Gross domestic product by industry for 1987-2000: new estimates on the North American Industry Classification System

Survey of Current Business, Nov, 2004 by Robert E. Yuskavage, Yvon H. Pho

ON November 15, 2004, the Bureau of Economic Analysis (BEA) released new estimates of gross domestic product (GDP) by industry for 1987-97 that are based on the 1997 North American Industry Classification System (NAICS). These estimates, together with the previously published industry estimates for 1998-2000, provide the first economywide, NAICS-based view of historical industry performance and contributions to GDP growth. The new estimates confirm the trends identified in the previously published estimates that were based on the Standard Industrial Classification (SLC) system, but they also offer new insights into changes in the structure of the economy. NAICS more clearly identifies high-technology industries, so these new estimates bring into sharp focus the important role played by information and communications technology industries in the economic expansion of the late 1990s. Moreover, the greater NAICS detail for the services sector provides a better understanding of the sources of the continuing growth in that sector's share of GDP.

In general, NAICS improves on the SIC as an industry classification system because it more consistently classifies establishments into industries on the basis of similar production processes, it recognizes new and emerging industries, and it provides greater detail for the services sector. However, the ability of statistical agencies, such as BEA, to provide NAICS-based industry time series using standard methodologies has been hampered by the lack of NAICS source data for years before 1997. As a result, the estimates for 1987-97 presented in this article were developed using a new methodology for extrapolating backward the NAICS industry estimates for 1998-2002 that were released in June as part of the integrated annual industry accounts) The extrapolation methodology was designed to provide historical annual estimates that are consistent over time, that largely preserve the broad patterns observed in the previously published SIC-based estimates, and that incorporate the latest results from BEA's input-output accounts and national income and product accounts. (See the appendix on methodology for the revised estimates.)

With the release of these new estimates, BEA has significantly expanded the availability of NAICS-based historical industry data. In September 2004, BEA released new estimates of the net stock of fixed assets by NAICS industry. (See the box below.)

By combining the new GDP-by-industry estimates for 1987-97 with the integrated estimates for 1998-2000, the analysis of historical trends presented in this article can include the acceleration of economic growth during the late 1990s. These new estimates clarify that information and communications technology industries in both the goods and services sectors played important roles in the acceleration, they confirm the continuing shift in the economy towards the services sector and away from the goods sector, and they provide insight into changes in the composition of the services sector during its expansion.

The new GDP-by-industry data show the following:

* Real GDP growth accelerated during 1995-2000 to an average annual rate of 4.1 percent, compared with 2.7 percent in 1987-95. The fastest growing industry groups in 1995-2000 were durable-goods manufacturing (8.9 percent) and information (8.0 percent). The computer and electronic products industry led the growth in durable-goods manufacturing. The publishing industry, which includes software, powered growth in the information sector.

* The largest contribution to the economywide acceleration in growth was made by the finance, insurance, real estate, rental, and leasing industry group, mostly due to the securities, commodity contracts, and investments industry. (2) The next largest contribution was made by durable-goods manufacturing.

* Private services industries' share of GDP expanded from 61.2 percent in 1987 to 66.5 percent in 2000. The share of private goods industries fell from 24.9 percent to 21.2 percent. Manufacturing's share declined from 17.1 percent to 14.5 percent.

* Within the services sector, the share of the professional and business services industry group, which includes computer systems design and related services, increased the most, from 8.7 percent in 1987 to 11.6 percent in 2000. The finance, insurance, real estate, rental, and leasing industry group had the next largest increase in share, from 17.7 percent to 19.7 percent.

In the remainder of this article, industry trends and developments are presented, future work is described, and the methodology is explained in an appendix. The detailed estimates for 1987-2000 are presented in tables 1-12 at the end of the article. (See the box below.)

Industry Trends in 1987-2000

Several important developments in the economy since 1987 can be more clearly identified and more thoroughly studied with the new GDP-by-industry estimates because of the features of NAICS. First, the important contribution of information and communications technology to the acceleration of economic growth in the late 1990s can be depicted in greater detail and with a sharper focus. Second, the sources of the continuing growth in the services sector's share of GDP relative to the goods and the manufacturing sectors can be more completely described. Third, the relationship between the growth of manufacturing output and the growth of final expenditures for goods ("GDP goods") can be better understood.