Updated summary NIPA methodologies

Survey of Current Business, Oct, 2001

THIS REPORT PRESENTS summary descriptions of the principal source data and methods used to prepare the current-dollar estimates of gross domestic product (GDP) and the estimates of real GDP. (1) These descriptions have been updated to reflect the methodological improvements that were introduced in the annual revision of the national income and product accounts (NIPA's) that was released in July 2001. (2)

Current-dollar estimates

Table 1 lists the components of current-dollar GDP starting with the components on the product side and proceeding to those on the income side. The subcomponents, with their dollar values for 2000, are grouped according to the methodology used to prepare them.

The column for the annual estimates covers the revision cycle for those estimates and notes the major differences in methodology as the estimates move through the three annual revisions to a benchmark revision. (3) For example, for "most goods" in personal consumption expenditures (the first item on the product side), the table indicates one methodology for benchmark years and another for all other years.

The column for the quarterly estimates covers only the advance estimate for the current quarter--that is, the estimate prepared about a month after the end of the quarter. That estimate, rather than the preliminary or final quarterly estimate, is described because more attention focuses on the "first look" at the quarter. In addition, the column lists only the source data and methods; it does not indicate how many months of source data are available or whether the data are subject to revision by the source agency. Information on the key monthly source data appears each month in the "Business Situation" in the SURVEY OF CURRENT BUSINESS. Additional information on the monthly source data used for the advance estimate is available on BEA's Web site <www.bea.doc.gov>.

The source data listed consist of a variety of economic measures, such as sales or receipts, wages and salaries, unit sales, housing stock, insurance premiums, expenses, interest rates, mortgage debt, and tax collections. For most components, the source data are "value data"; that is, they encompass both the quantity and price dimensions that are required for current-dollar estimates. In these cases, the methodology indicated in table 1 covers only the adjustment of the value data to derive estimates consistent with NIPA definitions and coverage.

For those estimates not derived from value data, the table indicates the combination of data with separate quantity and price dimensions that is used to derive the required value estimate and the major adjustments needed to derive estimates consistent with NIPA definitions and coverage. On the product side, a "physical quantity times price" method is used for several components. For example, the estimate for new autos is calculated as unit sales times expenditure per auto (the average list price with options, adjusted for transportation charges, sales tax, dealer discounts, and rebates). On the income side, an "employment times earnings times hours" method and variations of a "stock of assets/liabilities times an effective interest rate" method are used for several components.

Some of the source data shown in table 1 for the annual estimates are used as indicators to interpolate and extrapolate the levels established by source data that are more comprehensive, and all of the source data shown for the advance quarterly estimates are used to extrapolate the level of the preceding quarter. In addition, extrapolation and interpolation may be based on trends, as is the case when "judgmental trend" is listed in the table. (4)

Estimating methods.--Table 1 refers to four methods--commodity flow, retail control, perpetual inventory, and fiscal year analysis--used by BEA for estimating specific components.

The commodity-flow method is used to obtain the value of final users' purchases of goods and services (that is, commodities) for BEA's benchmark input-out-put accounts. These values serve as the benchmark for the NIPA estimates of personal consumption expenditures (PCE), of equipment and software, and of the commodity detail for State and local government consumption expenditures and gross investment. (5) This method is also used for equipment and software in non-benchmark years, but it is implemented in an abbreviated form. An even more abbreviated commodity-flow method is used for current quarterly estimates of equipment and software.

The retail-control method is used to estimate over one-third of the value of PCE for periods other than benchmark years. This method provides the indicator series used in extrapolating and interpolating the total of "most goods" and the "control" total to which the PCE categories and residential equipment included in this group must sum. These PCE categories consist of all goods except autos and trucks, food furnished to employees, food and fuel produced and consumed on farms, standard clothing issued to military personnel, school lunches, and net foreign remittances. (6)