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New structures and equipment by using industries, 1977.

The Capital flow table (CFT) presented in this article shows the using industries for each type of new structures and equipment contained in gross private fixed investment (GPFI) in the 1977 input-output (I-O) use table. The 1977 CFT is the fourth in a series; earlier tables are for 1963, 1967, and 1972.

The CFT is at the summary 85-industry/commodity level of detail; however, more detailed information on new structures and equipment by I-O commodity is also available.

Relationship to I-O use table

The relationship between the CFT and the I-O use table is illustrated in chart 1. In the I-O use table, the rows show the commodities--the raw materials, semifinished goods, and services--that are either consumed by industries or sold to final demand. Structures and equipment used by business are shown as sales to GPFI, a part of final demand. As the chart indicates, the CFT disaggregates GPFI to show the flows of structures and equipment--referred to as "capital goods" in the chart--to using industries. The row and column totals of the CFT in the chart specify total new capital goods. The CFT shows the using industry only for new structures and new equipment; it does not include purchases of scrap, net purchases of used goods, nor real estate commissions on the sale of used structures. Table 1 reconciles GPFI in the I-O table with GPFI in the CFT.

The CFT treats most leased structures and equipment somewhat differently than the associated lease payments are treated in the I-O table. In the CFT, structures and equipment were distributed to their users rather than their owners. In the I-O table, payments for leased assets, except those under capital leases, were distributed to the real estate and rental (I-O 71) and business services (I-O 73) industries as the owners of the assets. For assets under capital leases, there are no lease payments in the I-O table; instead, the capital consumption allowances and other expenses associated with those assets are shown in the using industry. The treatment of these assets is, therefore, consistent with the CFT.

The CFT and the I-O table treat imports similarly. In the I-O table, imports are added to domestic production and the total is distributed across the commodity row to consuming industries; as a result, the portion of each cell of the GPFI column that is imported is not identified. Similarly, in the CFT, imports are not identified in the distributions to using industries.

Uses of the CFT

Capital flow information can be used in several ways. First, a CFT provides information on the mrakets for capital goods. When the CFT is combined with the current-account transactions in the I-O use table, the users of the entire output of a commodity can be identified. Second, a CFT can help to measure the amount of each industry's total output that is required for a specified level of investment by a given industry. The CFT information on the type of capital goods bought or leased by a given industry is used to translate a specified level of total investment by the given industry into the detailed direct requirements industries. These direct requirements, which constitute a "bill of goods," are then applied against an I-O industry-by-commodity total requirements table to measure the effect of the specified investment on each industry.

Finally, capital flow information is used by BEA to estimate capital stocks by industry. Investment flows by commodity cross-classified by industry are needed to deflate investment by industry and to apply service lives to the investment in each industry.

Description of the CFT

The CFT, in the upper panel of table 2, shows 76 using industries for 42 I-O commodities. The 76 using industries are those from the 85-industry/commodity level I-O table that use new GPFI (I-O 92). The 42 I-O commodities are those from the same table that have entries in GPFI. A companion tabulation, in the lower panel, shows using industries for 41 capital goods categories. The capital goods categories are those shown in tables 5.4 and 5.6 of the national income and product accounts (NIPA's). (Table 3 presents the same information as table 2, but is aggregated into broad industry groups to facilitate evaluation of capital flows at that level.)

The CFT is in producers' prices; these prices exclude the transportation and trade margins involved in getting the commodity from the producing to the using industry. The transportation and trade margins appear separately in table 2 as I-O commodities 65 and 69, respectively. The values in these rows are equal to the total margins paid for all the new structures and equipment used by the industry identified in the column. The CFT is in producers' values, so that it is consistent with the 1977 I-O use table presentation. The companion tabulation by capital goods category is in purchasers' values--that is, the margins are included in the value of the capital goods; thus, it is consistent with the NIPA series on structures and on producers' durable equipment.

The commodity-by-using industry information in the CFT may be illustrated by referring to a single row and a single column. The row for engines and turbines (I-O 43) shows that the electric, gas, water, and sanitary services industry (I-O 68) is the largest user of this machinery, with $785.8 million. The second largest user is the construction industry (I-O 11), which uses $143.8 million. Many other industries employ smaller amounts of this machinery. The column for the electric, gas, water, and sanitary services industry shows that, in addition to engines and turbines, the utilities use a large amount of new construction (I-O 11), $13,408.8 million, and electric industrial equipment and apparatus (I-O 53$, $2,451.8 million.

The companion tabulation by capital goods category highlights how the distributions of structures and equipment varied among the industries. For example, the trade and service industries (I-O's 69 through 77) used $109.7 billion of new structures (70 percent of the total), and manufacturing (I-3's 13 through 65) used $9.0 billion (6 percent). The same industries used $49.2 billion of new equipment (31 percent of the total) and $40.4 (26 percent), respectively.

Sources and methods

The CFT was prepared in three stages. First, total expenditures for structures and for equipment were compiled for each industry; data sources included the economic censuses, BEA's plant and equipment expenditures survey, and Internal Revenue Service tabulations. These data were adjusted as much as possible to reflect I-O and capital flow industry definitions. Second, expenditures for 838 types of structures and equipment were distributed across the rows to using industries. In this procedure, most distributions were made in proportion to some indicator, such as employment, assumed to be correlated with the use of the commodity. Indicators weer necessary because, in general, some types of structures and most types of equipment are used by more than one industry. Types used exclusively or predominantly by a particular industry were distributed to that industry; these were the most reliable distributions. Approximately 12 percent of the value of structures and 67 percent of the value of equipment were distributed in proportion to an indicator. Third, the structures and the equipment distributed in the second stage wee summed to industry totals, and these totals were compared with those estimated in the first stage. Where the totals differed, adjustments were made. For industries in which leasing is prevalent, the totals established in the first stage were adjusted; for other industries, the distributions established in the second stage were adjusted.
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Article Details
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Author:Silverstein, Gerald
Publication:Survey of Current Business
Date:Nov 1, 1985
Previous Article:Employment and employee compensation in the 1977 input-output accounts.
Next Article:U.S. affiliates of foreign companies: operations in 1983.

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