Fixed assets and consumer durable goods for 1993-2003

Survey of Current Business, Sept, 2004 by Paul R. Lally

As part of the annual revision of the national income and products accounts (NIPAs), the Bureau of Economic Analysis (BEA) has released preliminary estimates of fixed assets and consumer durable goods for 2003 and revised estimates for 1993-2002. (1) These estimates cover the net stock of equipment and software and of structures owned by business and government and the net stock of durable goods owned by consumers.

The estimates reflect the following improvements:

* The conversion of the industry distribution of private nonresidential equipment, software, and structures to the North American Industry Classification System (NAICS), which better reflects new and emerging industries and which provides better international comparability, (2)

* The incorporation of the 1997 capital flow table, which is integrated with the 1997 benchmark input-output accounts and shows the industries that purchase or lease new investment,

* The use of an updated depreciation schedule for consumer autos, and

* A new distribution of the estimates by legal form of organization that shows estimates of sole proprietorships and of partnerships to provide more detail within the NIPA business sector.

In addition, the estimates reflect the use of an updated depreciation schedule for computers and peripheral equipment and the use of updated depreciation rates for communication equipment, for nonresidential commercial structures, for railroad structures, and for nonresidential farm structures.

The estimates of the net stock of fixed assets and consumer durable goods are presented in two valuations--current cost and real cost. The current-cost valuation includes the effects of both price changes and changes in the physical volume of assets, but the real-cost valuation, which is measured in terms of chain-type quantity indexes, reflects only changes in the physical volume or real changes. (3)

In 1987-2003, the net stock at current cost grew at an average annual rate of 4.9 percent, and at real cost, it grew 2.6 percent (table A). Real-cost private net stock grew at an average annual rate of 2.5 percent; real-cost government net stock grew at an average annual rate of 1.8 percent; and real-cost net stock of consumer durable goods grew at an average annual rate of 4.9 percent.

During the economic expansion of 1991-2000, the real-cost net stock grew at an average annual rate of 2.6 percent, primarily reflecting 5.1-percent growth in the real-cost net stock of nonresidential equipment and software and 4.6-percent growth in the real-cost net stock of consumer durable goods. (4) In 1995-2000, nonresidential equipment and software grew at an average annual rate of 5.6 percent, peaking at 7.4 percent in 1999; most of the growth was accounted for by an increase in information and processing equipment and software. Most of the growth in consumer durable goods was accounted for by an increase in motor vehicles.

In 2001-2003, the growth in the real-cost net stock of fixed assets and consumer durable goods slowed to an average annual rate of 1.7 percent, reflecting much slower growth in most categories.

Changes in methodology and presentation NAICS

As part of the annual NIPA revision, the estimates of the net stock of private fixed assets for 1987-2003 have been converted to the 1997 North American Industry Classification System (NAICS). This change reflects the NAICS basis of BEA's capital flow table, which serves as an important source of data for the net stock estimates. (5) This change in classification affects the detailed estimates by industry but not the aggregate measures of the net stock of private fixed assets, and it follows the recent implementation of the 1997 NAICS in BEA's estimates of income and employment by industry. (6)

NAICS adds many new classifications--such as those for information, management, and services. The estimates of investment were converted to a NAICS basis for a sufficiently long period in order to use the perpetual inventory method to convert the estimates of net stock to a NAICS basis. (7)

Sole proprietorships and partnerships

As part of the annual NIPA revision, the estimates by legal form of organization now present estimates for sole proprietorships and estimates for partnerships. As a result of this change, the estimates by legal form of organization provide more detail within the NIPA business sector.

Capital flow table

The capital flow table is an important source for the derivation of the industry distribution of gross private domestic fixed investment by type of asset on a use basis. However, because net stocks are tabulated on an ownership basis, the estimates of capital flows by industry are adjusted in order to convert them from a use basis to an ownership basis. The most significant adjustment was to the capital flows for equipment that are purchased for lease to others under operating leases, such as autos, trucks and truck trailers, computers, communication equipment, construction equipment, and aircraft.

In addition, investment in mining exploration, shafts, and wells was reclassified from the construction industry to the mining industry, and force-account construction was reclassified from the construction industry to the industries that perform the construction. (8) The capital flows of nonprofit institutions that primarily serve individuals now remain in their assigned industries in order to better reflect the net stock of assets of these industries; previously, these flows were reclassified to the real estate industry.