1. Supply and Use Tables and the input-output framework
THE CONTRACTOR IS ACTING UNDER A FRAMEWORK CONTRACT CONCLUDED WITH THE COMMISSION

2. SUTs and the i-o framework
The following set of slides is based on Chapter 9 of ESA 2010, and the Eurostat Manual of Supply, Use and Input-output Tables (2008)
It has also benefitted from documentation of the UK sources and methods (ONS 1998) up dated as necessary

3. Supply and use tables
Supply and use tables show the flow of goods and services in the economy
Supply is domestic production and imports classified by products
Use is expenditure on these products either as intermediate consumption by industry or category of final demand

4. Simple Example
Output
Imps
Total supply
Agric uses
Man uses
Serv’s uses
Total int dem
Final demand
Exps
Total Uses
Agric 20 40 5 15 10
Man 50 30 80 25
Serv’s
100
120 35 65
Total
170 70
240 75
125
Vale added
Uses are shown in the columns, resources are shown in the rows

5. Links to sector accounts
Goods and services account
Resources: domestic production output, imports
Uses: Intermediate consumption, final consumption, gross capital formation, exports
No balancing item

6. Links to sector accounts
SUT differences from Goods and services account
G&S account shows product transactions by sector, not by industry and final demand categories
So Household uses are not the same as Household Final Consumption Expenditure
Industry uses are not the same as private corporation uses e.g public health and education uses

7. Links to sector accounts
Goods and services account
No balancing item
Same as Supply-use table
supply of products equals demand for products in rows

8. Links to sector accounts
Production account
Resources: Output of domestic activities
Uses: Intermediate consumption by activity
Balancing item: Value added by activity
Same as . . .

9. Links to sector accounts
Supply-use industry columns
Body of table: intermediate consumption
Total industry output (basic prices) at foot of each column
Value added shown as balance above output

10. Links to sector accounts
Generation of income account
Resources: value added
Uses: compensation of employees
other taxes less subsidies on production
Balancing item: gross operating surplus

11. Links to sector accounts
As with all balancing items in the accounts, they can be shown on a gross or net basis
Gross makes no allowance for the using up of capital assets in production
Net shows the balancing item net of capital consumption

12. Supply and use tables
When the supply and use tables are balanced, the following identities hold:
Value added = sum of compensation of employees and gross operating surplus
Output + imports = sum of intermediate demand, final consumption, capital formation and exports ( P + M = ID + C + I + X)

13. Supply and Use tables
At the level of the whole economy, intermediate demand = intermediate consumption ID = IC
Placing production output on same basis as purchasers prices of demand
P + M + product taxes = ID + C + I + X
(P + product taxes - IC) = C + I + (X-M)
GDP (P) = GDP (E)

14. Supply and Use tables For each industry column
Operating surplus = value added less compensation of employees
So compensation of employees + operating surplus = value added

15. Supply and Use tables
So for a supply use framework which is completely balanced, GDP is identical from the production, expenditure or income approach
The use of information from each approach in producing a balanced set of supply use tables is considered to be the best basis for benchmark estimates of GDP

16. Supply and Use tables Exercise
Which approach receives most “weight” in the balancing process?
Which is second, third?
Why?

17. Supply and Use tables Moving from Supply-Use to sector accounts
1. Allocate reporting units of industry to the sectors of the accounts
2. Re-allocate columns according to sectors
Re-allocation depends on quality of sector information in business register

18. Conditions for balancing
a uniform price basis across the components of the supply-use tables
Allow for changes to inventories in moving from sales and purchases to outputs and inputs
adjustment must be made for the role of the distributive industries.

19. Common price basis
Supply is measured at basic prices – prices charged by producers and other suppliers before entering final markets
So the price will reflect sales excluding taxes on products. It will include other taxes on products (D.29) as this is taken as an unavoidable charge on carrying out the business

20. Common Price basis
Producer prices are basic prices with non-VAT product taxes added
If output is valued at producer prices, the only tax that needs to be added is non-deductible VAT to move supply on to purchasers’ price basis with regard to tax
The producers’ price (ex-works price) is that used to invoice customers (includes non-VAT taxes)

21. Common price basis
Instead of showing output of retailers and wholesalers as a separate product, spread this output as margins across products sold to users
Similarly, where transport is purchased by customers as part of the cost of a product, separately from the other distribution margins, allocate this transport output to products as transport margins

22. Handling trade margins
To raise the output prices to match the price paid by final customers, wholesale, retail and transport trade margins must be added
As these margins are already included in the production matrix as output of the wholesale, retail and transport industries, these outputs must be reduced by the margins applied.

23. Handling trade margins
Compile production matrix at basic prices, with margin industries showing output as sale of goods less goods bought for resale
Distribute this output as a retail margin across the outputs of products retailed, using information on retail margins by survey

24. Handling trade margins
Repeat this process for wholesaling margins, according to margins established through a wholesale trades survey
These surveys should establish margins by industry, and identify industries where wholesaling takes place

25. Handling trade margins
Increase product supply by margins, so that all margin output is allocated
This may require an iterative process, reconciling margins added to supply, with the output of the margin trades
Exercise!

26. Transport margins
Usually, transport is provide by the retailer or wholesaler, and so the “margin” is included in the final price charged
In this case, the transport output is purchased as intermediate consumption by the retailer
Only when the customer is invoiced and pays transport separately does the transport figure as a margin activity (rare)

27. Imports supply
Information on imports is normally available though customs records, or through special surveys reflecting the administrative records of international trade regulation system.
These measures are “c.i.f” – “cost insurance freight” basis. This is effectively at purchasers’ prices.

28. Units, classifications, and valuation
Supply-use tables use information on units, classifications and valuations that allow the balancing of supply of products and their use
The units and classifications reflect production and the demand for the products of production and imports

29. Units
An institutional unit is an economic entity that can own assets, incur liabilities and engage with other units in its own right
In Supply Use tables, important units are:
Enterprises, kind of activity units (establishments), and local units

30. Classification of units
Industry units - by kind of activity
Household units – private consumers with shared wants and resources
Government units – government controlled administrative agents

31. Industry units Enterprise group Enterprise Kind of activity unit (KAU)
Local unit
Local KAU
Institutional unit
Unity of homogeneous production UHP
Local UHP

32. Industry classification
Units classified by type of activity
Units classified by region
Units classified by ownership – domestic or foreign
Classification in Europe is NACE Rev 2 (international equivalent ISIC)

33. Types of activity
Principal – the main Kind of Activity by a unit, determined by the amount of value added
Secondary – another activity (not the main) carried out by the same unit, with output suitable for delivery to another
Ancillary – internal activity supportive of the other activities in a unit, not usually suitable for delivery outside

34. Types of activity
In the production table, principal activities fall on the diagonal
Secondary activities are off-diagonal (above or below the diagonal main entry)
Ancillary activities are not recognised separately from the main activity (regional exceptions)

35. NACE Rev 2 International links
ESA NACE Rev 2 manual.docx
Plus Balance of Payments Services detail

36. International trade in services
EBOPS – Extended Balance of Payments Services
Given in the Manual on Statistics of International Trade in Services (MSITS)
Examples – goods for processing abroad, transport, construction abroad, insurance and pension services, telecomms, personal services e.g. betting on web

37. Reporting units

38. Industries NACE Rev 1 NACE Rev 2 A B
Agriculture, hunting and forestry Fishing A
Agriculture, forestry and fishing C
Mining and quarrying B D
Manufacturing E
Electricity, gas and water supply
Electricity, gas, steam and air conditioning supply
Water supply, sewerage, waste management and remediation activities F
Construction G
Wholesale and retail trade; repair of motor vehicles, motorcycles and personal and household goods
Wholesale and retail trade; repair of motor vehicles and motor cycles H
Hotels and restaurants I
Accommodation and food service activities
Transport, communications
storage
and
H J
Transport and storage Information and communication J
Financial intermediation K
Financial and insurance activities

39. NACE Rev 1
NACE Rev 2 K
Real estate, renting and business activities
L M N
Real estate activities
Professional, scientific and technical activities
Administrative and support service activities L
Public administration and defence; compulsory social security O M
Education P
Health and social work Q
Human activities, health and social work
Other community, social and personal services activities
R S
Arts, entertainment and recreation Other service activities
Activities of private households as employers and undifferentiated production activities of private households T
Activities of households as employers; undifferentiated goods- and services producing
activities of households for own use
Extraterritorial organisations and bodies U
Activities of extraterritorial organisations and bodies

40. Valuation Output, and so Value Added, are at basic prices
Basic prices include “other taxes” (D.29) but exclude product taxes (D.21)
So “other taxes” are paid out of the operating surplus component of value added at basic prices
Output at producer prices are output at basic prices plus product taxes

41. Valuation Purchaser prices are producer prices plus
VAT not deductible by purchaser
Separately invoiced transport charges
Wholesalers’ and retailers’ margins

42. The Supply table (basic prices)
Prod-ucts (CPA)
Industries (NACE)
ind ind 2 dist’n
Imports
(FoB)
Supply (basic prices)
P 1 35 10 45
P 2 40 80
Distn 25
Total 50
150

43. The Supply table move to purchaser prices
Products (CPA)
Industries (NACE)
ind ind dist’n
Imports
(Cif)
Margins
Product taxes
Total supply
P 1 35 10 5 60
P 2 40 15
100
Distn 25
-25
Total 50
160

44. The Use table (purchaser prices)
Pro-ducts
I 1
I 2
D’n
Total int. dem-and
Final cons
Cap. form
Exp-orts
Total final dem-and
Total dem-and
P 1 5 10 20 40 60
P 2 45 25 80
100
Dist’n IC 15 VA
120
160
Out-put 35 65

45. GDP in the use table (purch. price)
GDP(P) = (35 – 10) + (40 – 15)+ (25 – 15) + 10
= 70 purchasers’ price
GDP (E) = – 50 = 70 purch. price
GDP (I) = = 70 purch. price

46. The Use table (basic prices)
Pro-ducts
I 1
I 2
D’n
Total int dem.
Final cons
Capital form’n
Exp-orts
Total final demand
P 1 3 8 5 16 13 10 6 29
P 2 33 21 64
distn 4 7 17
Int. cons 15 40 56 20 34
110 VA 25 60
Output 35
100

47. GDP in the use table (basic prices)
GDP(P) = ( 35 – 10) + (40 – 15)+ (25 – 15)
= 60 at basic prices
GDP (E) = – 50 = 60 basic prices
GDP (I) = = 60 basic price

48. SUT Exercise Transactions
Construct a supply table, and use table, at both basic prices and purchasers prices (market prices)
Using the information on the hand-outs