Business investment by industry in the U.S. economy for 1997

Survey of Current Business, Nov, 2003 by Douglas S. Meade, Stanislaw J. Rzeznik, Darlene C. Robinson-Smith

ON September 30, 2003, the Bureau of Economic Analysis (BEA) released the capital flow table for 1997. This table supplements the 1997 benchmark input-output (I-O) accounts, which were published in the December 2002 SURVEY OF CURRENT BUSINESS. (1) The use table from the benchmark I-O accounts shows the materials and services input requirements for each industry. The capital flow table shows the structure of flows of new capital goods and services for each industry.

The capital flow table enables many types of analysis that are not possible using only the I-O table. Among these are the market analysis for capital goods, the examination of the effects of information technology investment on productivity, and the development of capital stocks by industry using asset-specific depreciation estimates. Analytical and statistical uses of the capital flow table are described in further detail below.

The 1997 capital flow table shows the destination of new investment in equipment, software, and structures in terms of the industries purchasing or leasing the new investment in 1997. This table is one of several BEA data products that present information on capital investment. The national income and product accounts (NIPAs) show investment by major type of asset. The I-O accounts show private fixed investment by detailed commodity as one column of purchases by all industries. The BEA fixed assets estimates show investment, depreciation, and net capital stocks by asset type by industry of owner. The capital flow table provides the most detailed view of investment by commodity and by using industry, showing flows of 180 commodities to 123 private sector industries.

The capital flow table is an important part of the theoretical apparatus that was developed by Wassily Leontief, the father of I-O analysis. However, Leontief did not succeed in building a capital flow table, and the first large-scale I-O table that was developed by the Bureau of Labor Statistics for 1947 had no capital flow table. (2) Work began on the first capital flow table after the 1963 benchmark I-O table was published by BEA. The 1997 capital flow table is the seventh in a series of tables that BEA has produced. The earlier tables supplemented the benchmark I-O accounts for 1963, 1967, 1972, 1977, 1982, and 1992. (3)

The following major changes have been introduced in the 1997 capital flow table:

* The data are now presented on the basis of the North American Industry Classification System (NAICS).

* More detail is now available in the services industries and the information sector (NAICS 51) that represent a large and growing market for information technology (IT) and other high-tech capital.

* The table now includes software investment, a change that was adopted in the NIPAs in 1999 and that was incorporated into the 1997 benchmark I-O accounts.

The goal of this article is to help make the capital flow table a familiar and useful tool to business economists, academic economists, and policymakers. The first section presents a tour of the main features of the table. The second section illustrates several analytical and statistical uses of the table. The remaining sections cover the definitions and conventions underlying the table, the methodology used to construct the table, and areas for future research.

Presentation of the Capital Flow Table

The capital flow table is presented in two formats at the end of this article. Both formats reflect the same underlying data. In table 1, the rows show the flow of new capital goods and services by 180 I-O commodities in producers' prices. (4) In table 2, the rows show flows of new equipment, software, and structures by 51 major NIPA categories in purchasers' prices. (5) Both tables have 123 columns of using industries, which are listed in appendix A. The commodities that make up structures, equipment, and software investment flows are listed in appendix B. (6)

The capital flow table by I-O commodity. The rows in table 1 show I-O commodities in producers' prices by using industry. The trade margins and transportation costs are in separate rows that represent the costs that are allocated to the users of the commodities.

The final row of the table shows total investment in new equipment, software, and structures used by each industry. The last column in the table shows the total sales of each commodity to private fixed investment. The trade and transportation rows show the margins that were spent to bring the good or service to the final user. The grand total of the matrix--$1,324.2 billion--is on the last page of the table, at the bottom right.

Viewing the rows of the table is useful when the market for, or the destination of, a particular capital goods commodity is examined. For example, row 133 shows the distribution of heavy duty trucks (336120). Total sales of heavy duty trucks in producers' prices were $13.8 billion (see line 133, in the last column). Truck transportation (4840) was the largest using industry, with total purchases and leases of $4.0 billion. The next largest using industry was "new and maintenance and repair construction" (2300), with total purchases and leases of $2.3 billion.