U. S. Bureau of Labor Statistics The Trials and Tribulations of Developing International Services Price Indexes The 2008 World Congress on National Accounts and Economic Performance Measures for Nations William Alterman Jeanette Siegel Will Adonizio May 17, 2008

What is the Bureau of Labor Statistics? The Bureau of Labor Statistics (BLS) is the principal fact-finding agency for the Federal Government in the field of labor economics and statistics. BLS is an independent, national statistical agency that primarily collects and reports economic data covering prices, employment, and compensation.

What is the International Price Program? Within BLS, the International Price Program (IPP) is one of three price programs, along with the Producer Price Program (PPI) and the Consumer Price Program (CPI). The data published by the IPP track price changes of U.S. imports and exports. These data are used to construct “real” trade flows; assess the impact of exchange rate fluctuations; and measure and forecast inflation.

BLS Services Price Indexes CPIPPI IPP Transactions Included Domestic and some imports Domestic and some exports Imports and Exports Prices Measured Paid by consumers Received by producers Paid by Importers Received by Exporters Services % of Total Trade 59%77% Exports: 30% Imports: 17% Coverage of Services 100%76% Exports: 7% Imports: 11% Data Sources for Sampling and Weighting Consumer Expenditure Survey Unemployment Insurance File Census Data Various Sources specific to each index

The Growing Importance of International Services Impact on the World Economy/Globalization Creation of Newly “Tradable” International Services Expansion of Established International Services

Importance of International Services in U.S. Trade Statistics Growth in Cross-Border Trade –From , exports of services grew 81 percent and imports of services grew 119 percent. –GDP grew 68 percent. –In 2005 services comprised approximately 30 percent of all exports and 17 percent of all imports. Growth in Sales Through Affiliates –During the same time period, U.S. affiliate sales abroad (MOFA) grew 178 percent and foreign affiliate sales in the U.S. (MOUSA) grew 160 percent.

Cross-Border and Sales Through Affiliates

The History of International Services Development in the International Price Program Import and Export Air Passenger Fares Import and Export Air Freight Import Ocean Liner Freight Import Crude Oil Tanker Freight 2006 Completed Switch From Quarterly to Monthly Publication of Services Price Indexes 2007 Export Travel and Tourism Export Post Secondary Education 2008IPP Budget Cuts

Challenges Budget Conceptual Measurement Operational/maintenance

Budget Issues Development of Services Indexes is More Labor Intensive than Goods Significant Growth in Both Import and Export Goods – cannot shift resources to work on Services No Additional Funding for Services Budget Reductions in the International Price Program in 2006 & 2008

Conceptual Issues What Types of International Services Indexes Should We Measure? Cross-Border Sales through Affiliates Input/Import Indexes Conceptual Issues within Specific Services Areas/International Services What is the Service?

Measurement Issues Defining the International Services Transaction Obtaining Data: Sample Frame, Weights, and Prices Pricing Consistent International Services Transactions Over Time

Operational Issues Developing Sampling and Weighting Methodologies Developing the Processing Requirements and Software to Produce International Services Price Indexes Maintaining International Services Indexes Over Time Aggregating International Services Indexes

How do we differ from the PPI? Conceptual and Measurement Differences Operational Differences Classification Differences

Direction for the Future What We Know We Can Cover Additional Cross-Border Indexes New Types of Indexes Collaborative Efforts with PPI

QUESTIONS????