National Income and Product Account, 1986 1 2. Principal Source Data and Estimating Methods Used in Preparing Current-Dollar Estimates of GNP 8 3. Principal Source Data and Estimating Methods Used in Preparing Constant-Dollar Estimates of GNP 21 4. Directory to Information about GNP 24 Introduction VjrNP is the most widely used measure of the Nation's production. It is used to track the cyclical ups and downs of the economy and to monitor economic growth. In conjunction with measures of labor and capital in- put, it provides indicators of the Nation's productivity. Thus, GNP is a primary focus in the analysis of the cur- rent economic situation, in macroeconomic forecasting, and in policy formulation. The usefulness of GNP stems in part from its be- ing the keystone of a set of measures that provide an- swers to two questions: First, what is the output of the economy — its size, its composition, and its use? Sec- ond, what is the economic process or mechanism by which output is produced and distributed? These mea- sures are in the framework of a set of accounts — the national income and product accounts (NIPA's) — that show production, distribution, consumption, and sav- ing. The summary NIPA system is shown on pages 16 and 17 of the July 1987 issue of the SURVEY OF Current Business. The first account in the summary system, the na- tional income and product account, shows GNP mea- sured in two ways (table 1). On the right side, GNP is measured as the sum of goods and services sold to final users. On the left side, GNP is measured as the sum of income payments and other costs. The right side, which corresponds to table 1.1 of the set of NIPA tables, shows personal consumption expenditures for goods and services and the other "product" compo- nents. The left side shows the compensation of em- ployees and the other "income" components; most of these entries appear as components of national income in NIPA table 1.14; the remainder appear in table 1.9, which shows the relation among major NIPA income and product aggregates. As explained in "An Introduction to National Eco- nomic Accounting," the national income and prod- uct account is what is referred to as a "production account." [18] ! Specifically, it is the production account for the Nation. Although most of the Nation's pro- duction takes place in the business sector, produc- tion also takes place in the other three sectors of the economy — households, government, and foreign. Thus, this account can be viewed as the consolidation 'Bracketed numbers refer to items in the second part of thi article. ml Incomr nnd Product Account, 1986 IRillionsn I '""• Line 27 h 30 34 35 36 II 42 44 Humble goods Nondurable goods Services Fixed investment "" Structures Producers' durable equipment Residential Change in business inventories Net exports of goods and services 2 3 Wages and salaries' Disbursements 2.IWI 1 2.0X9 1 II 415 8 2\tl 20] 1 289 X in 7 2X1 t '402 4 4 5 6 7 g 9 in U Employer cnnt nhut ions for social insuranr Other labor income Proprietors' income with inventory vnluation nnd r adjustments Rental income of persons with cnpital consumption Corporate profits with inventory valuation ant) cap Profits before tax apitnl consumption adjustment 1.458.0 671 ... 6552 4369 1374 299 5 2183 15.7 -105.5 376.2 ProRts fa* liability Co e 13 Profits after Usx 14 Dividends Federal ' National defense Nondefense State and local CROSS NATIONAL PRODUCT 15 16 18 Undistributed profits inn Net interest tr,ii 884 503 5 19 Nntinnnl Income 20 Business transfer payments 21 Indirect business In* and nontax liability /.ess Subsidies less current surplus of government 'nlorprises 23 24 25 Capital consumption allowances with capital consu Charges srninst frnss national product nption adjustment 156 7 t. 2.19.9 1 H 1.235.0 2fi CROSS NATIONAL PRODUCT 1.235.0 GNP Overview^ September 198\ of the production accounts for all economic trans- actors, based either on actual production accounts or those that can be assumed to exist. The na- tional income and product account also serves as the appropriation account for the business sector; that is, it records the business sector's current in- come, current outlays, and saving. The other ac- counts in the summary system are appropriation ac- counts for the three other sectors and a consolidated saving-investment account for the domestic sectors. The first, part of this article summarizes the sourct data and estimating methods used to prepare thi current- and constant-dollar estimates of GNP. This overview of GNP complements the more detailed in- formation that is becoming available in other paper! in this series on the conceptual framework of the NIPA's and the methodology used in preparing the estimates. The second part provides a directory oi the information about GNP that has appeared in re- cent years in the SURVEY and other BEA publications. ■>'.^"V<^-t<^V.^->*^ Income-side components Compensation of employees (line 1): The income accruing to employees as remuneration for their work. It is the sum of wages and salaries and of supplements to wages and salaries. Wages and salaries (line 2): The monetary remuneration of employees, including the compensation of corporate officers; commissions, tips, and bonuses; and receipts in kind that rep- resent income to the recipients. It consists of disbursements (line 3) and wage accruals less disbursements (line 4). In disbursements, retroactive wages are counted when paid rather than when accrued. Supplements to wages and salaries (line 5): Employer contributions for social insurance and other labor income. Em- ployer contributions for social Insurance (line 6) includes employer payments under the following programs: Federal old- age, survivors, disability, and hospital insurance; State and Fed- eral unemployment insurance; railroad retirement and unemploy- ment insurance; government employee unemployment insurance and retirement; military medical insurance; and publicly admin- istered workers' compensation. Other labor Income (line 7) consists primarily of employer contributions to private pension and private welfare funds, including privately administered work- ers' compensation funds. Proprietors' income with Inventory valuation and cap- ital consumption adjustments (line 8): The income, includ- ing income in kind, of sole proprietorships and partnerships and of tax-exempt cooperatives. The imputed net rental income of owner-occupants of farm dwellings is included. Dividends and monetary interest received by proprietors of nonnnancial business and rental incomes received by persons not primarily engaged in the real estate business are excluded; these incomes are included in dividends, net interest, and rental income of persons. The inventory valuation adjustment is described following corporate profits with inventory valuation and capital consumption adjust- ments, and the capital consumption adjustment is described fol- lowing capital consumption allowances with capital consumption adjustment. Rental Income of persons with capita] consumption adjustment (line 9): The income of persons from the rental of real property, except the income of persons primarily engaged in the real estate business; the imputed net rental income of owner-occupants of nonfarm dwellings; and the royalties received by persons from patents, copyrights, and rights to natural re- sources. The capital consumption adjustment is described fol- lowing capital consumption allowances with capital consumption adjustment. Corporate profits with Inventory valuation and capital consumption adjustments (line 10): The income of organiza- tions treated as corporations in the NITA's. These organizations consist of all entities required to file Federal corporate tax re turns, including mutual financial institutions and cooperative subject to Federal income tax; private noninsured pension funds nonprofit organizations that primarily serve business; Federal R* serve banks; and federally sponsored credit agencies. The incorai is that arising in current production. With several difference! this income is measured as receipts less deductions as defined in Federal tax law. Among these differences are: Receipts ex elude capital gains and dividends received, deductions excludi depletion and capital losses, inventory withdrawals are valued at current replacement cost, and depreciation is on a consistent ac- counting basis and valued at current replacement cost. Becaus* national income is defined as the income of U.S. residents, iti profits component includes income earned abroad by U.S. corpo- rations and excludes income earned in the United States by for- eigners. The inventory valuation adjustment is described below, and the capital consumption adjustment is described following capital consumption allowances with capital consumption adjust- ment. Profits before tax (line 11): The income of organization! treated as corporations in the NIPA's, as described above, except that it reflects the inventory and depreciation accounting prac- tices used for Federal income tax returns. It consists of profits tax liability, dividends, and undistributed corporate profits. This measure is sometimes referred to as "book profits." Profits tax liability (line 12): The sum of Federal, State, and local income taxes on all corporate earnings; these earnings include capital gains and other income excluded from profits be- fore tax. The taxes are measured on an accrual basis, net of refunds and applicable tax credits. Profits after tax (line 13): Profits before tax less profits tax liability. It consists of dividends and undistributed corporate profits. Dividends (line 14) is payments in cash or other assets, excluding the corporation's own stock, made by corporations lo- cated in the United States and abroad to stockholders who are U.S. residents. The payments are measured net of dividends re- ceived by U.S. corporations. Dividends paid to State and local government social insurance funds and general government are included. Undistributed profits (line 15) is corporate profits after tax less dividends. Inventory valuation adjustment (line 16): For corpora- tions, the difference between the cost of inventory withdrawals as valued in determining profits before tax and the cost of with- drawals valued at current replacement cost. A similar adjustment is applied to nonfarm proprietors' income. Net interest (line 18): Interest paid by business less interest received by business, plus interest received from foreigners less interest paid to foreigners. Interest pay- ments on mortgage and home improvement loans are counted as interest paid by business, because homeowners are GNP Overview . .September 1987 GNP and the other entries in the national income and product account are defined next. Measures of production.— As indicated, the total on both sides of the national income and product ac- count is GNP. Gross national product, to use the words that underlie the familiar acronym, is defined as the market value of the goods and services pro- duced by labor and property supplied by residents of the United States. The product side of the account shows that GNP is the sum of purchases of goods and services by persons and government, gross private domestic investment (including the change in business inventories), and net exports (exports less imports). This sum is the market value of final sales and busi- ness inventory change. To avoid double counting, the summing does not include business purchases of goods and services on current account — for example, business purchases of paper to make books; their value is re- flected in the value of final sales and business inven- tory change. The investment component of GNP is treated as businesses in the NIFA's. In addition to monetary interest, net interest includes imputed interest. The imputed in- terest payments by financial institutions other than life insurance carriers and private noninsured pension plans to persons, gov- ernments, and foreigners have imputed service charges as coun- terentries in GNP; they are included in personal consumption expenditures, in government purchases, and in exports, respec- tively. Business transfer payments (line 20): Payments by busi- ness to persons for which they do not perform current ser- vices. These payments include liability payments for personal injury, corporate gifts to nonprofit institutions, and consumer bad debts — i.e., defaults by consumers on debts owed to business. Indirect business tax and nontax liability (line 21): Tax liabilities (except employer contributions for social insur- ance) that are chargeable to business expense in the calculation of profit-type incomes and certain other business liabilities to government agencies (except government enterprises) treated as taxes. Indirect business taxes include sales, excise, and property taxes, and the windfall profit tax on crude oil production. Taxes on corporate incomes are excluded; these taxes cannot be calcu- lated until profits are known, and in that sense are not a business expense. Nontaxes include regulatory and inspection fees, special assessments, fines and penalties, rents and royalties, and dona- tions. Nontaxes exclude business purchases from government of goods and services that are similar to business purchases of in- termediate products from other businesses. Government receipts from the sale of such products are netted against government purchases so that they do not appear in GNP. Subsidies less current surplus of government enter- prises (line 22). Subsidies are the monetary grants paid by government to business, including government enterprises at an- other level of government. The current surplus of govern- ment enterprises is their sales receipts and subsidies received from other levels of government less their current expenses. In the calculation of their current surplus, no deduction is made for depreciation charges and net interest paid. Subsidies and current surplus are combined because deficits incurred by government en- terprises may result from selling goods to businesses at lower than market prices in lieu of giving them subsidies. For the same rea- son, the current surplus of government enterprises is not counted as a profit-type income and, accordingly, not as a factor charge. Capita] consumption allowances wltb capital con- sumption adjustment (line 24): Capital consumption based on the use of uniform service lives, straight-line depreciation, and replacement cost. For nonprofit institutions serving in- dividuals, it is the value of the current services of the fixed capital assets owned and used by these institutions; it is in- cluded in personal consumption expenditures. Capital con- sumption allowances consists of depreciation charges and accidental damage to fixed capital. For nonfarm business and corporate farms, depreciation is as reported on Federal income tax returns. For noncorporate farms, nonprofit institutions serv- ing individuals, tax-exempt cooperatives, and owner-occupied houses, depreciation is calculated by BEA based on their expendi- tures for fixed capital, uniform service lives, straight line depreci- ation, and historical cost. Capital consumption adjustment (line 17) for corporations is the difference between tax-return- based capital consumption allowances and capital consumption based on the use of uniform service lives, straight line deprecia- tion, and replacement cost. Similar adjustments are calculated for proprietors' income, rental income of persons, and nonprofit institutions serving individuals. Statistical discrepancy (line 26): GNP less charges against GNP. It arises because GNP and charges against GNP are esti- mated independently. Product-side components Personal consumption expenditures (line 27): Goods and services purchased by individuals, operating expenses of nonprofit institutions serving individuals, and the value of food, fuel, cloth- ing, housing, and financial services received in kind by individ- uals. Net purchases of used goods are also included. Purchases of residential structures by individuals and nonprofit institutions serving individuals are classified as gross private domestic invest- ment. Gross private domestic Investment (line 31): Fixed capi- tal goods -structures and equipment — purchased by private busi- ness and nonprofit institutions, and the value of the change in the physical volume of inventories held by private business. The for- mer include private purchases of new residential structures pur- chased for tenant or owner occupancy. Net purchases of used goods are also included. Net exports of goods and services (line 38): Exports less imports of goods and services. Exports (line 39) is goods and services provided by U.S. residents to foreigners. Imports (line 40) is goods and services provided by foreigners to U.S. residents. For both exports and imports, services include services of labor and capital, for which factor incomes are paid. Imports are de- ducted because, although they are included in the expenditure and inventory change components of GNP, they are not part of national production. Government purchases of goods and services (line 41): Compensation of government employees and purchases from busi- ness and from foreigners. Transfer payments, interest paid by government, and subsidies are excluded. Gross investment by government enterprises is included, but their current outlays are not. Net purchases of used goods are included; sales and pur- chases of land and financial assets are excluded. GNP Overview. September 198', measured before deduction of charges for consumption of fixed capital. The income side shows charges against GNP (line 25), the costs incurred and the profits earned in the production of GNP. This sum equals GNP, except for the statistical discrepancy. The factor charges compensation of employees, proprietors' income, rental income of persons, corporate profits, and net interest — represent the incomes of the factors of production (la- bor and property). These factor incomes are measured before deduction of taxes on those incomes and after de- duction of depreciation and other allowances for capital consumed in production. The total of these incomes is a measure of production called national income. Three nonfactor charges business transfer payments, indi- rect business taxes, and the current surplus of govern- ment enterprises — are added to national income and one — subsidies — is subtracted to yield charges against net national product, yet another measure of produc- tion. Charges for the consumption of fixed capital are added to charges against net national product to yield charges against GNP. The four measures of production that have been men- tioned so far differ from each other because of dis- tinctions that are made between measures at factor cost and at market value (that is, including nonfac- tor charges as well as factor costs) and between mea- sures that are gross and net of capital consumption. GNP and charges against GNP are gross market value measures. National income (line 19), the income that originates in the production of the goods and services attributable to labor and property supplied by residents of the United States, is a net factor cost measure (line 19). Charges against net national product (line 23), the income that originates in, plus the nonfactor charges incurred in, the production of the goods and services attributable to labor and property supplied by residents of the United States, is a net market value measure. One further basic distinction can be made in defin- ing the measures of production. This distinction is be- tween national measures and domestic measures. As indicated by its name, the national income and prod- uct account presents measures on a national basis. Na- tional measures relate to the ownership of the factors of production; they refer to production attributable t( labor and property supplied by residents of a conn try. Domestic measures relate to the physical loca tion of the factors of production; they refer to produc- tion attributable to all labor and property located ic a country. The national measures differ from the do- mestic measures by the net inflow — that is, inflow less outflow — of labor and property incomes from abroad. The choice of a measure of production from this ar- ray depends on the use to which it will be put. For example, national income is often used in studies deal- ing with the allocation of factors of production to var- ious uses. A market price measure, such as GNP, is usually preferred for studies of economic behavior and welfare, because market price is the basis for choice among alternative products. Gross domestic product, rather than GNP, is the most widely used measure of production in other countries, and thus it is often used in international comparisons. Components. — The income and product components of GNP are defined in the box on pages 2 and 3. They are in the order of the line numbers in the national in- come and product account, starting on the income side and proceeding to the product side. These components are often defined by reference to the purchaser of the goods and services or to the payor or recipient of the income. "Business," in the main, refers to corporate and noncorporate private entities organized for profit. Mutual financial institutions, private noninsured pen- sion funds, cooperatives, nonprofit organizations that primarily serve business, Federal Reserve banks, and federally sponsored credit agencies are also included as part of business. Government enterprises (such as the Commodity Credit Corporation and State-owned liquor stores) are treated in some respects like private business and in other respects like other government agencies. "Persons" refers to individuals, nonprofit in- stitutions serving individuals, private noninsured wel- fare funds, and private trust funds. ("Households and institutions" excludes the two kinds of funds.) "Gov- ernment" refers to all Federal, State, and local govern- ment agencies. "Foreigners" refers to foreign residents who are transactors with U.S. residents; "rest of the world" is used with the same meaning. Part I. Source Data and Estimating Methods _L HIS part summarizes the source data and estimat- ing methods used to prepare GNP. Such a summary encourages appropriate use of the estimates by mak- ing the content of the income and product components more concrete than did the definitions. For example, the definition of fixed investment refers to capital goods "purchased;" the summary methodology clarifies that the estimate for structures is of the value put in place in a time period, which would differ from the full pur- chase price if the construction is underway in several time periods. Such a summary also makes explicit that the component estimates rely in varying degrees on proxies and judgment — a reminder that, although the estimates are useful analytical tools, they cannot be precision instruments. Source data are the facts and figures BEA uses to prepare the estimates, and estimating methods are the steps BEA takes to conform the source data to the con- cepts and definitions of the NIPA's and to fill in gaps in data coverage. Taken together, source data and esti- mating methods are often referred to as "methodology." The summary in this article highlights features of the methodology that serve the purposes just mentioned; they throw light on the content of the components and provide indications of reliability. The methodology described — first for current-dollar estimates and then for constant-dollar estimates — is that in use as of the July 1987 annual revision . Method- ology is not fixed once and for all. First, source data emerge and disappear, and BEA adapts the estimat- ing methods accordingly. Second, often independently of circumstances that lead to these adaptations, BEA improves the estimating methods. In recent years, a number of improvements were associated with the ex- panding use of computers; most obvious perhaps is the ability to handle a finer level of estimating detail in the allotted timeframe. Finally, the economy changes, and BEA updates the methodology to ensure that the estimates continue to provide a reliable picture of the transactions and transactors in the economy. One no- table instance of methodological change — the improve- ments in the constant-dollar estimates and associated price measures over the last decade — is evident from the directory of information about the estimates, in the second part of the article. In this instance, the impetus was the inflation that began in the early 1970's, and the improvements involved developing new source data, re- fining other source data, and adapting the estimating methods to include more sophisticated treatments and to handle more detail. Current- dollar estimates Preview of source data and the estimating cycle. — With few exceptions, the data used in preparing the estimates are collected for purposes other than the preparation of the income and product estimates. Data collected by Federal Government agencies provide the backbone of the estimates, although they are supplemented by data from trade associations, businesses, organizations, and other private sources. The government data come from a number of agencies, mainly Commerce Depart- ment's Census Bureau, Treasury Department's Internal Revenue Service, Labor Department's Bureau of Labor Statistics, Office of Management and Budget, and Agri- culture Department. Some government-collected data, referred to as "administrative" data, are byproducts of government functions such as welfare and social secu- rity programs, tax collection, defense, and regulation. Nonadministrative data, sometimes referred to as "gen- eral purpose" or "statistical" data, include the periodic economic and population censuses and a wide range of sample surveys, such as those that collect data on manufacturing activity, corporate profits, and the labor force status of households. Of the relatively few items for which BEA itself collects data used to estimate the NIPA's, most refer to international transactions. These include investment by foreigners in the United States and by U.S. residents in foreign countries. The article about the annual NIPA revision in the July 1987 issue of the SURVEY highlights an impor- tant characteristic of the estimates: The source data on which they depend improve in quantity and quality as the estimates progress through the estimating cy- cle. A cycle usually takes 5 years and runs from three estimates of the current quarter to three (usually) an- nual revisions and, finally, to a comprehensive revision (often referred to as a "benchmark" revision). For the preliminary estimate of GNP for the current quarter, which is released about 3 weeks after the end of that quarter, source data provide less than full coverage and usually are subject to revision. The data available for 6 GNP Overview^ September 198, this estimate are series collected monthly. One impor- tant series, retail sales, is released early in the month following collection, and the preliminary GNP estimate is timed to incorporate it. Thus, the preliminary esti- mate incorporates 3 months of data for that series. The preliminary estimate also incorporates 3 months of data for auto and truck sales and for employment, hours, and earnings. For several other important monthly series, 2 months of data are available. In the 2 months immediately following the prelim- inary estimate, BEA prepares two revised estimates of GNP for the current quarter. These estimates, re- ferred to as the "first revision" and "second revision," each incorporate both revised and previously unavail- able monthly data. As well, they incorporate three major sets of quarterly data. One set is the data on domestic corporate profits. Except for the fourth quar- ter, a preliminary corporate profits estimate is released with the first revision of GNP and a revised estimate with the second revision of GNP; for the fourth quar- ter, the corporate profits schedule lags 1 month. The second set is the data on foreign transactions from the BEA balance of payments accounts. With the excep- tion of merchandise trade data, most of the source data underlying these accounts, including the BEA surveys of direct investment, are quarterly. Data from the bal- ance of payments are incorporated in the second revi- sion. The third set is the data on assets from the flow of funds accounts prepared by the Federal Reserve Board, also incorporated in the second revision. Most quarterly and monthly source data are based on samples. The sample-based data include the monthly Census Bureau reports on shipments or sales and in- ventories of manufacturing, wholesale trade, and retail trade (the sales series mentioned earlier); the corpo- rate profits data for manufacturing, mining, and trade in the Quarterly Financial Report prepared by the Cen- sus Bureau; the monthly data on employment, hours, and earnings compiled from reports of nonfarm estab- lishments by the Bureau of Labor Statistics and the monthly data on employment collected from households by the Census Bureau in the current population sur- vey, both published by the Bureau of Labor Statistics in Employment and Earnings; and the monthly data reported by the Census Bureau in Vaiue of New Con- struction Put in Place. Several sets of source data are not samples and provide complete or nearly complete coverage. One monthly set of data, that reported by the Census Bu- reau in Highlights of U.S. Export and Import Trade, is from documentation intended to cover nearly all goods as they enter or leave the country. (The monthly trade data and the monthly construction data that are used for current quarterly estimates are not replaced by an- nual data based on a more inclusive collection system and are used for annual estimates as well.) Two othe: sets that provide complete coverage are the Federal re ceipts and expenditures in the Treasury Departmen' report referred to as the Monthly Treasury Statemen and the unit sales of autos and trucks from a tradi source. Ordinarily, the GNP estimates for the most recent calendar year and usually the 2 preceding years an revised each year in July. These annual revisions an timed to incorporate annual source data, although thej also incorporate quarterly data released too late to b« used in the current quarterly estimates. In addition, the seasonal adjustments applied to the source data are updated. (See the box on page 16 for more about seasonal adjustment.) Annual data are usually based on samples. The schedule of one of the sample-based sets of annual data — data related to business income from tabulations of tax returns — is the major reason for the third annual revision. These data are compiled by the Internal Rev- enue Service and published in its Statistics of Income series. Data on sole proprietors and partnerships be- come available for the second annual revision, and data on corporations become available for the third. The sample-based data also include the annual coun- terparts of the data on shipments or sales and inven- tories mentioned earlier (reported by the Census Bu- reau in the Annual Survey of Manufactures, the An- nua/ Retail Trade Report, and the AnnuaJ Wholesale Trade Report); receipts of service establishments re- ported by the Census Bureau in the Service AnnuaJ Survey; data on agriculture — production, inventories, costs, and more — collected in several surveys by the Department of Agriculture; receipts and expenditures of State and local governments reported by the Census Bureau in Governmental Finances; and data collected by the Census Bureau in the biennial housing survey. The annual revisions also incorporate data com- piled by the Bureau of Labor Statistics on wages and salaries of employees covered by State unemployment insurance. These data, published in Employment and Wages, have provided nearly complete coverage of pri- vate nonfarm and of State and local government em- ployees in recent years. (Data from this source and from the Internal Revenue Service tabulations men- tioned above are not replaced by data based on a more inclusive collection system and are used for comprehen- sive revisions as well as for annual revisions.) Comprehensive revisions are carried out about every 5 years. The comprehensive revisions — which also in- corporate definitional and classificational changes — are timed to incorporate the quinquennial economic cen- suses; the year of the economic censuses is referred to as the "benchmark year." The source data available for the comprehensive revisions provide the most com- GNP Overview.. September 1987 plete coverage. Examples are the decennial census of population, the decennial census of housing (and its supplementary survey of residential finance), the quin- quennial census of governments, and the quinquennial economic censuses, all collected by the Census Bureau. The economic censuses, currently conducted in years ending in "2" and "7," provide extensive data on man- ufactures, wholesale trade, retail trade, service indus- tries, construction industries, agriculture, transporta- tion, and mineral industries. (An alternative view of the use of source data is that these censuses are the major sources used to prepare BEA's input-output ta- bles and that the input-output tables, in turn, are the single most important source for the comprehensive re- visions of the NIPA's. The input-output tables pro- vide the level for the product — that is, expenditures — components of GNP in the benchmark year.) The data from these decennial and quinquennial cen- suses as well as data (such as from the tabulations of business tax returns and the unemployment insurance system) that are not replaced — that is, are considered final — determine the levels of the component estimates. Other source data are used to interpolate and extrapo- late; as will be explained more fully in the next section, these source data provide the basis for the annual and quarterly changes in the level. Annual data are usu- ally used to interpolate between and extrapolate from the final levels. Quarterly data are used to interpolate between and extrapolate from annual levels. Notes to the sources and methods table. — Table 2 identifies the principal source data — those previewed as well as many others — and estimating methods used to prepare the current-dollar annual and quarterly es- timates of GNP components. The components are as shown in table 1, starting on the income side and pro- ceeding to the product side. The subcomponents in table 2, with their 1986 dollar values, are grouped ac- cording to the methodology used to prepare them. The column in table 2 for annual estimates covers the several annual estimates in the estimating cycle; ma- jor differences in methodology as the estimates move through the annual revisions to a comprehensive re- vision are few enough to condense into a table. For example, for most goods in personal consumption ex- penditures (the first item on the product side), the ta- ble indicates one methodology for benchmark years and another for all other years. The column for the quarterly estimates is a conden- sation in several respects. First, it refers to the pre- liminary estimates for the current quarter. That one estimate, rather than all of the current quarterly esti- mates, is described because more attention focuses on the "first look" at the quarter. Second, even for the preliminary estimate, the column does not detail how many months of data are available nor whether the data are subject to revision by the source agency. Thus, the benefit of condensation is at the cost of not detailing the tradeoff between the timeliness of the preliminary esti- mate and the improved quantity and quality of source data available in the 2 following months. 2 The information in the column for the quarterly esti- mates is generic; it fits any preliminary estimate for the current quarter. For users who want to track the ac- tual data and resulting estimates, BEA prepares "Key Source Data and Projections for National Income and Product Estimates." This table, provided at the time of the preliminary estimates, shows the monthly figure for key source data that are available (and indicates whether the data are subject to revision by the source agency) and BEA's projected figures for data that are not available [41]. BEA is reformatting this table and plans to make it more accessible by putting it on the Commerce Department's Economic Bulletin Board. Table 2 lists source data referring to a variety of dif- ferent economic measures — wages and salaries, premi- ums, expenses, interest rates, mortgage debt, tax col- lections, unit sales, housing stock, employment, and average price, to name a few. For most components, the source data are "value data;" that is, they em- body both the quantity and price dimensions that are required for current-dollar estimates. In these cases, the methodology indicated in table 2 is the adjust- ment of the value data to derive estimates consistent with NIPA definitions and coverage. The descriptions of the adjustments to derive domestic corporate profits and change in business inventories are examples. Three 'The methodology for pergonal congumption expenditureg il- lugtrate* the gequential introduction of gource data in the current egtimateg. For the preliminary egtimateg, the key data available are: 3 monthg of retail galeg (of which 2 monthg are gubject to revigion by the gource agency); 3 monthg of unit galeg of new motor vehicleg, 1 month of information with which to allocate the unit galeg among congumerg and other purchagerg, and 2 or 3 monthg of average Hat priceg (which are gubject to modification ag more detailed information on modelg of car* gold, and thug actual retail priceg, becomeg available); and 1 or 2 monthg of data for gerviceg amounting to three-fifthg of total gerviceg. The egtimateg for moat of the remainder of pergonal congumption expenditureg are extrapolationg baaed either on related indicator gerieg or on judgmental trenda. For the firat reviaion, reviaed retail galeg for 2 monthg become available. For the gecond reviaion, information on galea of uged cara and more data on aeveral gerviceg — hogpitalg, electricity, natural gag, telephoneg, airline tranaportation, foreign travel, and inaurance other than life ingurance — become available. The "Buginegg Situation" in the SURVEY provideg a footnote at the time of the preliminary egtimateg of GNP (January, April, July, and October) Hating major gource data, including the num- ber of monthg for which they are available, for that GNP ea- timate. Notea to a table in the "Buaineaa Situation" in the 2 following montha list gource data, including revigiong to earlier data, that gubgequently became available and were incorporated in that egtimate. 8 GNP Overview^ September 1987 Table 2. — Principal Source Data and Estimating Methods I'sed in Preparing Current-Dollar Estimates of GNP Component (billions of dollnrs) Subcomponent (hi dollnrs) Annual estimntes: Source datn and methods used to determine level for benchmark nnd other final years or, for other years, used to prepare an extrnpolator or interpolator Preliminary quarterly estimates: Source data nnd methods used to prepare an extrnpolator Income side (Charges against GNP of $4,239.! Compensation i employees ($2,504.9) Proprietors' income with IVA nnd CCAdj ($289.8) Farm CCAdj (-$8.1) See footnotes at end of table Wages and salaries: Private industries, State and local government, and rest of the world ($1,956.8) Wages and snlnries: Federal ($132.3) Employer contributions for social insurance ($214.7) Other labor income ($201.1) Nonfarm income ($217.7) Nonfarm IVA (-$0.2) Nonfarm CCAdj ($35.1) Farm income with IVA ($454) For most, nnnunl tabulations of wages nnd salaries of employees covered by State unemployment insurance from the Bureau of Labor Statistics; for remainder, wages from a variety of sources (such as Dept of Agriculture for farms nnd Railroad Retirement Board for rnilroad transportation) and indirect estimation for only a few cases (such as a percentage of revenues for tips not reported as wages) Wages from the Office of Personnel Management and the Office of Management and Budget, Budget nf the United States Contributions from the Social Security Admin., other agencies administering social insurance programs, and Census Bureau surveys of State and local government retirement funds Years except most recent- For private pension and profit- sharing funds, employer contributions from Internal Revenue Service tabulations of business tnx returns when available and judgmental trend in other years; for group health and life insurance, mainly totnl premiums pnid from trade sources and Health Care Financing Admin nnd dntn on employer share from trade source; for workers' compensntion, contributions from trade sources. Most recent year— For group henlth insurance, total premiums paid from Health Care Financing Admin.; for others in the category, judgmental trend. Years except most recent — Income from Internal Revenue Service tabulations nf business tnx returns, adjusted for understntement of income on tax returns and for several conceptual differences. Most recent year— For construction, trade, and services, indicators of activity (such as value of housing put in place); for most others, judgmental trends. The IVA is described under the entry for corporate profits with IVA and CCAdj. The CCAdj is described under the entry for capital consumption allowances with CCAdj. Rased on Dept of Agriculture data on net income, obtained by deriving gross earnings (cash receipts from marketing, inventory change, government payments, other cash income, and nonmoney income) and subtracting production expenses, adjusted to exclude corporate income from Internal Revenue Service tabulations of business tnx returns. The CCAdj is described under the entry for capital consumption allowances with CCAdj. For most private, wages and salaries derived, by industry, from Bureau of Labor Statistics monthly employment times earnings times hours; for State and local government and other private, judgmental trend Same ns nnnual. For Federal programs, BEA-derived wages and salaries of employees covered by the programs; for State and local government programs, judgmental trend Judgmental trend Same as annual for most recent year. Dept of Agriculture projection adjusted for consistency with NIPA's. GNP Overview^ September 1987 Table 2.— Principal Source Data and Ksli Methods Used in Preparing Current-Dollar Estimates of GNP— Cc Component (billi of dollars) Subcomponent dollar Animal estimates: Source data and methods used to determine level for benchmark and other final years 01 for other year's, used to prepare an oxtrapolalor or interpolator Prelin Sou re linary quarterly estimates: data and methods used to p epare an extrapolator Rental income of persons with CCAdj ($16.7) Corporate profits with IVA and CCAdj ($2S4 4) CCAdj ($46.0) See footnotes at end of table. Rent from nonfat nonresidential properties ($104) Rent from owner occupied nonfarm housing ($18.5) Rent from tenant occupied nonfarm housing ($17.5) Royalties ($10.8) Rent from farms owned by nonoperator landlords ($5.1) CCAdj (-$45.5) Profits: Domestic, before tax ($200.7) Profits: Rest of the world, before and after tax ($31.2) IVA ($6.5) Years except the 2 most recent Rent* paid and received by business and government, adjusted for expenses associated with property (mainly depreciation, taxes, interest, and repairs), from Internal Revenue Service tabulations of business tax returns, Census Bureau surveys, and the Budget of (he United Stairs prepared by the Office of Management and Budget. Two most recent years — Judgmental trend Derived as space rent— see the entry for nonfarm housing in personal consumption expenditures less related expenses, including maintenance and repair from Rureau of Labor Statistics quarterly consumer expenditure survey, mortgage debt from Federal Reserve Board times an interest rate, and property taxes from Census Bureau quarterly surveys of State and local tax collections. Same as described under owner-occupied housing and adjusted to cover only rental income accruing to persons not primarily engaged in the real estate business Years except most recent- Internal Revenue Service tabulations of royalties reported on individual lax returns Most recent year -Judgmental trend Prepared in conjunction with farm proprietors' income; see that entry The CCAdj is described under the entry for capital consumption allowances with CCAdj. Years except the 2 most recent — Receipts less deductions from Internal Revenue Service tabulations of business tax returns, adjusted to include in profits the depletion allowances on domestic minerals, income of the Federal Reserve and federally sponsored credit agencies, the excess of additions to bad debt reserves over losses actually incurred, and an estimate of the amount by which income on tax returns is understated and to exclude capital gains and losses on the sale of property and dividends received from domestic corporations. Two most recent years— Separately for about 70 industries, profits from Census Bureau quarterly survey of corporate profits, regulatory agency reports, and compilations of public company reports Estimated as part of the balance of payments; see the entrv for receipts and payments of factor income, net, under net exports of goods and services. Obtained as the difference between the NIPA change in business inventories (that is, physical volume of inventories valued in prices of the current period) and the change in the book value of inventories reported by business as described in the entry for change in business inventories The CCAdj is described under the entry for capital consumption allowances with CCAdj. Same as annual fo For owner-occupied space rent, same as annual, for depreciation, interest, and taxes, based on estimates of those components; for other expenses, based on judgmental trend. Same as annual Same as annual for most recent Judgmental trend For some industries in transportation, some in finance, etc., and all in services, judgmental trend, for others in this group, same as annual for 2 most recent years (Released at time of first revision of GNP for the first, second, and third quarters and of second revision for the fourth quarter.) Judgmental trend. ' (Released at time or first revision of GNP Tor the first, second, and third quarters and of second revision for the fourth quarter.) Same as annual to GNP Overview .September 198) Table 2. — Principal Source Data and Estimating Methods Used in Preparing Current-Dollar Estimates of GNP — Continued Component (billi of dollars) Subcomponent (hi dollarsi Annual estimates: Source data and methods used determine level for benchmark and other final year 1 for ottier years, used to prepare an extrapolalnr interpolator Preliminary quarterly estimates; Source data and methods used to prepare an extrapolator side (Charges against CNP of $4,2.'l ■•st; Net interest ($326.1) Business transfer payments ($22.3) Indirect bn tax and nontax liability ($347.7) Subsidies less current surplus of government enterprises ($8.7) Capital consumption allowances with CCAdj ($4of>.7) CCAdj ($21.0) See footnotes at end of table Net interest: Domestic monetary ($12R.!» Net interest: Rest-of-the world monetary ($8.1) Net interest: Imputed— lil insurance carriers and private noninsured pension plans ($113.0) Net interest: Imputed — banks, credit agencies, and investment companies ($76.1) Federal ($50.9) State and local ($296.8) Federal ($23.3) State and local (-$14.6) Capital consumption allowances ($477.7) For farm interest paid and received. Dcpt, of Agriculture surveys; for residential mortgage interest, mortgage debt from Federal Reserve Board times an interest rate; for all other interest paid and received by business, Internal Revenue Service tabulations of business tax returns or, when these tabulations are not available, interest receipts and payments from regulatory agencies (such as the Federal Deposit Insurance Corporation), from trade sources, or obtained by applying an interest rate to a st'H'k of assets/liabilities from Federal Reserve Doard flow of funds accounts Estimated as part of the balance of payments; see the entry for receipts and payments of factor income, net, under net exports of goods and services. Property income earned (and for life insurance carriers, profits) from Internal Revenue Service tabulations of business tax returns or, for the 2 most recent years, from trade sources Property income earned on investment of deposits and monetary interest paid (and for mutual depositories, profits from Internal Revenue Service tabulations of business tax returns when available) from annual reports of regulatory agencies and the Federal Reserve Hoard The counterentry to the interest, financial services furnished without payment, is allocated to persons, government, and rest of the world on the basis of deposit liabilities from the same sources For corporate gifts to nonprofit institutions and bad debts incurred by consumers. Internal Revenue Service tabulations of business tax returns; for other components (such as liability payments for personal injury), information from other government and trade sources. For excise taxes and customs duties, collections from the Internal Revenue Service; for nontaxes (such as fines), receipts from the Office of Management and Budget, Budget of the United States. Receipts from Census Bureau quinquennial censuses and annual and quarterly surveys. Outlays and receipts from Treasury Dept. reports; Office of Management and Budget. Budget of the United States; and reports of various agencies sucn as the Commodity Credit Corporation For subsidies, limited to railroad, judgmental trend; for current surplus, see entry for State and local purchases other than compensation and structures. For depreciation of nonfarm sole proprietorships, partnerships, and corporations. Internal Revenue Service tabulations of business tax returns; for other depreciation (including farms, nonprofit mstitutions, and owner-occupied houses), perpetual-inventory calculations; for accidental damage to fixed capital, losses reported to insurance companies and government agencies. Obtained in two parts: First, the part that places a historical-cost series for capital consumed on a consistent hasis with regard to service lives and on a straight-line depreciation pattern is the difference between tax return based calculations at historical cost and the perpetual inventory calculations; second, the part that places the historical-cost series on a current- cost basis is the difference between two perpetual- inventory calculations, one at historical cost and one at current cost. Derived by combining estimates of (1) interest received by persons, (2 government interest paid and received, and (3) interest paid by consumers to business. For (1), judgmental trend; for (2), largely from Monthly Treasury Statement for (3), consumer debt from the Federal Reserve Roard times BEA estimates of interest rates ■ Judgmental trend ' Judgmental trend Judgmental trend Judgmental trend For customs duties, the Monthly Treasury Statement; for other in this group, indicators of activity (such as gasoline production for gasoline tax). Judgmental trend For subsidies, reports of various agencies and the Monthly Treasury Statement; for current surplus, agency report for the Commodity Credit Corporation and budget projections for others in this group. Judgmental trend Judgmental trend. For capital consumption allowances, judgmental trend as mentioned in preceding item; for current-cost series, perpetual-inventory calculation based on investment nnd on investment prices. GNP Overview. September 1987 1 1 Table 2.— Principal Source Data and Estimating Methods Used in Prepnring Current-Dollar Estimates of (INP— Continued Component (billions of dollars) Annual estimates: Source data and methods used to determine level for benchmark and other final years or Preliminary quarterly estimate Source data and methods used prepare an oxtrapnlator Personal consumption expenditures ($2,799.8) 2 Durable and nondurable goods: ($1,341.81 Most goods (goods except subcomponents listed separately) ($1,090.0) New trucks ($27.6) New and used autos ($135.3) Onsoline and oil ($75.3) Food furnished employees (including military) ($8.5) U.S. residents ($4 0) less personal remittances in kind to foreigners ($0.5) Benchmark years -- Commodity -flow method, starting with manufacturers' shipments from Census Bureau quinquennial rensus and inrluding an adjustment for exports and imports from Census Bureau merchandise trade. Other years Retail control method, using retail trade sales from Census Bureau annual survey or, for the most recent yenr, monthly survey of retail trade. Benchmark years— Commodity-flow method, starting with manufacturers' shipments from Census Bureau quinquennial census and including an adjustment for exports and imports from Census Bureau merchandise trade. Other years except most recent— Abbreviated commodity- flow method, starting with manufacturers' shipments from Census Bureau annunl survey and including an adjustment for exports and imports from Census Bureau merchandise trade. Most recent year — Physical quantity purchased times average retail price: Unit sales and information with which to allocate sales among consumers and other purchasers from trade sources and average price based on a Bureau of Labor Statistics consumer price index. For new autos, physical quantity purchased times average retail price: Unit sales, information with which to allocate sales among consumers and other purchasers, and average list prices, all from trade sources. For used autos, change in the consumer stock of autos at least 1 year old plus dealers' margins based on unit sales times miction price, all from trade sources Years except most recent— Physical quantity purchased times average retail price: Gallons consumed from the Dept of Transportation, information with which to allocate that total among consumers and other purchasers from Federal agencies and trade sources, and monthly average retail price by grade from the Bureau of Labor Statistics. Most recent year— Physical quantity purchased times average retail price Domestic supply from Energy Information Admin monthly surveys and price as above For commercial employees, number of employees of appropriate industries from Bureau of Labor Statistics tabulations times a Bureau of Labor Statistics consumer price index for food; for military personnel, outlays from the Budget of the United States prepared by the Office of Management and Budget Estimated as part of the balance of payments; see the entry for receipts and payments for other services, net, under net exports of goods and services Same a year. inual for the most recent Same as annual for the most recent year. See footnotes at end of table For new autos, same as annual; for used autos, same as annual except that change in consumer stock is based on judgmental trend Same as annunl for most recent year. For commercial employees, same as annual; for military personnel, number of persons in Armed Forces from the Dept. of Defense times a Bureau of Ijibor Statistics consumer price index for food, ital trend Judgn 12 GNP Overview^ .September 1981 Table 2. — Principal Source Data and Estimating Methods Used in Preparing Current-Dollar Estimates of GNP— Continued Component (billions of dollnrs) Subcomponent (billions of Hollnrs) Annual estimntes: Sourre data nnd methods used to determine level for benchmark and other final years or, for other years, used to prepare an extrnpolator or Preliminary quarterly estimates: Source data and methods used to prepare an extrapolator Product side (GNP of $4,235 billion in 1986)— Continued Personal consumption expenditures- Continued Services: ($1,450.8) Nonfarm housing— space rent for owner-occupied and rent for tenant occupied ($410.5) Farm housing— rent ($9.9) Auto and other repair, legal and funeral services, barbershops and beauty parlors, nursing homes, laundries, other recreation (except vidor cassette rentals, cable TV, and lotteries), hole and motels, and commercial education ($231.0) Physicians, dentists, and other medical professional services ($143.7) Private elementary and secondary schools, welfare activities, and other personal business ($70.1) Financial services furnished without payment by banks, credit agencies, and investment companies ' ($70.9) Brokerage, bank service charges, intercity transportation, and private higher education ($70 9) Domestic services ($9.7) Benchmark years — Based on data on housing stock and average annual rental from Census Bureau decennial census of housing and survey of residential finance Other years- Rased on data on housing stock from the Census Bureau biennial housing survey or on the number of households from Census Bureau monthly current population survey and updated average annual rental Dept of Agriculture survey Benchmark years -Receipts from Census Bureau quinquennial census of service industries adjusted for receipts from business and governments. Other years— Receipts, for spectator sports from private organizations, for legitimate theaters from tabulations of wages and salnries of employees covered by State unemployment insurance from the Bureau of I-abor Statistics, for others in this group from Census Burenu service annual survey Benchmark years— For nonprofit professional services, expenses; for others in this group, receipts, adjusted for government payments and prepayment plans, from Census Bureau quinquennial census of service industries Other years— Receipts, adjusted for government payments and prepayment plans, from Census Bureau service annual survey. Benchmark years- For schools of religious organizations, enrollment from Dept of Education times BEA estimate of average expenditures per pupil; for others in this group, receipts from Census Bureau quinquennial census of service industries Other years — Tabulations of wages and salaries of employees covered bv State unemployment insurance from the Bureau of f,abor Statistics. See entry for net interest: imputed— banks, credit agencies, nnd investment companies. For private higher education, expenses, and for others this group, receipts, all from annual reports of government administrative agencies. Number of workers times weekly hours times earnings from Census Bureau monthly current population survey. Same method as annual, with housing stock based on annual estimates adjusted for completioni from Census Bureau survey and average rent based on annual estimates adjusted using a Bureau of I.ahor Statistics consumer price index for rent. Judgmental trend For nursing homes, wages and salaries derived from Bureau of I>abor Statistics monthly employment times earnings time* hours; for legitimate theaters, receipts from trnde source; for others in this group, judgmental trend For nonprofit professional services, wages and salaries derived from Bureau of Labor Statistics monthly employment times earnings times hours; for others in this group, judgmental trend. Wages and salaries derived from Bureau of I^nbor Statistics monthly employment times earnings times hours. See footnotes at end of table. Judgmental trend For brokerage, stock exchange transactions from trade sources; for bank service charges, judgmental trend; for intercity transportation, receipts from trade sources; for private higher education, wages and salaries for the industry derived from Bureau of Labor Statistics monthly employment times earnings times hours. Judgmental trend. GNP Overview c . ,„„„ September 1987 13 Table 2.-Principal Source Data and Kstimntin* Methods Iteei in Preparing Current-Dollar Egtlmatea of GNP-Continued Personal consumption expenditures- Continued Nonresidential structures ($137.4)* Annual estimates: Source data and methods used to determine level for benchmark and other final years or, for other years, used to prepare an extrapolator or interpolator Preliminary quarterly estimates Source data and methods used to prepare an extrapolator Product side (GNP of $4,235.0 billioi 98fi>— Continued Services -Continued Insurance, hospitals except nursing homes, religions activities, cable TV, utilities, and local transport ($373.0) Water and other sanitar services, and lotteries ($22.9) Foreign travel by US residents ($23 .71 less expenditures in the United States by foreigners ($15 2) Other services: Video cassette rentals and parimutuel net receipts; other housing except hotels and motels; other education and research except commercial education; bridge, etc. tolls; other household operation except repairs and insurance; and clubs and fraternal organizations ($36.9) Nonfarm buildings ($90.8) Public utilities: Telephone and telegraph ($8.2) Public utilities: Other ($18.0) Mining exploration, shafts, and wells ($15.8) Other nonfarm structures ($2.3) Farm buildings ($2.0) and most See footnotes at end of table For life insurance, expenses from reports of private organizations or, for the most recent year, tabulations of wages and salaries of employees covered by State unemployment insurance from Rureau of Labor Statistics; for insurance other than life insurance, premiums and benefits from reports of private organizations; for hospitals except nursing homes, expenses from reports of private organizations; for religious activities, expenses based on contribution membership from private organizations or, for th. recent year, judgmental trend; for cable TV and utiiit..„, receipts from government agencies and trade sources; for local transport, receipts from reports of private organizations. Years except 2 most recent— For water and other sanitary services, expenditures from Census Bureau quinquennial censuses and annual surveys of State and local governments, adjusted to a cnlendnr year basis from a fiscal year basis; for lotteries, net receipts from the same source Two most recent years— Judgmental trend. F.stimated as part of the balance of payments; see the entry for receipts and payments for other services, net, under net exports of goods and services. Various source data Value put in place from Census Bureau monthly construction survey Value put in place from Census Bureau monthly construction survey. Expenditures from Federal regulatory agencies and trade sources. Benchmark years— Expenditures from Census Bureau quinquennial census of mineral industries. Other years— For petroleum and natural gas, physical quantity times average price: Footage drilled and cost per Toot from trade sources; for other mining expenditures from BEA plant and equipment' survey k Value put in place from Census Bureau monthly construction survey. Expenditures for new construction from Dept of Agriculture surveys. For life insurance and religious activities, wages and salaries derived from Bureau of Labor Statistics monthly employment times earnings times hours; for hospitals and electricity, reports from private organizations; for telephone and gas, reports from government agencies, for others i this group, judgmental trend. ' Same as 2 most recent years Same as annual. Judgmental trend Same as annual Same as annual Anticipated expenditures from BEA plant and equipment survey. Same as annual for years other than benchmark years. Same as annual Judgmental trend of value put in place from Census Bureau. Table 2. _,.„„™a, Source M. .«- HI »« M^,«.«.. i n.- re p.,in 8 Cu,r«., t .D.n.rE: imates of GNP— Continued nponent (billions of dollars) Nonresidential producers' durable equipment ($299.5) Subcomponent (billi dollarsl Equipment except ($278.8) \„n..-,l .-Mti.nnt.-s Sou...- dntll I.nd methods used to interpolator diminnry quarterly estimates Jrce data and methods used U prepare an extrapolator rrnrfuot side (GNP of $4,235.0 billion in 1986J-C in ued ith Residential investment ($218.3) s Change in business inventories ($15.7) New and used nub ($20.7) Permanent site single family housing units ($102.4) Permanent-site multifamily housing units ($32.5) Mobile homes ($5.3) Additions and alterations, and major replacement? ($54.0) Brokers' commissions ($19.5) Producers' durable equipment ($5.4) Manufacturing and trade ($6.3) Renehmark vears Commodity How method, starting ^manufactiTrers' shipments from Census ^Bureau -;;;:;n:r!,^;:l'^:siiu:v;i;: j m^n-.. producer price indexes ^saswca sesirsas, ** - tutos at least 1 year old from trade source. V»1.h> nut in place based on phased bousing starts and V average construction cost from Census Bureau monthly construction surveys Value put in place from Census Bureau monthly For trucks, see entry for personal Consumption expenditures; lor others in this group, same as annual for years other than benchmark years except with less detail ndg. al; for nd. I Same as annual Same as annual | Other nonfarm industries ($10.5) Farm (_$1.11 See footnotes at end of tahlr Benchmark years- See entry for equipment except autos in miresi den ial producers' durable equipment. Othe y" nrs Physical quantity shipped times price: Shipments from trade sources and average retail price from Census Bureau monthly survey. Expenditures by owner-occupants t™**™**^ bv Statistics quarterly consumer expenditure survey ana t,y landlords from Census Bureau quarterly survey ol landlords Physical quantity times price times average commission rZ N i m her of nne-mmily houses sold, mean sales p e and commission rates, from Census Bureau monthly construction survey and trade sources. See entry for most goods under personal consumption expenditures. E£en^S^h^=^, n r stou,,.hecomn^^ frnmBurea of lab" Statistics producer price indexes O&ears- Mainly book values from Census Bureau annual surveys or for the most recen year month! urveys, converted to N1PA basis, as described above. For petroleum bulk stations in all years-physical quantities times price: Monthly quantities from the Energy Information Admin times a Bureau of Labor Stat sties producer price index. Book values converted to NP basis (except when noted as physical quantity "imes prirei, as described for manufacturing and trade. Feminine Internal Revenue Service tabulations or ror niHiiiK, ^ .^ ^ ,, ^^ ieCP nt vears, Sus Bureau quarterly surveys of profite »"*££ years; for services and construction, Internal Revs nue Service tabulations of business tax returns or, in the/ m^t "eceni Tears, judgmental trend, f- transportation and electric utilities. Internal Revenue Service tabulations of business tax returns except in the two , ' ' ,, v„.,rs or working capital from the Census most recen >. Mrs or wo, k ng ^ fe^ntyear o monthly Quantities from the Energy Information Admin for electric utilities and judgmental trend for transportation in the most recent year Physical quantities times current prices, from Dept. of Agriculture surveys. Same as annual for years than benchmark years Judgmental trend. Same as annual. I Same as ar Same as annual for most recent year. For electric utilities and for petroleum bulk stations-physical quantities times price: Monthly quantities from Energy Information Admin times a Bureau of Labor Statistics producer price index; for all others, judgmental trend. I Judgmental projection by BEA and | Dept. of Agriculture. GNP Over vie w_ September 1987 15 Table 2.-Prinripal Source Data and Estimating Method u I'srd in Preparing Current-Dollar Estir tales of GNP— Continued Hofpr no? , r eS u SoU u rce d ? ta nnd mp,hwls used to determine level for benchmark and other final years or for other years, used to prepare an extrnpolator or interpolator Preliminary quarterly estimates: Source data and methods used to prepare an extrannlnfm Net exports of goods and services (-$105 5) Government purchases of Roods and services ($869.7) Merchandise ex wrts and imports, net (-$142.6) Receipts and pa 'ments of factor income, ($33.7) net Product side (GNP of $4,235.0 hilli -Continued age and icnts basi Receipts and payments other services, net ($3.4) Federal State and local compensation ($299.9) State and local structur ($(51.4) State and local other than compensation and structures ($142.2) Estimated as part of the halance of pavi export documents compiled monthly 1 Bureau with adjustments by REA for valuation to put them on a halance of and then on a NIPA basis. ' " "vestment" Zr ^ ^nv? 1 *™ ° f P a >'™nts: For direct interest rates and reports hy U.S. (Jovernmenl aeendes ol interest receipts-all adjusted to NIPA basis. Istimated as part of the balance of payments For government transactions, reports Dy Federal agencies on fr?nsrv . E , eL P^nger f ares, other urn i shed without payment; see entry for net interest comjanie^ ' CrP< '" nRencies ' and investment Outlays from the Budget of the United States prepared bv T ea ur Hen n nH '"'"i *»*»** prepared by the transactions and transactions in land and t exclude -nterest. subsidies, net expenditures of g ove e enterprises, transfer pavments, and graVs in I Also ""•lodes financial services furnished without payment see entry for net interest: imputed banks, cred it agencies, and investment compani- Main t and Sai Judgmental Same procedures as annual but using outlays from the Monthly treasury Statement and monthly reports of selected agencies. ^yt^^^^^^Z^^^^ Judgmental trend covered hy State unemnlnvmn. of I ahor St it ic :,. V \ I .insurance from Bureau Securitv Adn , ,T H cont "butions from the Social Security Admin , other agencies administering social S KHJS? r e r ms ' ™ H Cenaua Bureau su^fysT Sfnte and local government retirement funds. For highways, for years except the most recent i e ;';:: "r f v ,m Ui ° ^ *•" , ° f ^^v^tL or , r or •n is ! , :i" , q r''' ,r ' co »"«™c"on put in place from nsus IS ureau surveys; for other categories vnlue of co°ns!ru U cSn ZZ&"" <""" Ce " SUS Bu ™ ™»™y YP CenZ C T ,h ° 2 ^ ^^-Expenditures from ( ensus Bureau quinquennial censuses and -mm, ,1 companies ,Mmpnl Two most recent years- Judgmental trend 1 For insurance other parti of domestic net intr of the second revision 2 Includea SIR billion military personnel, and ut™ , r ., ,.. lif "ms^n™^^''^ '"'"'^ Wi,ho "> ^men. 4 mS?« " w£ n l- p ^ te nnnpront w'™ $ structures Value put in place from Census Bureau monthly construction surveys. Same as annual for 2 most recent years. It, data become ■ food produced ind consumed the jud B mental trend firms, standard clothi OCAdj Capita IVA Invent NIPA Nation Source \mr, , and product account -Survey of Currfnt 16 GNP Overview. September 198) other methods are described more fully in the next sec- tion. ,• When value data are not used in preparing an esti- mate, the table indicates the combination of data with separate quantity and price dimensions that is used to derive the required value estimate (as well as indicating any major adjustments needed to derive estimates con- sistent with NIPA definitions and coverage^ On the product side, a "physical quantity times price method is used for several components. For example, the esti- mate for new autos is prepared as unit sales tunes aver- age list price. Both the income and product sides refer to an "employment times hours times average hourly earnings" method and to several forms of a stock of assets/liabilities times an interest rate" method. As mentioned earlier, some of the source data shown in table 2 for the annual estimate are used to inter- polate and extrapolate the levels established by source data that are viewed as final, and all of the source data shown for the preliminary quarterly estimates are used to extrapolate the level of the preceding quarter In addition to using indicator series, as is the case when source data are listed in the table, extrapolation and interpolation may use trends, as is the case when judg- mental trend" is listed in the table. Extrapolation is a method of extending estimates from one period forward (or backward) in time to other periods. In simple terms, extrapolation applies a per- cent change-either the percent change in the indicator series or the percent change in the trend-to the level of the preceding period. Interpolation is a method of filling in estimates between two periods. Interpolate applies a more complex mathematical formula-ther are several in use-to preserve the pattern of the ind cator series consistent with the level of the source dat viewed as final. (An explanation of interpolation an extrapolation, using simple numerical examples, in t context of DEA's regional estimates is in [22], pp. 1-3 and T-35.) Illustrative methods. -Table 2 refers to th« methods-commodity flow, retail control, and perpel ual inventory-used for specific components. lhet methods are described briefly in the following par. graphs to illustrate the work of conforming source dat to the concepts and definitions of the NIPA's and fillu in gaps in data coverage. The commodity-flow method was originally deve oped in the 1930's as a way to obtain the value I consumers' purchases of goods (that is, commoditiei or of producers' purchases of durable equipment. I R eneralization of that method is now applied for the. components within the input-output framework that; used to establish GNP in benchmark years. The stej and information used in benchmark years for producer durable equipment except autos and scrap are summi rized in the tabulation. The commodity-flow method is also used for produ ers' durable equipment in nonbenchmark years, but it implemented in an abbreviated form. It uses less con modity detail— starting with shipments for about 3( commodity classes from the Census Bureau annual su vey of manufactures— and assumes the same distribi Seasonal Adjustment, Annual Rates, and Base Years The quarterly estimates in both current and constant dollars are usually presented as seasonally adjuste I annual rates, and quarterly price indexes aid Implicit pr.ee : deflator, are presented a* seasonally adjusted indexes Typ.ca ly he source data are seasonally adjusted to remove the -nations- due to events such as weather, holidays, and tax payment dates-that normally occur at about the same tune and in about the same magnitude each year After seasonal adjust- ment, cyclical and other short-term changes in the ^onomy stand out more clearly. The seasonal adjustment -made thods such as the widely used Census Bureau X- using met 11 ratio-to-moving-average m ethod— reflect historical expen- ih , ; n on which this experience is based are con- tinually moved forward, and new seasonal adjustments are introduced at the time of annual (and comprehensive) rev,_ sions (The full set of NIPA tables, as presented in annual and comprehensive revisions, includes six seasonally unadjusted quarterly series: GNP, personal consumption expenditures, Federal receipts and expenditures, State and local receipts and expenditures, foreign transactions, and corporate profits with inventory valuation adjustment.) Annual rates are the result of putting values for a quarter or a month at their annual equivalent; that is they are the value that would be registered if the rate of activity were maintained for a full year. For example if 2 million cars were sold in a quarter, the annual rate of sales would be 8 million. Annual rls make it easier to compare values for time : periods of different lengths: The 8 million annua rate of sales fo r a quarter is easily compared with the sales of, say, the preced.ng ^Percent changes from one quarter to the next are usually presented as annual rates of change; that is, they are the rates of change that would be registered ,f continued-or more specifically, compounded-for a full year. For example, ,f the rate of change from one quarter to the next were 2 percent the annual rate of change would be 8.2 percent. (The 8_ 2 percent is more. than four times the 2 percent because of the compounding; it is calculated as (1.02) ■) Constant-dollar estimates are expressed in terms of the prices of what is referred to as the W (« ^ a * ro J period. Periodically, the base year is shifted forward so that the base-year price, are more representative ol recent eco- nomic activity. The base year was shifted from IWteWM at the time of the comprehensive revision released in 1W». (Thus tables of constant-dollar estimates at present bear the headnote "billions of 1982 dollars.") Correspondingly price indexes and implicit price deflators are set equal to 100 in GNP Overview. September 1987 17 tion in steps 3-6 as in the last benchmark. (See [10] for a description of the method as applied to computers.) An even more abbreviated commodity-flow method is used for current quarterly estimates. The strength of the commodity-flow method is that it draws on the very detailed commodity classification odity-Flow Method Step 1. Identify manufacturers' shipments of equipment 2 Add imports and subtract exports of equipment 3. Subtract change in trade inventories (mainly wholesale) of equipment. 4. Subtract intermediate purchases (that is, business current-account purchases), purchases by persons, and purchases by governments 5. Add trade and transportation margins. fi. Add the margin on used equipment and adjust for intersector sales to obtain producers' durable equipment Three criteria are used to identify commodity classes that may contain capital equipment (ll The commodity must hnve n life ..( more Ihnn 1 your, (2) it must not be treated as an integral part of a structure, and (3) it must include a commodity that, if purchased by a business, would be charged to a capital account under normal accounting procedures About 800 commodity classes are identified as solely or partly equipment Shipments are from the Census Bureau quinquennial census of manufactures Exports and imports are from Census Bureau merchandise trade. The change in inventories is from the Census Bureau quinquennial censuses of wholesale and retail trade. Intermediate purchases are primarily from the Census Bureau quinquennial census of manufactures; purchases by persons ore based on a variety of public and private data sources; purchases by government are from the Census Bureau quinquennial census of governments for State and local government and the Census Bureau annual survey of shipments to the Federal Government. Trade margins are from the Census Bureau quinquennial census of wholesale and retail trade adjusted to a commodity basis; transportation margins are from tabulations of reports to the Interstate Commerce Commission and the Dept. of Transportation Margins on used equipment are from the same sources as margins in step . r >. For irrtersector sales and purchases by business, sales to persons are based on the Census Bureau quinquennial censuses of retail trade and transportation; purchases from the Federal Government are based on Treasury Dept and General Services Admin, reports, and purchases from State and local governments are based on the Census Bureau quinquennial census of governments; and purchases from and sales to foreigners are from Census Bureau merchandise trade and comprehensive coverage of the census of manufac- tures for benchmark years. To go from domestic manu- facturer's shipments to business purchases, it relies on data drawn from several other comprehensive, but not necessarily consistent, sets of source data. As applied in its abbreviated form, when the data for steps 3-6 are not available, the method relies on the assumption that the relationships do not change rapidly. The as- sumption that, for each type of equipment, the share of the total going to intermediate purchases, persons, and governments is stable between benchmark years is an important limitation. The retnil-control method, which is used to estimate over one-third of the value of personal consumption expenditures, is more direct than the commodity-flow method. The method provides, first, the indicator se- ries used in extrapolating and interpolating the total of most goods and, second, provides the "control" total to which type-of-good components in this group are made to sum. Specifically, it is used to prepare estimates for all goods except motor vehicles, gasoline and oil, food furnished employees, expenditures abroad by U.S. res- idents, and personal remittances in kind to foreigners, each of which is shown separately in table 2 (and the very small amounts of food produced and consumed on farms and standard clothing issued to military person- nel, which are not shown separately). The steps and information used for each current month's estimate are explained in the tabulation. For current quarters, the monthly estimates are summed to quarterly estimates. The same steps are used with comparable information for annual estimates except in benchmark years. The retail-control method makes it possible to use re- tail sales, available only by kind of business except at 5- year intervals, to provide type-of-good detail. Further, its feasibility on a monthly basis is the foundation for the monthly estimates of personal consumption expen- ditures. These monthly estimates, in combination with monthly estimates of personal income, provide timely information for the analysis of the economic activities of one of the major sectors in the economy. The ba- sic limitation of the method as an extrapolator is that it cannot take into account changes in the relative im- portance of business purchases at retail stores, services sold at retail stores, or personal purchases outside of retail stores. In addition, use of the method to provide the control to which components sum relies on the gen- eral assumption that the types of goods purchased in the various kinds of retail stores do not change rapidly. The perpetual-inventory method is used to derive es- timates of fixed capital stock. The stock estimates, in turn, form the basis for the estimates of capital con- sumption allowances with capital consumption adjust- 18 GNP Overview September 1987 Step For the expenditures totnl: 1. Derive total sales (inchirliriR nnles taxes) for retnil establishments for which most of their sales are consumer-type products not estimated separately This totnl, called the retail control, is the sum of a. Total retail sales of establishments other than those operated by the military less sales of building materials stores, hardware stores, garden supply stores, and mobile home dealers (because their sales relate mainly to homeownership items, which are not included in PCE) and of motor vehicle dealers and gasoline service stations (because related expenditures are estimated independently) b. Sales taxes Sales of retail establishments operated by the military Monthly sales by kind of business (grocery stores, drug stores, and household appliance stores, etc.) are from the Census Bureau monthly survey of retail trade- Monthly sales taxes are based on tax rates, derived from Census Bureau quarterly surveys of State and local tax collections distributed by industry by BEA and retail sales from the Census Bureau annual survey of retail trade, applied (by kind of business) to retail sales in step la. Monthly sales from the Department of Defense, covering commissaries and post exchanges 2. Extrapolate the last monthly estimate by the retail control For PCE type of-good categories: 3. Derive an extrapolation index for each PCE category by weighting sales for each kind of business by the percentage of total salesof a PCE category accounted for by that kind of business and summing over all kinds of business 4. Extrapolate the Inst monthly estimate for each PCE category by the extrapolation index to obtain a preliminary estimate for the category 5. Substitute independently prepared estimates of tobacco products, boats, and personal aircraft (because they are thought to be more reliable than an estimate prepared by allocation) 6. Sum the estimates of the PCE categories to obtain a total 7. Adjust the estimates for the PCE categories other than the independently prepared estimates so that their total plus the independently prepared estimates equals the retail control derived in step 2 PCE Personal consumption expenditures Percentages used as kind-of- business weights are based on merchandise line sales (groceries and other foods, drugs, major household appliances, etc.) from the Census Bureau quinquenninl census of retail trade. ment (often referred to as "economic" depreciation) and for the estimates of the capital consumption ad- justment shown with proprietors' income, rental in- come of persons, and corporate profits. The perpetual- inventory method is based on cumulating past invest- ment flows and deducting the value of discarded assets; it is an alternative to direct measurement of the cap- ital stock, which is seldom statistically feasible on a comprehensive basis. The steps and information used in preparing BEA's estimates of the capital stock are summarized in the tabulation. One of the main advantages of obtaining the stock estimates in this way is that, for the most part, com- prehensive, detailed, and relatively reliable estimates of investment flows— with which the method starts— are available within the NIPA's. By using these flows, the resulting stock and depreciation estimates are consis- tent conceptually and statistically with the NIPA's. In addition, the perpetual-inventory method provides al- ternative valuations of the capital stock— at historical cost (that is, when an asset is valued at the price at which it was purchased new), at constant cost (that is, when an asset is valued at the price that would have been paid for it had it been purchased in the base pe- riod), and at current cost (that is, when an asset is val- ued at the price that would have been paid for it had it been purchased in the period to which the stock esti- mates refer). One of the disadvantages of this method is that it relies on information on the service lives of various kinds of assets; accurate and up-to-date infor- mation of this kind is difficult to obtain. Observations.— Although the main purpose of the sources and methods table is to provide a convenient reference, the overview it provides serves as the basis for several broad observations about methodology. First, on the product side, separate methodologies are often shown for benchmark and other years. On the income side, the distinction between benchmark and other years seldom appears. For many income-side components, the same methodology is used each year. However, for several— notably corporate profits and net interest— the final source data do not become available for several years so that interim methodologies must be 1 used until the final one can be substituted. Second, product-side estimates are largely based on nonadministrative data. Census Bureau censuses and surveys dominate; for the annual estimates, they ac- count for about two-thirds of the product-side total. Income-side estimates are largely based on administra- tive data. Tabulations from the unemployment insur- ance program and from business income tax returns dominate; for the annual estimates, they account for about two-thirds of the income-side total. GNP Overview. September 1987 19 Third, the product-side estimates provide detail by type of good or service. Identifying each sector's pur- chases is fundamental to the structure of the national income and product account, and that requirement dic- tates the use of source data — notably manufacturers' shipments as used in the commodity-flow method — that also provides detail for many components. (Also, as indicated in the next section, detail is crucial to the preparation of constant-dollar estimates.) The income- side estimates provide detail by industry, by legal form of organization (for example, corporate and noncorpo- rate business), or both. Finally, the estimates of personal consumption ex- penditures provide an interesting contrast between the methods of deriving totals and component detail. Perpetual- Inventory Method Step 1. Assemble investment flows (supplemented by transfers of used assets) in asset/industry/ legal form detail going back far enough in time to account for the stock at a starting date. 2. Deflate flows to obtain constant- dollar estimates. 3 Cumulate the value of the constant-dollar investment Hows 4. Associate a "life" (that is, the length of time between the investment and when the asset is normally retired from the stock) with each asset type in the N1FA fixed investment series to estimate the value of retirements 5 Cumulate the value of retirements and subtract these cumulative values from I In- cumulative value of investment; the result is gross stock at constant cost 6. Calculate the part of each investment flow that is consumed each year 7. Cumulate the value of depreciation and subtract the cumulative value from the gross stock; the result is the net stock at constant cost. 8. Reflate constant cost stocks to current cost. Information used Investment tlows at the all- industry level for 1929 and later are the NIPA fixed investment series, and those for earlier years are based on a variety of public and private sources. Price indexes are those used to derive the constant dollar NIPA fixed investment series: For structures, they are based on various price and cost indexes; for equipment, based on producer price indexes from the Bureau of Labor Statistics, a price index for aircraft from the Dept. of Transportation, a price index for ships from the Maritime Admin , and the UEA computer price index. Average service lives are from industry studies in the 1970's by the Treasury Dept., moil i Heat ions Of "Bulletin F" (1942 ed ) of the Treasury Dept., book value data compiled by regulatory agencies, Dept. of Agriculture data, and trade association data. Distributions ol retirements around the average service life are based on a bell-shaped distribution centered on the average (for example, retirements start at 5 percent of the average life and end at 19. r > percent for residential structures). Straight line depr eciation is applied to the i i vest me ,t 11 over their servi e lives es are tiiose When the retail-control method is used, the total of expenditures for goods prepared in that way is esti- mated with more certainty than is the component de- tail, which is derived by allocating the total using per- centages determined at 5-year intervals. In contrast, the total of expenditures on services is pieced together from component detail. The estimating procedure is sampler in that the consumer of a service often pur- chases it directly from the producer and many types of services haircuts, for example — are purchased only by persons. However, any uncertainty about the source data that provide the detail carries through to the total of expenditures for services. ConBtaiit-dollar estimates and associated price indexes The principle underlying constant-dollar estimates is simple: Value each component at its price in a base period. (See the box on page 16 for more about the base period.) This approach, rather than the approach of adding the various physical quantities (the approach perhaps suggested by the term "real" that is often used in referring to constant-dollar estimates), is taken be- cause "you can't add apples and oranges." Constant- dollar values provide the means of aggregation. This principle is implemented for the product-side components of GNP by one of three methods, depend- ing on the availability of source data. The method used for by far the largest part of GNP is deflation. In fact, deflation is so widely used that the term is often used to describe the preparation of all constant-dollar estimates. In deflation, constant-dollar estimates are obtained by dividing the most detailed current-dollar components by appropriate price indexes with the base period — at present, the year 1982 — equal to 100. The other methods, quantity extrapolation and di- rect base-year valuation, are similar in that they both use quantity data. For quantity extrapolation, constant-dollar estimates are obtained by extrapolat- ing the current-dollar estimates from the base year to the current period by quantity data. For direct valua- tion, constant-dollar estimates are obtained by multi- plying base-year prices by quantity data for the current period. In preparing constant-dollar estimates, detail is cru- cial because the greater the detail the more closely the results approximate the ideal of pricing each good or service purchased in the current period with its base- year price. A number of the improvements in method- ology for the constant-dollar estimates have focused on carrying out the calculations at a more detailed level. For example, until the mid- 1970's, expenditures on food consumed at home had been deflated by the index for food at home from the Consumer Price Index, in which 20 GNP Overview .September 1987 food prices are weighted by the composition of expen- ditures in a base period. The improvement was to dis- aggregate these expenditures and deflate 16 separate categories with the appropriate component of the in- dex Thus, if there are shifts in expenditures between (he base year and the current year Tor example, from meats to vegetables- the more detailed deflation cap- tures the shifts and provides a more accurate measure of changes in constant-dollar expenditures on food. At present, roughly 600 categories of goods and services are deflated separately for the quarterly and regular annual estimates. Table 3 summarizes the methodology for the prepa- ration of constant-dollar estimates of GNP and its product-side components, showing which of the three methods is used and indicating the source data with which it is implemented. 3 The subcomponents are as shown in table 2, except where more detail is needed to highlight differences in methodology for constant- dollar estimates. For example, more detail is provided for Federal purchases because distinctly different source data are used for the deflation of national defense and nondefense purchases. For this table, the distinction between annual and quarterly methodology is far less important than it was for the current-dollar method- ology, and major differences between the annual and quarterly source data are noted within the individual entries. Table 3 shows that components of the Consumer Price Index and the Producer Price Index, prepared monthly by the Bureau of Labor Statistics, are used to deflate many components, which together account 'With few exceptions, BEA does not prepare constant-dollar estimates of income measures because price indexes cannot be as- sociated with them, as they can with product measures. Two ex- ceptions are disposable personal income and the profits measures presented in BEA's Business Conditions Digest. In both cases, the series are adjusted for price change by reference to prices of the goods and services on which the income is spent. BEA pre- pares constant-dollar net national product and national income by preparing constant-dollar estimates of capital consumption al- lowances with capital consumption adjustment and of the non- factor charges and then subtracting them from constant-dollar GNP. for well over three-fourths of GNP. Other indexes used in deflation are mainly for services (indexes of earn- ings and expense), structures (various cost indexes and a Census Bureau index for new houses), merchandise exports and imports (Bureau of Labor Statistics and Census Bureau indexes), and national defense (primar- ily BEA indexes). Quantity extrapolation is used for a few service subcomponents in personal consumption expenditures, mining shafts and wells, imputed inter- est and financial service charges, and compensation of employees in government purchases. Direct valuation of quantities is used for used autos and inventories of agricultural commodities held by farmers and the Fed- eral Government. The implicit price deflator and price indexes The preparation of current- and constant-dollar esti- mates yields a byproduct— the implicit price deflator. It is derived as a current-dollar measure divided by a constant-dollar measure, multiplied by 100. Techni- cally, the implicit price deflator for GNP or a compo- nent'of GNP is an average of the indexes of prices of all the goods and services that make up GNP or the com- ponent, weighted by the constant-dollar composition of GNP or the component in the current period. Thus, changes in the implicit price deflator reflect not only changes in prices but also any shift in the composition of GNP or the component. A fixed-weighted price index also is an average of the indexes of prices of all the goods and services that make up GNP or the component. In contrast to the implicit price deflator, the index is weighted by the composi- tion of GNP or the component at a fixed point selected as the base period. Such indexes measure the changes in the price of a fixed market basket; thus, they mea- sure only price change. Chain price indexes, from one period to the next, also do not reflect shifts in the com- position. In the 1970's, it became especially useful to distinguish quarter-to-quarter shifts in the composition of GNP from price changes because at times each was large. Since then, BEA has increasingly featured the GNP fixed-weighted and chain price indexes as appro- priate measures of price change. GNP Overview- September 1987 21 Table 3, — Principal Source Data and Estimating Methods Used in Preparing Constant-Dollar Estimates of GNP Nonresidential Nonresidential produt era durable equipment XCept as noted, CPI, military clothing, I New aulos, CP1 - uputers, UFA pne Used uutos in t stock, based i and BEA con Food furnished employees Expenditures abruud by U i residents less personal Auto and other repair, legal am: funeral services, barbershops and beauty parlors, nursing homes, laundries, other recreation (except video cassette rentals, cable TV, am lotteries), hotels and motels, and commercial education Physicians, dentists, and other medical professional services Private elementary and secondary schools, welfare 1 other personal Schools and welfur ■ TV, and local transport Water and other sanitary Foreign travel by US resid less expenditures in the I States by foreigners Other services; Video cassel rentals and panmutuel nt receipts; other housing ex hotels and motels, other i .insjMH -i.iiiun, UFA on revenue- pa.vsenge X'ut of Traiis[xir lain Jed with consumer pi Foreign travel, foreign con price indexes (exrhange-i Other education and resea clubs and fraternal urga; BEA earnings and ex|H-i bridge, etc tolls. UFA in rokeruge, BFA orders den from volume data from Securities and Exchange I OUIIH1S.-.IOI1 ui trade sour deflated benefit receipts, deflated TeUpho Exploration, ei di-nuloi fur 22 GNP Overview. September 1987 Table 3.-Princip«l Source Data and F.«timatin K Methods Used in Preparing Constant-Dollar Estimates of GNP-Continued Deflation using price based nn — Using quant ty for- Component Component, of the Consumer Price Index (CPU or the Producer Extrapolation Direct valuation Price Index ll'l'll Residential Investment Permanent site housing units Price of new houses from Census Durenu Additions and alterations, and CPI major replacements Broker* commiaaions Price of new houses from Census Producers' durable equipment PPI Mobile home. PPI ( h.n,r In business Nonfarm Purchased Roods, nil Except as noted. PPI Crude petroleum index from Energy industries Information Admin Nonfarm Work in proreaa and Except aa noted. PPI. BRA unit labor est finished (rnoHn, manufacturing itema. CPI IVpt of Agriculture quantities hy crop Net export* of foods and Merchandise exports and imports. Ilurrnu of IjiU.r SUtiatiCH '•«,-, rt and Bureau monthly unil vnlue indoles, implicit price deflntors (including, for computers. BRA price index); Receipts and payments of factor Except OS noted, implicit price deflator for net domestic product Imputed interest paid lo foreigners, paid employee hours of relevant institutions Receipts and pavmont.s for other Travel receipts. CPI; Military transfers and direct defense Rinnncial services furnished services, net » railroad freight. PPI expenditures ahroad. selected defense purchases (see below); without payment \ paid employee hours of relevant travel payments and US parts of freight and port (Government payments for expenditures, relevant tonnage miscellaneous services, foreign and other private services, implicit price deflator for gmss domestic product Government purchases Federal National defense Full-time equivalent employment of foods and services compensation hy rank Federal National defense other Travel, rent, and Goods and services except as noted and military structures. BRA indexes based on Dept of Defense prices paid, computers. BRA price Federal Nondofonso Full time equivalent employment cnmpcnsatinn hy grade Federal Nondefenae other than Moat „,v*H PPI. travel. Structures, coat index from trade Financial services furnished Commodity Credit source, compulses, BRA price index, Corporation purchases. services except as noted. BRA employee hours of relevant Dept of Agriculture quantities by crop State and local compensation earnings and expense index For employees in education, full time equivalent employment by education and experience; for other employees, full time equivalent employment State and local structures government agencies State and local other than Services exce pt as noted Transportation, hooks and noslnge, BRA indexes hased on IVpt of Financial services furnished compensation and structures and goods used in without payment ', paid hours repair, CPI; ponds BRA price index except aa noted and electricity, TH life insurance carriers an 2 Entries are repro-vn •>e r I9«fi. pp 35 3B es furnished without payment hy finan. ate noninsured pension plans , for full detail, see table 9. Snnvrv nr Ci first and second j) and imports lor receipt* and payments) are prepared if the quarterly estimates, the export and import price >f the quarter, are interpolated to obtain quarterly aver tnnth of the Census Bureau unit value indexes is used Part II. A Directory to Information About GNP IN recent years, a number of BEA publications have provided information about GNP and its income and product components. The following is an annotated list of those publications, numbered with the most re- cent publication first and going back to the mid-1970's. Among the items listed are the methodology papers mentioned earlier and articles describing the compre- hensive and annual revisions. The methodology papers explain the conceptual framework of the NIPA's and the source data and estimating methods used to pre- pare the estimates. One of the papers provides an in- troduction to national economic accounting; it is listed as item 18. Two others, on foreign transactions and corporate profits, have been published; they are listed as items 4 and 16, respectively. During the period cov- ered by the list, comprehensive revisions were released in 1985, 1980, and 1976; the articles describing them are listed as items 14, 35, and 48. Annual revisions were re- leased in most years (except before or after comprehen- sive revisions); the articles describing them are listed as items 2, 8, 20, 25, 30, 38, 42, 44, 46, and 54. A number of the other publications in the list, although more gen- eral or less directly related, contain useful information about GNP and its components. These include publi- cations about reliability of the estimates (items 1 and 11), capital stock (items 3 and 15), regional income esti- mates (item 22), and the underground economy (items 19 and 21). Table 4 is designed to serve as a directory to the in- formation in these publications. For GNP and several other measures of production and for each income and product component, the first two columns indicate the publications that have included descriptions of method- ology and the second two columns indicate publications that have discussed changes in definition and classifi- cation and changes in methodology. The publications about the methodology for constant-dollar estimates or about price measurement are marked with an asterisk. The items indicated for the production measures tend to be overviews; those for components, more specific. 1. "Evaluation of the GNP Estimates." August 1987 SURVEY. Reviews the accuracy and reliability of quarterly GNP estimates and recommendations for improvements in source data. Draws on several BEA studies as well as on recent studies by university re- searchers. 2. "The U.S. National Income and Product Ac- counts: Revised Estimates, 1984-86, and First and Sec- ond Quarters 1987." July 1987 SURVEY. Presents a regular annual revision. Describes methodological changes affecting personal consumption expenditures (different source data for quarterly estimates of gaso- line, first-time estimates of video cassette rentals, and, for current-dollar estimates, an adjustment for qual- ity change in used car purchases); producers' durable equipment (more detailed treatment of exports and im- ports in the abbreviated commodity-flow method and, for current-dollar estimates, an adjustment for quality change in used car transactions); net exports (added coverage of commissions on securities transactions and of medical services); and deflation procedures. The changes in deflation procedures affected personal con- sumption expenditures (a different price index for new trucks); residential investment (a modification of the price index for new houses); and personal consump- tion expenditures, producers' durable equipment, net exports, and government purchases (inclusion of prices for personal computers). 3. Fixed Reproducible Tangible Wealth in the United States, 1925-85. 1987 (GPO Stock No. 003-010- 00177-1, price $18.00). Includes a detailed descrip- tion of the investment flows used to implement the perpetual-inventory method of preparing the capital stock estimates and of the derivation of the associated estimates of depreciation. Also describes the recently developed estimates of fixed private capital by industry. 4. Foreign Transactions in the National Income and Product Accounts. BEA Methodology Paper Series MP-3, 1987 (GPO Stock No. 003-010O0178-0, price $2.75). Describes the concepts, sources, and methods ■::>> 24 GNP Overview September 1987 Tnhle 4. Directory to Information about CNP [Numbers refer to items in the list of publications, asterisk refers to methodology for constant-dollar estimates] Description of methodology Chant es in: General Subcomponents or specific aspects Definitions and classifications 1 Methodology Other Charged against CNP . Compensation of employees: 1 (incl.*) 5 7; 18; 19 4 (rest of the world), fi (rest of the world); 22 (disbursements); 37 (disbursements); 45 22 (other labor income); 37 (other labor income); 45 21; 30 (State and local) 42 (other labor income, employer contributions) Supplements to wages and salaries 14 (employer contributions); 48 Proprietors' income with IVA and CCAdj 22; 25; 37 40 (farm). 8 (farm); 20 (farm); 21 (nonfarm); 35 Rental income of persons with CCAdj 22; 25; 37 14; 20; 21; 30 Corporate profits with IVA and CCAdj 16 4 (rest of the world); 6 (rest of the world); 22 (dividends); 23 (financial); 29 (reinvested earnings); 37 (dividends) 35 (rest of the world) 8; 35 8; 20; 25 4 (rest of the world); 6 (rest of the world); 8 (personal interest income); 20 (personal interest income); 22 (personal interest income); 25 (personal interest income); 33 (personal interest income); 37 (personal interest income) 25 (rest of the world); 30 (rest of the world); 35 48*; 52 Business transfer payments 22; 37 48* 8 (State and local); 48* Indirect business tax and nontax liability Subsidies less current surplus of government enterprises 48* Capital consumption 3; 15; 50 14 allowances with CCAdj Statistical discrepancy 35* OOA.Ij Capital consumption adjustment. IVA Inventory valuation adjustment. 1. For items that were reclassified from o ration of meiliral vendor payments from (rr expenditures but not for government pure! latter component is n< (sumption expenditure >n the table. For example, the reclassifi- entry is made for personal consumption GNP Overview^ September 1987 25 Table 4. — Directory to Information about GNP [Numbers refer to items in the list of publications; asterisk refers to methodology for constant-dollar estimates] Description of methodology Chant c» in: General Subcomponents or specific aspects Definitions and classifications 1 Methodology Other GNP 1 (incl.*); 17*; 62 (incl.*) 37 (incl.*) 6 14 (base-year*); 48 (base year*) 2 (several changes, incl. trucks*, computers'); 8 (airline travel*, computers*); 20 (space rent*); 21; 30 (gasoline, space rent), 35 (hospital*); 42 (auto repairs, brokerage*, food*), 48 (food*, financial services*) 14*; 21; 44* 2 (several changes, incl. computers*); 8*; 12; 21; 36; 44*; 48 (several changes), 51* 2 (new houses*); 14 (additions and alterations*); 21; 26 (additions and alterations*); 44* 20 (farm); 35*; 42 (farm*); 46*; 48 2 (computers', services); 13; 14* (exclusion of Puerto Rico and U.$. territories); 20 (services); 25 (services); 30 (services); 35*; 38 (gold); 44* 2 (computers*); 14*, 36*, 44\ 48* 2 (computers'); 14 (Commodity Credit Corporation*); 44* 2 (computers*), 30 (compensation of employees); 35', 42 (compensation of employees); 44'; 48* 35 7 (incl.*) 11 Personal consumption expenditures Gross private domestic investment: Fixed investment: Nonresidential: 3 (durables, incl.*); 8 , (services); 25 (rent, imputed financial services); 43*, 49 (vehicles) 14 (medical vendor payments, energy and crime victim assistance), 48 (border workers, workers compensation) 14 (railroad track), 35 (hotels and motels); 48 (mini-shafts) 18; 19; 41 (incl.*) 3 (incl.*); 16 (incl.*), 63* 3 (incl.*); 16 (incl.*); 61* 3 (incl.*); 15 (incl.*); 63* 62 (incl.*) 4 (incl.*); 6 (incl.*); 26 (incl.*); 34 (incl.*) 27 (incl.*); 89*.... 10 (computers'); 49 equipment 14 (major replacements), 48 (mobile homes, landlords' durables) Change in business 32 (manufacturing*); 47 (manufacturing and trade) 10 (computers*); 38 (gold) 3 (equipment and structures, incl.*); 10 computers'); 24*; 28 (incl.*); 36 3 (equipment and structures, incl.*); 9 (Commodity Credit Corporation); 10 (computers*), 25 (imputed financial services); 31; 36 3 (equipment and structures, incl.*); 10 (computers*); 25 (imputed financial services) inventories Net exports of goods and service* Government purchases of goods and services: Federal: National defense 14 (imputed bank service charge, military shipments); 35 (services); 48 (border workers) 14 (compensation of employees), 48 several changes including compensation of employees) 48 (several changes, including imputed interest) 48 (several changes, including imputed interest) 54 54 (Commodity Credit Corporation) Addendum: Command GNP 4 (incl.*); 6 (incl.*); 34 Gross domestic purchases .. 26 GNP Overview ^September 1987 of the NIPA foreign transactions components, includ- ing the net exports component of GNP. In particular, describes the conceptual and statistical relationship be- tween the NIPA foreign transactions and the balance of payments accounts. See also item 6. 5. "Gross Product by Industry, 1986." April 1987 SURVEY. Includes a summary of sources and methods for the estimates of GNP by industry, for which the current-dollar estimates are prepared as distributions by industry of the income-side components of the na- tional income and product account. 6. "Foreign Transactions in the National Income and Product Accounts: An Overview." November 1986 SURVEY. Presents the conceptual basis and framework of foreign transactions in the NIPA's, describes the pre- sentation of the estimates, and summarizes the sources and methods used to prepare them. See also item 4. 7. The National Income and Product Accounts of the United States, 1929-82: Statistical Tables, 1986 (GPO Stock No. 003-010-00174-7, price $23.00). Includes a full set of definitions of NIPA aggregates and com- ponents, a brief discussion of constant-dollar estimates and price indexes, and descriptions of the classification of production by sector, legal form of organization, and industry. 8. "The U.S. National Income and Product Ac- counts: Revised Estimates, 1983-85 and First Quarter 1986." July 1986 SURVEY. Presents a regular annual revision. Describes methodological changes affecting State and local indirect business tax and nontax accru- als (to include fines levied under Federal oil price regu- lations and paid to States as a nontax); corporate prof- its (adjustments for profits reported on the completed- contract method of accounting, for reversions of de- fined benefit pension plans, for employer contributions to tax-credit stock ownership plans, and for the amount of fines paid); farm proprietors' income and farm cor- porate profits (incorporating a defaulters' gain); and deflation procedures. The changes in deflation proce- dures affected personal consumption expenditures (for airline transportation, a BEA discount-adjusted price index; for computers, a P>EA price index that incor- porates detailed information on changes in prices and characteristics of computers) and producers' durable equipment (eliminating the lagging of price indexes pre- viously needed to put them on a delivery basis). In describing revisions, presents summary methodologies for services in personal consumption expenditures and for net interest and personal interest income. 9. "Federal Farm Programs for 1986-90." April 1986 SURVEY. Includes a statement of the NIPA treatment of the transactions of the Commodity Credit Corpora- tion. 10. "Improved Deflation of Purchases of Comput- ers." March 1986 SURVEY. Presents the quality- adjusted deflators constructed by BEA for computers included in producers' durable equipment, exports and imports, and government purchases, primarily from price indexes developed by IBM Corporation. Dis- cusses the selection of the index most appropriate for deflation of computers in GNP, the construction of the new deflators, and their use in the estimates presented in the comprehensive revision released in 1985. See also "The Economic Interpretation of Hedonic Meth- ods" and "Quality-Adjusted Price Indexes for Com- puter Processors and Selected Peripheral Equipment" in the January 1986 SURVEY and "Corrections to the Estimates of Purchases of Computers" in the March 1986 SURVEY. 11. The Use of National Income and Product Ac- counts for Public Policy: Our Successes and Failures. BEA Staff Paper No. 43, 1986 (GPO Stock No. 003- 010-00144-5; price $3.75). Reviews the "accuracy" of NIPA estimates, using the size of the revisions to GNP as an indicator, and users' recommendations over the last 30 years for new and improved series, schedules of release, changes in concept and structure, etc. 12. "Revised Estimates of the National Income and Product Accounts of the United States, 1929-85: An Introduction." December 1985 SURVEY. Presents a comprehensive revision; see item 14. Includes notes on the effect of shifting the base period and on the revision of producers' durable equipment. Presents a table indicating new NIPA tables and items. 13. "A Note on Merchandise Trade Data." October 1985 SURVEY. Describes the changes in the Census Bureau monthly data on merchandise trade that are used as source data for the NIPA quarterly estimates. (Further changes were made in 1987; they were noted in the announcement of the consequent rescheduling of BEA's release of several estimates in the February 1987 SURVEY.) 14. "An Advance Overview of the Comprehensive Revision of the National Income and Product Ac- counts." October 1985 SURVEY. Describes defini- tional and classificational changes: Two relate to classi- fication of certain business expenditures — replacement railroad track and major replacements to residential structures — as investment, three relate to Federal Gov- ernment employee benefit programs, three relate to for- eign transactions (one of which is described in item 12), and two relate to government assistance pro- grams. Describes three methodological changes affect- ing a number of components — improved adjustments for misreporting on tax returns ("underground econ- omy adjustments" — see item 21), improved estimates GNP Overview. September 1987 27 of capital consumption allowances (based on new work on capital stock estimates), and exclusion of the Com- monwealth of Puerto Rico and U.S. territories. Also describes a change affecting rental income of persons (improved accounting for expenses of homeownership); a shift from 1972 to 1982 in the base year for the cal- culation of constant-dollar estimates and price indexes; changes in deflation procedures; and a number of other methodological changes. The changes in deflation pro- cedures affected the several components that include for computers (a BEA price index that incorporates de- tailed information on changes in prices and character- istics of computers — see item 10), nonresidential build- ings, residential additions and alterations (see item 25), Commodity Credit Corporation purchases, national de- fense purchases, and net exports. 15. "Fixed Private Capital in the United States: Re- vised Estimates, 1925-81, and Estimates by Industry, 1947-81." July 1985 SURVEY. Includes a description of the investment flows used to implement the perpetual- inventory method of preparing the capital stock esti- mates and of the derivation of the associated estimates of depreciation. (See item 3 for an updated, fuller de- scription.) 16. Corporate Profits: Profits Before Tax, Prof- its Tax Liabilities, and Dividends. BEA Methodology Paper Series MP-2, 1985 (GPO Stock No. 003-010- 00143-7, price $2.50) Describes the concepts, sources, and methods of the corporate profits components of the NIPA's. 17. "A Note on the Implicit Price Deflator." May 1985 SURVEY. Describes the implicit price deflator for GNP and contrasts it with the GNP fixed-weighted and chain price indexes. (A more technical explana- tion appears in "Alternative Measures of Price Change for GNP" in the March 1969 SURVEY.) 18. Introduction to National Economic Account- ing. BEA Methodology Paper Series MP-1, 1985 (GPO Stock No. 003-010-00158-5, price $1.00). Reprint of an article that appeared in the March 1985 SURVEY. Places the U.S. NIPA's within the larger framework of national economic accounting. Shows the step-by-step derivation of a general national economic accounting system from the conventional accounting statements used by business and government and inferred for other transactors. Also shows how the income and prod- uct accounts, the capital finance accounts, and input- output accounts — the major branches of national eco- nomic accounting in the United States today — are de- rived from this general system. Includes a list of sug- gestions for further reading. 19. "The Underground Economy: An Introduction." May and July 1984 SURVEY. In May, discusses the coverage of the term "underground economy," a syn- opsis of measurement methods and results, and a sur- vey of implications. In July, discusses illegal activities in the context of the NIPA's, three sets of NIPA esti- mates sometimes misunderstood as being measures of the underground economy (including the adjustments for misreporting described in item 21), and the effect on NIPA estimates of possible misreporting in source data due to the underground economy. An appendix .in July shows the types of source data used to esti- mate the income and product components of GNP for a benchmark year. Includes a bibliography. 20. "The U.S. National Income and Product Ac- counts: Revised Estimates, 1981-83, and First and Sec- ond Quarters 1984." July 1984 SURVEY. Presents a regular annual revision. Describes methodological changes affecting service components of net exports (different data sources for foreign travel and the sep- aration of remitted and reinvested earnings of unincor- porated affiliates of U.S. residents and of foreign resi- dents), quarterly patterns of farm inventories and cash receipts for crops, quarterly pattern of rental income of persons, and deflation of the space rent portions of per- sonal consumption expenditures and housing output (a price index prepared by BEA). In describing the revi- sions, presents a summary methodology for net interest and personal interest income. 21. "Improved Adjustments for Misreporting of Tax Return Information Used to Estimate the National In- come and Product Accounts, 1977." June 1984 SUR- VEY. Describes the use of tax return information in the NIPA's and the methodology for preparing improved adjustments for misreporting. The improved adjust- ments, sometimes referred to as the "underground economy adjustments," were included in personal con- sumption expenditures, gross private domestic invest- ment, and several components of charges against GNP. The estimates for 1977, subsequently extended forward and backward to provide a time series, were included in the comprehensive revision released in 1985. 22. State Personal Income: Estimates for 1929-82 and a Statement of Sources and Methods. 1984 (GPO Stock No. O03-01O-OO125-9, price $9.50). Provides a comprehensive statement of sources and methods used for estimating State personal income, much of which is relevant to the national estimates of income. (A major improvement has since been made in the methodology for nonfarm proprietors' income; see the August 1986 SURVEY.) Also presents two case studies of improve- ments over time — one referring to the definition of other labor income and one referring to the extension of cov- erage of unemployment insurance data in estimating wage and salary disbursements. 28 GNP Overview. September 1987 23. "Special Note.— Profits of Financial Corpora- tions." November 1983 SURVEY. Includes a summary of coverage, concepts, and methodology. 24. "Implicit Price Deflators for Military Construc- tion." November 1983 SURVEY. Presents some of the results of the project described in item 39. 25. "The U.S. National Income and Product Ac- counts: 1980-82 and First Quarter 1983." July 1983 SURVEY. Presents a regular annual revision. Describes methodological changes affecting a services component of net exports (a different data source for ocean freight and port charges), net interest paid by the rest of the world (refinements to the methodology of applying in- terest rates to the amounts outstanding in asset cate- gories), and deflation of residential investment (a dif- ferent price index for additions and alterations). In describing the revisions, presents summary methodolo- gies for rental income of persons and rent of houses in personal consumption expenditures, for interest and imputed financial services (see item 8 for an updated methodology), and for proprietors' income. 2C. "Net Exports of Goods and Services, 1980-82." March 1983 SURVEY. Includes a summary methodol- ogy for exports and imports of goods and services in current and constant dollars. (See item 4 for an up- dated, fuller description.) 27. "Special Note. — National Defense Purchases." November 1982 SURVEY. Includes a summary method- ology. (See item 39 for a fuller description.) 28. "National Defense Purchases: Detailed Quar- terly Estimates, 1977-82." November 1982 SURVEY. Introduces quarterly estimates at a more detailed level than previously available, based on the methodology summarized in item 27. 29. "Special Note. — Reinvested Earnings of Incor- porated Affiliates in the National Income and Product Accounts." September 1982 SURVEY. Includes a sum- mary methodology. 30. "The U.S. National Income and Product Ac- counts: Revised Estimates, 1977-81 and First Quarter 1982." July 1982 SURVEY. Presents an annual revision (covering 5 years). Describes methodological changes affecting quarterly estimates of gasoline purchases in personal consumption expenditures (a different indica-. tor of volume), the space rent portion of personal con- sumption expenditures and rental income of persons (introduction of the average contract rent for tenant- occupied units to estimate the average rental value), net interest paid by the rest of the world (introduction of several different interest rates in the estimation of an appropriate interest rate to apply to amounts out- standing in the categories of claims and liabilities re- ported by U.S. banks), and compensation of State and local government employees (different data on wages and salaries). 31. "Special Note. — The Commodity Credit Corpo- ration in the National Income and Product Accounts." January 1982 SURVEY. Includes a summary method- ology. 32. "Constant-Dollar Manufacturing Inventories." November 1981 SURVEY. Describes the methodology for manufacturing inventories introduced in the com- prehensive revision released in 1980. Introduces the constant-dollar estimates of manufacturing inventories by stage of fabrication made possible by the improved methodology. 33. "Special Note. — Personal Interest Income." September 1981 SURVEY. Includes a summary methodology. 34. "International Transactions in Measures of the Nation's Production." May 1981 SURVEY. Introduces the measures of command-basis GNP and terms of trade; discusses the scope and deflation of international flows of factor income, focusing on the addition of rein- vested earnings of incorporated foreign affiliates to the factor income flows and on the use of the deflator for net domestic product (both introduced in the compre- hensive revision released in 1980); and describes the methodology for deflating other components of exports and imports (see item 4 for an updated, fuller descrip- tion). 35. "The National Income and Product Accounts of the United States: An Introduction to the Revised Esti- mates for 1929-80." December 1980 SURVEY. Presents a comprehensive revision. Describes definitional and classificational changes, most importantly the change that adds reinvested earnings of incorporated foreign affiliates of U.S. direct investors and subtracts the rein- vested earnings of incorporated U.S. affiliates of foreign direct investors from the factor income components of net exports. Also describes the elimination of capi- tal gains from earnings of unincorporated foreign affil- iates, the reclassification of earnings of unincorporated foreign affiliates to dividends, and the reclassification of hotels and motels to nonresidential structures. In- troduces several new aggregates, including gross do- mestic purchases. Describes methodological changes affecting income components (a number of changes, af- fecting proprietors' income, corporate profits, and net interest), producers' durable equipment (use of the ab- breviated commodity-flow method alone rather than as part of an average), net exports (a new treatment of gold — see item 38), and deflation procedures. The changes in deflation procedures affected personal con- sumption expenditures (a new price index for hospital GNP Overview. September 1987 29 expenditures), change in business inventories (see item 32), net exports (including a conceptual change for fac- tor services — see item 34), government purchases (more detail for national defense — see item 39 — and for State and local), and the statistical discrepancy. Presents a table indicating new NIPA tables and items. 36. "Federal Fiscal Programs." February 1980 SUR- VEY. Includes a discussion, built around reconcilia- tion tables, of the differences between unified budget concepts, as presented in the "Budget of the United States," and NIPA concepts of receipts, expenditures (including purchases), and national defense purchases. (The tables are updated annually.) 37. "Monthly Estimates of Personal Income, Taxes, and Outlays." November 1979 SURVEY. Prepared when the introduction of monthly estimates of four kinds of outlays — personal taxes and nontax payments, personal consumption expenditures (in current and constant dollars), interest paid to consumers, and per- sonal transfer payments to foreigners — completed the monthly presentation of all components of the personal income and outlay account. Describes the methodology for the annual and monthly estimates (quarterly esti- mates are the sum of monthly estimates) of personal income and its components; of personal tax and non- tax payments, personal outlays, and personal saving; and of the constant-dollar estimates and related series. 38. "Revision of NIPA Estimates." July 1979 SUR- VEY. Presents a regular annual revision. Describes a change, mainly affecting net exports, in the treatment of gold. 39. Price Changes of Defense Purchases of the United States. 1979 (NTIS Accession No. PB-80217359). Dis- cusses the results of a major project, started in the mid- 1970's by BEA in cooperation with the Department of Defense, to develop price indexes at a detailed level us- ing data provided by the Department of Defense. 40. "The Farm Sector." November 1978 SURVEY. Includes a methodology for farm income and also for farm output and product. 41. "Key Source Data and Projections for Na- tional Income and Product Estimates: Third Quarter 1978." October 1978 SURVEY. Presents tables showing monthly data sources for current-dollar GNP compo- nents and for deflation at the time of the preliminary quarterly estimates. (Although not currently published in the SURVEY, the tables are available each quarter.) 42. "Revisions of NIPA Estimates." July 1978 SUR- VEY. Presents a regular annual revision. Describes methodological changes affecting auto repairs in per- sonal consumption expenditures (a new method based on mileage driven), Federal transfer payments (reclas- sification of Federal payments to nonprofit institutions for training the unemployed, previously treated as a purchase), contributions for social insurance (a new data source for contributions by State and local govern- ments to pension plans for their employees), and defla- tion procedures. The changes in deflation procedures affected personal consumption expenditures (for bro- kerage charges and investment counseling, a new BEA price series; for food, improved weights for the compos- ite price index and new information on imported food) and change in business inventories (for farm invento- ries, improved weights). 43. "Reconciliation of Quarterly Changes in Mea- sures of Prices Paid by Consumers." March 1978 SUR- VEY. Describes three measures: The implicit price de- flator for personal consumption expenditures and the chain price index for personal consumption expendi- tures, both prepared by BEA, and the Consumer Price Index, prepared by the Bureau of Labor Statistics. The reconciliation, which was based on the Consumer Price Index available prior to January 1978, has been discon- tinued. 44. "Revisions of the NIPA's." July 1977 SURVEY. Presents a regular annual revision. Describes method- ological changes affecting the deflation of fixed invest- ment and government purchases (introduction of a lag- ging procedure for one of the construction price indexes and revisions in the lags applied to the price indexes for equipment to put them on a delivery basis) and of net exports (application of price indexes at a more detailed level). 45. "Reconciliation of BEA Compensation and BLS Earnings." May 1977 SURVEY. Describes the two fre- quently used series on hourly compensation; the recon- ciliation table continues to be published each quarter in the SURVEY. 46. "Revisions of the NIPA's." July 1976 SURVEY. Presents a regular annual revision. Describes a method- ological change affecting the change in business inven- tories (use of a more detailed procedure in preparing constant-dollar estimates). 47. "Manufacturing and Trade Inventories and Sales in Constant-Dollars, 1959 to First Quarter 1976." May 1976 SURVEY. Includes a methodology for constant- dollar stocks of inventories. (Item 32 includes an up- dated methodology for manufacturing inventories.) 48. "The National Income and Product Accounts of the United States: Revised Estimates, 1929-74." Jan- uary 1976 SURVEY, Part I. Presents a comprehensive revision. Describes the definitional and classificational changes, including those made to capital formation and consumption (including the introduction of the capi- tal consumption adjustment see item 50) and to gov- 30 GNP Overview September 1987 ernment transactions (including reclassification of in- terest paid by the Federal Government to foreigners and introduction of imputed interest receipts and im- puted charges for services furnished without payment by financial intermediaries). Describes the methodolog- ical changes affecting the motor vehicles components (see item 49), change in business inventories (mainly the introduction of information that permits a bet- ter separation of book value inventories according to the accounting method underlying them), producers' durable equipment (valuation of computers leased by the manufacturers to others at cost and inclusion of nuclear reactor fuel elements and control rods), gov- ernment purchases (a change in procedures for con- verting information on local governments from a fis- cal year basis to a calendar year basis and inclusion of certain receipts as negative State and local pur- chases), and deflation procedures. The changes in defla- tion procedures affected personal consumption expen- ditures (food and financial services), construction (see item 53), producers' durable equipment (see item 51), and government purchases (an approximation of spec- ification pricing for employee services and new detail on purchases from business). Also describes the shift from 1958 to 1972 in the base year for the calculation of constant-dollar estimates and price indexes and the methodology for preparing constant-dollar estimates of nonfactor charges (indirect business tax and nontax li- ability, subsidies less the current surplus, and business transfer payments) that made possible the presentation of several new constant-dollar aggregates, notably na- tional income. Presents exhibits indicating new NIPA tables and items. 49. "Vehicles: Recent Developments and Treat- ment in the GNP Accounts," November 1975 SURVEY. Summarizes the methodology (including improvements introduced in the comprehensive revision released in 1976) used to estimate the auto and truck components of the expenditure components of GNP. 50. "New Estimates of Capital Consumption Al- lowances in the Benchmark Revision of GNP." October 1975 SURVEY. Describes the concept and methodology for the adjustment, introduced in the comprehensive re- vision released in 1976, that converts tax-return-based measures of depreciation to measures that are based on consistent accounting and valued at current replace- ment cost. 51. "Improved Deflation of Producers' Durable Equipment." July 1975 SURVEY. Describes the use of the Wholesale Price Index (now Producer Price In- dexes) and other price indexes, featuring a timing ad- justment to place the indexes on the delivery basis needed for the NIPA's. (As of July 1986, the adjust- ment was no longer needed for the Producer Price In- dexes; see item 8.) 52. Quarterly GNP Estimates Revisited in a Double- Digit Inflationary Economy. BEA Staff Paper No. 25, 1974 (NTIS Accession No. COM 75-10042). Summa- rizes the sources and methods used to estimate current- dollar quarterly GNP and quarterly national income and to deflate quarterly GNP (tables 2 and 3 in this article are more up to date). Describes the sources and methods used to estimate inventories and the inventory valuation adjustment. 53. "Revised Deflators for New Construction, 1947- 73." August 1974 SURVEY, Part I. Describes the price indexes from government agencies and trade sources used to calculate the deflators for each type of construc- tion activity. (Several changes in methodology were made later.) 54. "U.S. National Income and Product Accounts, 1970-73." July 1974 SURVEY. Presents a regular an- nual revision. Introduces two new tables: A reconcili- ation of national defense outlays in the unified budget and NIPA national defense purchases (see item 36) and a reconciliation of the Commodity Credit Corporation's outlays in the unified budget and its NIPA expenditures (see items 31 and 9). Publications for which an NTIS accession number is given can be ordered from the National Technical Infor- mation Service, 5285 Port Royal Road, Springfield, V^ 22161. Publications for which a GPO stock number ii given can be ordered from the Superintendent of Docu ments, U.S. Government Printing Office, Washington DC 20402. See "A User's Guide to BEA Information' in the February 1987 SURVEY for additional informa tion about BEA's publications. Methodology Papers: The National Income and Product Accounts Bureau of Economic Analysis U.S. Department of Commerce 1. Introduction to National Economic Accounting. Methodology Paper Series MP-1, March 1985. 2. Corporate Profits: Profits Before Tax, Profits Tax Liability, and Dividends. Methodology Paper Series MP-2, May 1985. 3. Foreign Transactions. Methodology Paper Series MP-3, May 1987. 4. GNP: An Overview of Source Data and Estimating Methods. Methodology Paper Series MP-4, September 1987. »U.S. Govcrnnci *314 AQDDDn37S71b )UBJE DATE DUE te$j*t 'fill* Demco, Inc. 38-293 ADQ00M37271L