1. Annual Industry Accounts Overview George Smith & Nicole Mayerhauser Current Industry Analysis Division Bureau of Economic Analysis Industry Accounts Users’ Conference, October 26, 2007

2. www.bea.gov 2 Annual Industry Accounts  “Integrated” Annual I-O and GDP by Industry  12 months after year (2006 in Dec 2007)  2005 and 2004 revised  65 industries  “Advance” GDP by Industry  4 months after year (2006 in April 2007)  22 industry groups

3. www.bea.gov 3 Outline  Uses and products  Methods and strengths  Challenges and progress  What’s ahead  Q & A

4. www.bea.gov 4 Integrated - Uses Link industry-sector-macro performance Relative size; relative growth; contribution to growth Analyze specific industries KLEMS and productivity analysis Input to other BEA programs TTSA; GDP by State; Regional I-O Model

5. www.bea.gov 5 Integrated - Products Annual time series, 1998-forward  Make and use tables  Supplementary tables  Direct & total requirements  Bridge (PCE, Private investment)  Import matrices Quantity and price decomposition Historical NAICS estimates, 1947-97

6. www.bea.gov 6 Integrated – Strengths  Improved consistency  I-O framework perspective  Current-dollar: cross-section & time series  Quantity and price: time series  Mix of inputs used by industries overall  (Step 1)

7. www.bea.gov 7 Mix of inputs overall (Step 1)

8. www.bea.gov 8 Integrated – Challenges & progress  Mix of inputs, by industry (Step 2)  BEA/Census “core expense” initiative  Input categories (e.g., purchased professional and technical services)  Services Annual Survey, beg. 2005  Annual Survey of Manufacturers, beg. 2006

9. www.bea.gov 9 Mix of inputs, ASM & SAS (Step 2)

10. www.bea.gov 10 Integrated – Challenges & progress  Mix of inputs, every industry (step 3)  Survey coverage of services industries  Private services-producing68% of GDP  Wholesale & retail trade13%  Covered by SAS30%  Not covered by SAS25%  Budget-contingent  2008 SAS coverage 55%

11. www.bea.gov 11 Mix of inputs, long run (Step 3)

12. www.bea.gov 12 Integrated – Challenges & progress  Quantity and price decomposition  PPI services coverage expansion  Retail trade margin output  Wholesale trade margin output  Budget-contingent Professional health care services Computer-related services

13. www.bea.gov 13 Integrated – Challenges & progress  Source data inconsistencies  Census output, BLS wages, etc.  Separate business registers  Different industry assignments of units  Data sharing restrictions  Micro-data research of payroll differences

14. www.bea.gov 14 Integrated – Publication level  Analytical needs  Value added  Publication and estimation levels  Work underway

15. www.bea.gov 15 Integrated – What’s ahead  Comprehensive revision  Revised 2002 benchmark I-O (2002 NAICS)  Comprehensive NIPA revision due 2009  Census survey data on industry inputs  Improved deflation of retail trade output  Publish more industries if possible  Imported service inputs by type

16. www.bea.gov 16 Integrated – More information  Featured estimates and articles:  www.bea.gov/industry/index.htm#annual  Underlying estimates:  www.bea.gov/industry/more.htm  Information guide:  www.bea.gov/industry/iedguide.htm#GPO

17. www.bea.gov 17 Advance GDP by Industry  Earliest look at most recent year  22 NAICS industry groups  Current dollars  Chained (2000)dollars  Chained-type quantity indexes  Chained-type price indexes

18. www.bea.gov 18  8 months earlier than integrated accounts  Less detailed but good indicator of  Direction of change  Rate of change (acceleration/deceleration)  Industry growth relative to overall GDP Advance - Uses

19. www.bea.gov 19 Advance - Uses Integration within BEA  NIPA current quarterly GDP/National Income  Advance GDP by Industry  Advance GDP by State

20. www.bea.gov 20 Advance - Current dollar method  Value Added  Advanced estimates  Extrapolated by industry  Controlled to NIPA GDP Output – Intermediate Inputs Compensation Taxes – Subsidies Gross Operating Surplus

21. www.bea.gov 21 Advance - Real estimates  Single deflation  Value added deflated with output prices  Output prices  NIPA price indexes  BLS price indexes  Nominal and volume output measures from government and private sources

22. www.bea.gov 22 Advance - Limitations  Single deflation  Assumption output and input prices grow at same rate  Misstates real VA growth when output prices and input prices do not move in the same direction or at the same rate of change

23. www.bea.gov 23 Advance - Modified single deflation  Output vs input prices  Adjustments to real value added made when known prices differences exist

24. www.bea.gov 24 Advance - What’s ahead  Double deflation  Separate deflation for output and for intermediate inputs  Real Value Added = real Output – real Intermediate Inputs  Requires few assumptions about the relationship between output and intermediate inputs.

25. www.bea.gov 25 Advance - What’s ahead  Opportunity to compare 2 years:  Single-deflation advanced estimates  Double-deflated prototype estimates  Integrated annual estimates  Assess size of revisions  Single-deflation vs double-deflation

26. www.bea.gov 26 Advance - More information  Press Release  http://www.bea.gov/newsreleases/indust ry/gdpindustry/gdpindnewsrelease.htm  Survey of Current Business  http://www.bea.gov/scb/index.htm