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Appendixes.

A. Additional Information About the NIPA Estimates

Statistical Conventions

Current-dollar GDP is a measure of the market value of goods, services, and structures that are produced in the economy in a particular period. The changes in current-dollar GDP can be decomposed into quantity and price components. Quantities, or "real" measures, and prices are expressed as index numbers with the reference year--at present, the year 2000--equal to 100. (1)

The annual changes in quantities and prices are calculated using a Fisher formula that incorporates weights from 2 adjacent years. For example, the annual percent change in real GDP for 2001-2002 uses prices for 2001 and 2002 as weights, and the 2001-2002 annual percent change in the GDP price index uses quantities for 2001 and 2002 as weights. Because the Fisher formula allows for the effects of changes in relative prices and in the composition of output over time, the resulting quantity or price changes are not affected by the substitution bias that is associated with changes in quantities and prices calculated using a fixed-weighted formula. These annual changes are "chained" (multiplied) together to form time series of quantity and price indexes. The percent changes in the Fisher indexes are not affected by the choice of the reference year.

BEA also publishes implicit price deflators (IPDs), which are calculated as the ratio of the current-dollar value of a component to the chained-dollar value of the component, multiplied by 100. The values of an IPD are very close to the values of the corresponding "chain-type" price index.

The measures of real GDP and its major components are also presented in dollar-denominated form, designated "chained (2000) dollar estimates." For most series, these estimates are computed by multiplying the current-dollar value in 2000 by a corresponding quantity index number and then dividing by 100. For example, if a current-dollar GDP component equaled $100 in 2000 and if real output for this component increased by 10 percent in 2001, then the chained (2000) dollar value of this component in 2001 would be $110 ($100 x 1.10). The percent changes calculated from the chained (2000) dollar estimates and from the quantity indexes are the same; any differences will be small and due to rounding.

The chained-dollar values for the detailed GDP components will not necessarily sum to the chained-dollar estimate of GDP (or to any intermediate aggregate) in a table, because the relative prices that are used as weights for any period other than the reference year differ from those of the reference year. A measure of the effect of such differences is provided by a "residual" line--the difference between the chained-dollar value of the main aggregate in the table and the sum of the most detailed components in the table. For periods close to the reference year, when the relative prices that are used as weights have usually not changed much, the residuals tend to be small, and the chained-dollar estimates can be used to approximate the contributions to growth and to aggregate the detailed estimates. For periods further from the reference year, the residuals tend to be larger, and the chained-dollar estimates are less useful for analyses of contributions to growth. In particular, for components for which relative prices are changing rapidly, the calculation of contributions based on chained-dollar estimates may be misleading even just a few years from the reference year. Thus, contributions derived from quantity indexes provide a better measure than contributions derived from chained-dollar estimates; contributions based on quantity indexes are shown in selected NIPA tables 1.1.2, 1.2.2, 1.5.2, 2.3.2, 3.9.2, 4.2.2, and 5.3.2.

For quarters and months, NIPA estimates are presented at annual rates, which show the value that would be registered if the rate of activity that is measured for a quarter or for a month were maintained for a full year. Annual rates are used so that periods of different lengths--for example, quarters and years--may be more easily compared. These annual rates are determined simply by multiplying the estimated rate of activity by 4 (for quarterly data) or by 12 (for monthly data).

For most quarterly NIPA estimates, percent changes in the estimates are also expressed at annual rates. Calculating these changes requires a variant of the compound interest formula:

r = [[([x.sub.t]/[x.sub.o]).sup.m/n] - 1] x 100

where r is the percent change at an annual rate; [x.sub.t] is the level of activity in the later period; xo is the level of activity in the earlier period; m is the periodicity of the data (for example, 1 for annual data, 4 for quarterly data, or 12 for monthly data); and n is the number of periods between the earlier periods and the later periods (that is, t-0).

Quarterly and monthly NIPA estimates are seasonally adjusted if necessary. Seasonal adjustment removes from the time series the average effects of variations that normally occur at about the same time and in about the same magnitude each year--for example, weather, holidays, and tax payment dates. After seasonal adjustment, cyclical and other short-term changes in the economy stand out more clearly.
Table 1. Relation of Net Exports of Goods and Services
and Net Receipts of Income in the NIPAs to Balance
on Goods and Services and Income in the ITAs

[Billions of dollars]

 Line 2005 2006

Exports of goods and services and
 income receipts, ITAs 1 1,788.6 2,096.2

Less: Gold, ITAs 2 5.5 8.8
 Statistical
 differences (1) 3 0.0 0.0
 Other items 4 1.4 1.2

Plus: Adjustment for grossing 5 7.2 8.6
 of parent/affiliate interest
 payments
 Adjustment for
 U.S. territories
 and Puerto Rico 6 56.1 56.0
 Services furnished
 without payment
 by financial
 intermediaries
 except life
 insurance carriers 7 8.6 8.3

Equals: Exports of goods and
 services and income receipts, NIPAs 8 1,853.5 2,159.0

Imports of goods and services and
 income payments, ITAs 9 2,454.9 2,818.0

Less: Gold, ITAs 10 4.4 5.6
 Statistical
 differences (1) 11 0.0 0.0
 Other items 12 0.0 0.0

Plus: Gold, NIPAs 13 -3.5 -4.3
 Adjustment for grossing
 of parent/affiliate
 interest payments 14 7.2 8.6
 Adjustment for U.S.
 territories and
 Puerto Rico 15 36.8 38.1
 Imputed interest
 paid to rest of world 16 8.6 8.3

Equals: Imports of goods and services
 and income payments, NIPAs 17 2,499.5 2,863.1

Balance on goods and services
 and income, ITAs (1-9) 18 -666.3 -721.8

Less: Gold (2-10+13) 19 -2.4 -1.1
 Statistical differences
 (3-11) (1) 20 0.0 0.0
 Other items (4-12) 21 1.4 1.2

Plus: Adjustment for U.S.
 territories and Puerto Rico (6-15) 22 19.3 17.9

Equals: Net exports of goods and
 services and net receipts of income,
 NIPAs (8-17) 23 -646.0 -704.1

 Seasonally adjusted
 at annual rates

 2006

 I II III

Exports of goods and services and
 income receipts, ITAs 1,976.1 2,074.4 2,131.6

Less: Gold, ITAs 7.7 8.8 9.6
 Statistical
 differences (1) 0.0 0.0 0.0
 Other items 1.3 1.1 1.2

Plus: Adjustment for grossing 7.6 8.4 8.9
 of parent/affiliate interest
 payments
 Adjustment for
 U.S. territories
 and Puerto Rico 56.8 55.0 56.3
 Services furnished
 without payment
 by financial
 intermediaries
 except life
 insurance carriers 8.5 8.4 8.3

Equals: Exports of goods and
 services and income receipts, NIPAs 2,039.9 2,136.3 2,194.3

Imports of goods and services and
 income payments, ITAs 2,693.1 2,802.0 2,905.4

Less: Gold, ITAs 5.7 6.2 5.6
 Statistical
 differences (1) 0.0 0.0 0.0
 Other items 0.0 0.0 0.0

Plus: Gold, NIPAs -4 -4.2 -4
 Adjustment for grossing
 of parent/affiliate
 interest payments 7.6 8.4 8.9
 Adjustment for U.S.
 territories and
 Puerto Rico 40.8 44.2 35.3
 Imputed interest
 paid to rest of world 8.5 8.4 8.3

Equals: Imports of goods and services
 and income payments, NIPAs 2,740.2 2,852.8 2,948.3

Balance on goods and services
 and income, ITAs (1-9) -717 -727.6 -773.8

Less: Gold (2-10+13) -2 -1.6 0.0
 Statistical differences
 (3-11) (1) 0.0 0.0 0.0
 Other items (4-12) 1.3 1.1 1.2

Plus: Adjustment for U.S.
 territories and Puerto Rico (6-15) 16.0 10.8 21.0

Equals: Net exports of goods and
 services and net receipts of income,
 NIPAs (8-17) -700.3 -716.5 -754.0

 Seasonally adjusted
 at annual rates

 2006 2007

 IV I II

Exports of goods and services and
 income receipts, ITAs 2,202.6 2,233.5 2,346.8

Less: Gold, ITAs 9.0 10.6 16.5
 Statistical
 differences (1) 0.0 -9.0 -9.0
 Other items 1.0 1.4 1.3

Plus: Adjustment for grossing 9.4 8.2 10.4
 of parent/affiliate interest
 payments
 Adjustment for
 U.S. territories
 and Puerto Rico 55.8 54.9 55.6
 Services furnished
 without payment
 by financial
 intermediaries
 except life
 insurance carriers 8.0 8.4 8.9

Equals: Exports of goods and
 services and income receipts, NIPAs 2,265.7 2,302.0 2,412.9

Imports of goods and services and
 income payments, ITAs 2,871.7 2,913.9 3,020.1

Less: Gold, ITAs 5.1 7.8 9.8
 Statistical
 differences (1) 0.0 5.8 5.8
 Other items 0.0 0.0 0.0

Plus: Gold, NIPAs -5.1 -4 -4.7
 Adjustment for grossing
 of parent/affiliate
 interest payments 9.4 8.2 10.4
 Adjustment for U.S.
 territories and
 Puerto Rico 32.2 40.1 37.2
 Imputed interest
 paid to rest of world 8.0 8.4 8.9

Equals: Imports of goods and services
 and income payments, NIPAs 2,910.9 2,953.0 3,056.4

Balance on goods and services
 and income, ITAs (1-9) -669.1 -680.4 -673.3

Less: Gold (2-10+13) -1.2 -1.2 2.0
 Statistical differences
 (3-11) (1) 0.0 -14.8 -14.8
 Other items (4-12) 1.0 1.4 1.3

Plus: Adjustment for U.S.
 territories and Puerto Rico (6-15) 23.6 14.8 18.4

Equals: Net exports of goods and
 services and net receipts of income,
 NIPAs (8-17) -645.2 -651.0 -643.5

(1.) Consists of statistical revisions to the ITAs that have not yet
been incorporated into the NIPAs. ITAs International transactions
accounts

NIPAs National income and product accounts


B. Suggested Reading

The Bureau of Economic Analysis (BEA) has published a wealth of information about the methodologies that are used to prepare its national, industry, international, and regional accounts. Most of this information is available on BEA's Web site at <www.bea.gov>; see "Methodology Papers" and the SURVEY OF CURRENT BUSINESS under "Publications."

National accounts

The national accounts encompass the detailed estimates in the national income and product accounts (including gross domestic product) and the estimates of fixed assets and consumer durable goods.

National income and product accounts (NIPAs). This series of papers documents the conceptual framework of the NIPAs and the methodologies that have been used to prepare the estimates.
 An Introduction to National Income and Product
 Accounts (2007)

 Corporate Profits: Profits Before Tax, Profits Tax
 Liability, and Dividends (2002)

 Government Transactions (1988)

 Measuring the Economy: A Primer on GDP and the
 National Income and Product Accounts (2007)

 Personal Consumption Expenditures (1990)


The methodologies described in these papers have been updated and improved, typically as part of the comprehensive and annual revisions of the NIPAs.

The following SURVEY articles describe the most recent comprehensive revision of the NIPAs.

"Improved Estimates of the National Income and Product Accounts for 1929-2002: Results of the Comprehensive Revision" (February 2004)

"Preview of the Revised NIPA Estimates for 1997 Effects of Incorporating the 1997 Benchmark I-O Accounts and Proposed Definitional and Statistical Changes" (January 2003)

"Preview of the 2003 Comprehensive Revision of the National Income and Product Accounts"

Changes in Definitions and Classifications (June 2003)

New and Redesigned Tables (August 2003)

Statistical Changes (September 2003)

"Measuring the Services of Commercial Banks in the NIPAs: Changes in Concepts and Methods" (September 2003)

"Measuring the Services of Property-Casualty Insurance in the NIPAs: Changes in Concepts and Methods" (October 2003)

In addition, see the following articles.

"Annual Revision of the National Income and Product Accounts" (August 2007) presents revisions and describes any changes in the data and the methods that are used to prepare the estimates.

"Updated Summary NIPA Methodologies" (November 2007) describes the source data and the methods that are used to prepare the current-dollar and real estimates of GDP.

"Chained-Dollar Indexes: Issues, Tips on Their Use, and Upcoming Changes" (November 2003) discusses the advantages of using chain-weighted indexes and the challenges of using chained dollars.

"Reliability of the NIPA Estimates of U.S. Economic Activity" (February 2005) evaluates the principal NIPA estimates by examining the record of revisions to them.

"Gross Domestic Product: Revisions and Source Data" (February 2006) describes the categories of data that are used for the advance, preliminary, and final quarterly estimates of GDP.

Fixed assets and consumer durable goods. Fixed Assets and Consumer Durable Goods in the United States, 1925-97 (2003) discusses the concepts and statistical considerations that underlie the estimates and their derivation.

"Fixed Assets and Consumer Durable Goods for 1925-2002" (May 2004) describes the improvements that were incorporated into these estimates as part of the most recent comprehensive NIPA revision.

"Fixed Assets and Consumer Durable Goods for 1997-2006" (September 2007) provides estimates that reflect the incorporation of the most recent annual NIPA revision.

Mission Statement and Strategic Plan

The mission statement of the Bureau of Economic Analysis and its most recently updated strategic plan for improving the accuracy, reliability, and relevance of the national, industry, regional, and international accounts are available on BEA's Web site at <www.bea.gov> under "About BEA."

Appendix B

Industry accounts

The industry accounts consist of the annual industry accounts (the input-output accounts and the gross-domestic-product-by-industry accounts) and one satellite account.

Annual industry accounts. "Improved Annual Industry Accounts for 1998-2003" (June 2004) describes the comprehensive revision of the annual input-output accounts and the GDP-by-industry accounts that features the integration of the two sets of accounts.

"Annual Industry Accounts" (December 2006) presents the annual revision of these accounts and describes the source data and any changes in the methods that are used to prepare the estimates.

In addition, see the following articles.

"Preview of the Benchmark Input-Output Accounts for 2002" (September 2005) includes the proposed new sectors that are based on the 2002 North American Industry Classification System.

"Preview of the Comprehensive Revision of the Annual Industry Accounts: Integrating the Annual Input-Output Accounts and the Gross-Domestic-Product-by-Industry Accounts" (March 2004) provides the details about the comprehensive revision.

"Benchmark Input-Output Accounts for the U.S. Economy, 1997" (December 2002)

Satellite accounts. These accounts extend the analytical capacity of the input-output accounts by focusing on a particular aspect of economic activity.

"Research and Development Satellite Account"

For 1959-2002 (December 2006)

For 1959-2003 (October 2007)

"U.S. Travel and Tourism Satellite Accounts"

For 2001-2004 (June 2005)

For 2002-2005 (June 2006)

For 1998-2006 (June 2007)

International accounts

The international accounts encompass the international transactions accounts, direct investment, and international transactions in services.

International transactions accounts (ITAs). The Balance of Payments of the United States: Concepts, Data Sources, and Estimating Procedures (1990) describes the methodologies used to prepare the estimates in the ITAs and the international investment position of the United States. These methodologies are usually updated and improved as part of the annual revisions of the ITAs.

The annual revisions of the ITAs are described in a series of articles, the latest of which was published in the July 2007 SURVEY.

Direct investment. International Direct Investment: Studies by the Bureau of Economic Analysis (1999) is a collection of previously published articles on U.S. direct investment abroad and foreign direct investment in the United States. It includes "A Guide to BEA Statistics on U.S. Multinational Companies;' which is also available in the March 1995 SURVEY, and "A Guide to BEA Statistics on Foreign Direct Investment in the United States," which is also available in the February 1990 SURVEY.

In addition, the updated methodologies are available in U.S. Direct Investment Abroad: Final Results From the 1999 Benchmark Survey (2004) and in Foreign Direct Investment in the United States: Final Results From the 2002 Benchmark Survey (2006).

International services. U.S. International Transactions in Private Services: A Guide to the Surveys Conducted by the Bureau of Economic Analysis (1998) describes 11 surveys. It includes classifications, definitions, release schedules, the methods used to prepare the estimates, and samples of the survey forms.

"Selected Issues in the Measurement of U.S. International Services" (June 2002) describes key issues in defining and measuring insurance, wholesale and retail trade, finance, construction, and utilities services and explores possible actions to address these issues.

Regional accounts

The regional accounts include estimates of personal income and gross state product.

Personal income. Estimates of personal income are prepared for states and for local areas.

"Comprehensive Revision of State Personal Income for 1969-2003" (May 2004) describes the improvements in the methodology that are used to prepare the estimates and that are part of a comprehensive revision.

"The Reliability of the State Personal Income Estimates" (December 2003) evaluates the estimates of state personal income and of selected components by examining the revisions of these estimates.

"Comprehensive Revision of Local Area Personal Income for 1969-2002" (June 2004) summarizes the improvements in the methodology that is used to prepare the estimates for counties and metropolitan areas. The detailed methodology is available on the DVD--ROM Regional Economic Information System, 1969-2005.

Gross domestic product by state. "Comprehensive Revision of Gross State Product" (January 2005) summarizes the sources and the methods that are used to prepare the estimates.

"Gross Domestic Product by State for 2003-2006" (July 2007) presents the most recent annual revision.

(1.) See J. Steven Landefeld, Brent R. Moulton, and Cindy M. Vojtech, "Chained-Dollar Indexes: Issues, Tips on Their Use, and Upcoming Changes," SURVEY OF CURRENT BUSINESS (November 2003): 8-16.
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