GDP by Expenditure AC Rev

7/28/2019 GDP by Expenditure AC Rev

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GDP by Type of Expenditure

A.C. Kulshreshtha

UN Statistical Institute for Asia and the Pacific

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Why GDP by Expenditure? Show demand for goods and services

Stimulus to the economy

Use of supply of goods and services Link to welfare and production capacity

Link with the rest of the world

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GDP by Expenditure

Estimates based on the supply and use of

goods and services

Estimate is atpurchasers prices

Estimate is equal to GDP by economic activity

at market or purchasers price

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What Are the Type of Expenditure?

Final consumption expenditure

Households

General government

Non profit institutions serving households

Gross domestic capital formation

Fixed assets, produced and non produced

Inventory

Valuables

Net export

Export of goods and services

Import of goods and services 4


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Final Consumption

Expenditure

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What Are Final Consumption

Expenditure?

Expenditure on goods and services byconsumer institutions

General government Households

Non profit institutions serving households

Consumption expenditure on goods andservices from supply of goods and servicesin the economy during the period

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1.Household Consumption

Expenditure

Consumption expenditure of resident

household in the economic territory

From domestic production

From imports of goods and services

Consumption expenditure of resident

households in other economic territory

Import of goods and services

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Household Consumption Expenditure?(Contd.)

Households final consumption expenditure

Goods and services acquired/used/ consumed

for well being of the members

Food, clothing, housing, transport, education,

health, personal needs, durables, other

miscellaneous expenditure

Purchased, own produced, barter, gifts,

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1. Household Consumption

Expenditure? (Contd.)

Consumption expenditure includes:

Purchases of goods and services

Own production of goods, housing services and

domestic services of paid employees Gifts received in kind

Consumption expenditure of members ofinstitutional households

Durables for exclusive use of household or itsmembers

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Consumption expenditure excludes:

Purchases for household operated activities

Expenditure of household on acquisition of house

Expenditure of household for gifts to other

households

Expenditure of household for gifts to charities or

other transfers

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Consumption expenditure is valued at

purchasers price

Consumption expenditure is net of sale by

household of second hand goods (clothing,

household equipment, other goods previously

purchased by households)

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Classification of Individual Consumption by

Purpose(COICOP)

1. Food,and non alcoholic beverage

2. Alcoholic beverage, tobacco and narcotics

3. Clothing and footwear4. Housing, water, electricity, gas and other

fuels

5. Furnishing, household equipment androutine maintenance of house

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Classification of Individual Consumption by

Purpose (COICOP)(Contd.)

6. Health

7. Transport

8. Communication

9. Recreation and culture

10. Education

11. Restaurant and hotels

12. Miscelleneous goods and services

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How Household Consumption Expenditure is

compiled? Direct use of Sources of data

Household expenditure survey

Food Balance Sheet

Balance of Payments statistics

Retail trade survey

Commodity Flow Approach

Availability of good/service

IC

GC

GFCF -Exports

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What is Actual Final Consumption of

Household? The value of goods and services that the

household consumed or used.

This includes:

Household consumption expenditure.

Social transfer in kind from general government

and non profit institutions.

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What is Social Transfer-in-kind? The value of general government consumption

expenditure which benefits individual household

or its members

The total value of consumption expenditure of

NPISH

This is a transfer of services or goods for which

the general government and NPISH has recordedas part of their consumption expenditure

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What is Social Transfer-in-kind?(Contd.)

The value of social transfer in kind is

recorded as income in resource side of

Redistribution of Income Account ofhousehold and as expenditure in Use of

Adjusted Disposable Income of household.

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What is Social Transfer-in-kind?(Contd.)

The social transfer in kind is recorded in the

use side of the redistribution of income

account and subtracted from theconsumption expenditure of in the use of

adjusted disposable income of general

government and NPISH

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What is Social Transfer-in-kind?(Contd.) The expenditure of government and NPISH that

are classified under social transfer in kindincludes:

Health services

Education

Culture, religion,social security and welfare services

Housing and refuse collection

Also includes purchases of goods or services ofgovernment that is directly provided to households notincluded in GO of any of general governmentproduction activities

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Example on How to Treat Social Transfer

in Kind Example:government spent 50 million on the state

university. The record showed there was a revenueof 12 million from tuition, sale of books, and other

services provided to the public. The treatmentwould be

Household consumption expenditure = 12 million

Government consumption expenditure= 50 12

= 38 million

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Example on How to Treat Social Transfer

in Kind (Contd.) Example:government spent 50 million on the state

university. The record showed there was a revenue of 12million from tuition, sale of books, and other servicesprovided to the public. The treatment would be

Government consumption expenditure for education issocial transfer in kind

Social transfer in kind = 38 million

Household adjusted income + 38 million and household

actual final consumption = 12+ 38 = 50

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What is Household Consumption

Expenditure?Use

Household

consumption

expenditure

Household saving

Resources

Disposable income

Compensation Property income

Current transfer

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What is Household Actual Final

Consumption? (Contd.)

Use

Actual household

consumption

Household consumption

expenditure

Individual consumption

expenditure of government

and NPISH

( Social transfer in kind)

Household saving

Resources

Adjusted disposable

income Household disposable

income

Government and NPISH

social transfer in kind

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2. Government Consumption

Expenditure

Gross value of output less sale of goods and

services of the following economic activities of

general government

Public administration

Education services

Health services

Other related services produced by generalgovernment

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Coverage of Government

Consumption Expenditure

Includes government purchases intended

primarily as current transfer in kind, not used

as intermediate input of production of

services

Government purchased food to be distributed to

the victims of flood

Government purchased blankets to be distributedto the homeless

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Estimation of GCE

Government consumption expenditure

GCE = GO- Sales

GO = gross output of generalgovernment

Sales = sales of goods and services

of government services

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Type of Government Consumption

Expenditure

Government consumption expenditure isclassified into:

Individual consumption expenditure -

Expenditure whose recipient are individualpersons or individual households(healthservices, education services, sports, socialwelfare)

Collective consumption expenditure -expenditure for general population-publicgoods- (public administration, police, etc..)

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What Is General Government

Consumption Expenditure? Sources of Data

Government Finance Statistics

Statement of Revenue and Expenditure ofnational and local government

National Budget Statement

Budget documents (Demand for Grants) of

Central Government (all Ministries), all StateGovernments and all Local bodies

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Classification of Function of

Government(COFOG)

1. General public services

2. Defence3. Public order and safety

4. Economic affairs

5. Environmental protection

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Classification of Function of

Government(COFOG) (Contd.)

6. Housing and community ammenities

7. Health8. Recreation,culture and religion

9. Education

10. Social protection

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3. What is Non-Profit Institutions Serving

Households (NPISH) Consumption

Expenditure? The value of services of NPISH less the sale or receiptfrom goods and services

Expenditure is generally funded through donations,

current transfers, property income and operatingsurplus of market establishment of NPISH

All expenditure of NPISH are taken as individual

consumption expenditure and is social transfer in

kind to households

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3. Consumption Expenditure of

NPISH

Final consumption expenditure of NPISH

equals output of NPISH less sale of goods and

services

FCE = GO ( NPISH)

Sales

All Final consumption expenditure of NPISH is

classified as individual consumption

expenditure

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Classification of the Purpose of the

NPISH (COPNI)1. Housing

2. Health

3. Recreation and culture

4. Education5. Social protection

6. Religion

7. Political parties, labour and

8. Environmental protection

9. Services n.e.c.

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4. Actual Final Consumption

Actual final consumption of households

= household final consumption expenditure +

individual consumption expenditure of

general government + individual consumption

expenditure of NPISH

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Actual final consumption of general

government

= Government consumption expenditure -

individual consumption expenditure of

general government

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Actual final consumption of NPISH

= NPISH consumption expenditure - individual

consumption expenditure of of NPISH

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5. Gross Domestic Capital

Formation

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Gross domestic capital formation

Acquisition of non financial assets less disposal of

new or existing tangible fixed assets

Acquisition of non financial assets less disposal ofnew or existing intangible fixed assets

Major improvement of tangible non produced

assets

Cost of transfer of ownership of non produced

assets

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Some Issues to Consider

Capital assets are used repeatedly for production,

including: animals, plants,etc..

Treated as addition to inventory while growing Treated as fixed assets once production starts

Death and reduction of productivity taken as CFC

Include produced assets acquired by purchases,

barter, capital transfers and produced for own use

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Some Issues to Consider

Only transfer cost of non produced assets are

included in capital formation

Household durables for household operatedactivities and household own use should be

allocated to GDCF and HCE

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Prices Used in Change in Inventory

addition withdrawal

Finished product basic basic

Goods in progress basic basic

Goods for resale purchasers purchasers

Raw materials purchasers purchasers

Supplies purchasers purchasers

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Estimation of Change in Inventory

= value of addition value of withdrawal

recurrent losses

= (volume of closing inventory

volume ofopening inventory) * average price during the

period

= value at closing inventory

value at openinginventory

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Estimation of Capital Formation on

Non Produced Assets

Improvement of non produced assets

Include transfer cost in change of ownership

Commission

Taxes

Other cost

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6. Export and Imports of Goods

and Services

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Transactions With Rest of the

World

Goods and services (included in estimation of GDP

by expenditure)

Incomes (flows of factor services: payment forresources of resident institutions used by rest of

the world such as labour income, investment

income and rent of natural resources)

Capital

Financial instruments

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Transactions of Goods and Services

With Rest of the World

Exports flow of goods and services from

resident units to non resident units

Imports

flow of goods and services fromnon resident units to resident units

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Transactions of goods classified using Harmonized system ( developed by international Customs

association for tax purposes)

System of International Trade classification

( SITC)

Recorded when transfer of ownership takes place,

in practice when recorded in: Customs ( crosses geographic boundary)

Purchases of non resident in economic territory

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Exports

Goods valued at f.o.b. free on board( excludes value ofinsurance and freight) during change of ownership or as

the goods crosses the customs boundary Trade in non factor services include provision of services

to non residents

Merchandising of goods

Transport, insurance, hotels and restaurants, etc..

Data on transaction of goods taken from customsmanifest and institutions purchasing from local economy( embassies and non resident institutions)

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Exports

Data on exports of services includes exports of non factorservices and purchases of non resident from resident

institutions Data on export of services are taken from surveys or

transactions from the banks, purchases of non residentin domestic territory are recorded as travel in BOP.

Exports could be understated by undervaluation,smuggling, misdeclaration, undercoverage and crossboarder trade and other unrecorded flows such as e-commerce in services

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Imports

Includes both imports of goods and non factor services

Goods are valued at CIF ( cost, insurance and freight) at

customs boundary but national accounts compilation

removes insurance and freight and transfer to services

Imports of goods purchased by resident during travel to

rest of the world is recorded as services under travel

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Imports

Data on imports of goods and services are understated

by smuggling, undervaluation , e-commerce, and under-

recording of transactions, and payment outside the

banking system.

Transactions of other services are difficult to measure,

e,g communication, computer services ( such as

development of software) and e- commerce

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Some exclusion in transactions of goods and

services with rest of the world

Transactions of non resident units in theeconomy with rest of the world

flows of sample product, goods for exhibition,

goods for repair and for rent

Flows of goods of returning residents

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Some exclusion in transactions of goods and

services with rest of the world

Factor services ( labour, financial resources, etc) Goods under operational leasing or for rent

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Standard International Trade


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Classification(SITC)0 - Food and live animals1 - Beverages and tobacco

2 - Crude materials, inedible, except fuels

3 - Mineral fuels, lubricants and relatedmaterials

4 - Animal and vegetable oils, fats andwaxes

5 - Chemicals and related products, n.e.s.

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St d d I t ti l T d


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Classification(SITC)

6 - Manufactured goods classified chieflyby material

7 - Machinery and transport equipment

8 - Miscellaneous manufactured articles9 - Commodities and transactions notclassified elsewhere in the SITC

I - Gold, monetary

II - Gold coin and current coin
http://unstats.un.org/unsd/cr/registry/regcs.asp?Cl=14&Lg=1&Co=Ihttp://unstats.un.org/unsd/cr/registry/regcs.asp?Cl=14&Lg=1&Co=IIhttp://unstats.un.org/unsd/cr/registry/regcs.asp?Cl=14&Lg=1&Co=IIhttp://unstats.un.org/unsd/cr/registry/regcs.asp?Cl=14&Lg=1&Co=I

GDP by Expenditure AC Rev

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