1. Flexible Annual Revisions Brian C. Moyer Chief, Government Division National Economic Accounts Data Users’ Conference New York, NY March 15, 2007

2. www.bea.gov 2 What are Flexible Annual Revisions?  Major definitional and statistical changes are incorporated into the national and industry accounts on a flow basis, rather than every five years  Annual revisions are not limited to the three most recent years—revisions can be incorporated for all periods

3. www.bea.gov 3 Advantages of Flexible Annual Revisions  For data users  More timely delivery of revision results  Fewer changes to digest at one time  More up-to-date sets of accounts  For BEA  Better planning and spreading of workloads  Reduced pressures on staff  More flexibility for introducing changes

4. www.bea.gov 4 Timing of Flexible Annual Revisions  Scheduled to begin in 2010, after the next comprehensive revision to the NIPAs and the Annual Industry Accounts.  New procedures being put into place prior to 2010 to ensure a smooth transition  Industry-National Steering Committee  Off-line testing

5. www.bea.gov 5 Examples of possible proposals  Potentially implement before 2013  Integrated BEA-BLS production account  Improved real insurance estimates: Separately deflated premiums and expected losses  Improved measures of motor vehicle output  Implement with the 2007 Benchmark I-O Table  Capitalization of R&D expenditures  Classification of government enterprises by sector

6. www.bea.gov 6 Background on Integration  Industry-National Integration Team established in early 2005  Two major objectives  Improve the process for incorporating revisions into the national and industry accounts  Share information by establishing a “feedback” mechanism between the industry and national accounts

7. www.bea.gov 7 Gains from feedback look promising …  PCE for Shoes  Nominal growth for 1997-2004 would be revised down from 4.2 percent to 3.0 percent  Due to changes in the sales-mix by kind of store  PCE for Televisions  Nominal level for 2002 would be increased by $3 billion (about 20 percent)  Due to strong import growth

8. www.bea.gov 8 Issues for Flexible Annual Revisions  Trade-off between more years subject to revision vs. receiving revisions on a flow basis  Revisions to the reference year for chained- dollars and indexes could trigger revisions to real estimates for long periods.  Synchronizing revisions between the annual industry accounts and the NIPAs for long periods.