Updated summary NIPA methodologies

Survey of Current Business, Oct, 2001

The perpetual-inventory method is used to derive estimates of fixed capital stock, which in turn form the basis for the estimates of consumption of fixed capital. This method is based on investment flows and a geometric depreciation formula; it is used instead of direct measurement of the capital stock because direct measurement is seldom statistically feasible on a comprehensive basis. (7)

The fiscal year-analysis method provides the framework for the annual and quarterly estimates of Federal Government consumption expenditures and gross investment. The estimates of expenditures are prepared by program--that is, by activity for a group of line items or for an individual line item in the Budget of the U.S. Government. For most programs, the fiscal year analysis begins by adjusting budget outlays for coverage and for netting and grossing differences between these outlays and NIPA expenditures. The expenditures total (as adjusted) for a program is then classified by type of NIPA expenditure--for example, transfer payments and interest paid--with nondefense consumption expenditures and gross investment determined residually. When a fiscal year analysis is completed, the detailed array of NIPA expenditures by program and by type of expenditure serves as a set of control totals for the quarterly estimates. (8)

International transactions accounts (ITA's).--The source data for the foreign transactions reflected in most NIPA components--such as net exports of goods and services and rest-of-the-world corporate profits--are from the ITA's, which are also prepared by BEA. (9) As noted in table 1, for some NIPA components, the ITA estimates are adjusted to conform to NIPA concepts and definitions. (10) Annual estimates of these adjustments and their definitions are shown in NIPA table 4.5B, which was last published in the August 2001 SURVEY on page 68; summary quarterly estimates are shown in "Reconciliation Tables" in appendix A of the SURVEY.

Other information.--In preparing the annual estimates of several of the income-side components, BEA adjusts the source data for various coverage and conceptual differences. For each subcomponent listed below, an annual NIPA table reconciles the value published by the source agency with the NIPA value published by BEA and identifies the BEA adjustments. The following is a list of the subcomponents and their corresponding reconciliation tables, which were last published in the August 2001 SURVEY beginning on page 118: Consumption of fixed capital, table 8.22; nonfarm proprietors' income, table 8.23; farm proprietors' income, table 8.24; corporate profits, table 8.25; net interest, table 8.26; and wages and salaries, table 8.27.

Real estimates

Table 2 shows which one of three methods--deflation, quantity extrapolation, and direct base-year valuation--is used to prepare the quantity index for each detailed product-side component of real GDP and identifies the source data with which the method is implemented. (11) Deflation is used for most of the detailed components. In deflation, the quantity index is obtained by dividing the current-dollar index by an appropriate price index that has the base year--currently 1996--equal to 100 and then by multiplying the result by 100.