U.S. Bureau of Economic Analysis Presentation to the National Association for Business Economics...

U.S. Bureau of Economic Analysis

Presentation to the National Association for Business Economics

December 17, 2003

Overview of the 2003 Comprehensive Revision

J. Steven LandefeldDirector

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Comprehensive Revision

• Updated concepts, methods, and sources• Increased consistency• Expanded and improved presentations• This revision: major changes affecting a large

number of components, but no significant rewrite of economic history

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Comprehensive Revision – The Numbers

• Growth trends– Relatively the same.– “New economy” period virtually unchanged. At

3.8% growth (1994-2000).• Business cycles

– Again, no significant changes in timing or magnitude of cycles.

– Average decline in post-war recessions were unrevised at -1.9.

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Recent Trends

Source: Bureau of Economic Analysis.

Average annual rates of change of real GDP(Selected periods)

3.4% 3.4% 3.2%

3.8%3.4% 3.4%

3.2%

3.8%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

1929-2002 1959-1992 1992-2002 1994-2000

Prev. published (1996) Revised (2000)

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-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

1960 1965 1970 1975 1980 1985 1990 1995 2000


Business Cycles


Real gross domestic product (Percent change)

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Last Recession (2000:IV-2001:III)

• Same length and timing (3 quarters).• Still mild versus past recessions (-0.6 revised to

-0.5 percent).• Investment declines are still a large part of the story.

– Decline in investment during the downturn (2000:IV - 2001:III) are slightly smaller (-11.0 revised to -9.2 percent).

– Period leading up to recession was weaker with one negative quarter in 2000:III.

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-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

98q4 99q1 99q2 99q3 99q4 00q1 00q2 00q3 00q4 01q1 01q2 01q3 01q4 02q1 02q2 02q3 02q4 03q1 03q2


Current Cycle


Real gross domestic product (Percent change, SAAR)

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Current Recovery (2001:III-2003:II)

• Still moderate versus prior expansion periods.

– Real growth of 2.6 percent as compared to growth of 5.2 percent.

• Small revision to growth means that strong productivity performance during the recovery will remain.

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Current Recovery (2001:III-2003:II)

Source: Bureau of Economic Analysis.* Includes the following recovery periods: 1958:I-1960:I, 1960:IV-1969:III, 1970:IV-1973:IV, 1975:I-1980:I, 1980:III-1981:I, 1982:III-1990:II, and 1991:I-2000:IV.

Average annual rates of change of real GDP (Selected periods)

5.1%

2.7%

5.2%

2.6%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

Avg. Past Recoveries * Current Recovery (01:III-03:II)


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Inflation

• Still moderate over the last decade.– Inflation, as measured by Gross Domestic

Purchases Prices, unrevised at 1.8 percent, 1992-2002.

• Still moderate during expansion.– Inflation, as measured by Gross Domestic

Purchases Prices, revised up from 1.5 percent to 1.6 percent, 2001:III - 2003:II.

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Inflation


Average annual rates of change in price indexes for gross domestic purchases, GDP, and PCE (1992-2002)

1.9%1.9%1.8%

1.9%1.9%1.8%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

Purchases GDP PCE


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Sources of Growth

• The sources of economic growth over the last decade for the major moving parts of GDP are little changed.– Growth rates for business fixed investment and

imports are unrevised, 1992-2002.– Consumer spending and residential investment

growth rates are slightly lower.– Exports and government are slightly higher.

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Sources of Growth


Average annual rates of change of real GDP and its major components (1992-2002)

5.0%

8.7%

2.0%1.7%

4.2%

6.5%

3.7%3.2%3.2%

8.7%

4.9%4.3%

6.5%

3.8%3.2%3.2%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

GDP FSDP PCE NRFI RFI EXPT IMPT GOV


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Revisions to Income

• The most significant revisions are to corporate profits.– Large upward revision in 2002 reflects improved

method for estimating the costs of stock options.

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Revisions to Profits


Corporate profits from current production(Revisions in level)

$0

$20

$40

$60

$80

$100

$120

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

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What Numbers Did Change?

• Banking

• Insurance

• Construction

• Fringe benefits

• Other – From used cars to copy machines

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Sources of Revisions


Sources of revision to current-dollar GDP(Billions of dollars)

-$100

-$50

$0

$50

$100

$150

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

GDP Major Definitional Statistical

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-$10

-$5

$0

$5

$10

$15

$20

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

PCE = Premiums - Claims Premiums Claims

Previously Published Insurance Data


PCE household insurance – published(Billions of dollars, SAAR)

Sept. 11

Hurricane Andrew

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-$10

-$5

$0

$5

$10

$15

$20

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

PCE = Premiums - Normal Claims Premiums Normal Claims

Revised Insurance Data


PCE household insurance – revised(Billions of dollars, SAAR)

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Revisions to Compensation


Sources of Revisions to Compensation of Employees(Billions of dollars)

-$25

$0

$25

$50

$75

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Compensation Wages and Salaries Supplements

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Why Weren’t the Changes Larger?

• Introduction of chain indexes in 1996 avoids rewrites of economic history due to base changes.

• Practice of bringing in updates and changes sooner rather than waiting for benchmarks provides revised data earlier – when its most relevant – rather than later.

• Investments in data made by Administration and Congress are beginning to pay off.

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What Challenges Remain?

• Large gaps in coverage remain.

– Detailed coverage of manufacturing, agriculture, and mining; but poor coverage of many new and old industries.

• Over 1/4 of GDP estimated using a patchwork of data.

– Census data on finance and insurance, utilities, real estate, and a large share of transportation are only available once every 5 years (1992 value of these industries sales was $3 trillion).

– Census data on personal and business services are available annually, but growth and volatility coupled with lack of quarterly data has caused services to be a large source of revisions to GDP.

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What Challenges Remain

• Monthly payroll data cover only the wages and salaries of production and non-supervisory workers, who account for a little over half of wages and salaries in today’s economy.

• Data on producers prices cover roughly 50% of service industry prices.

• The United States has the world’s finest set of economic accounts, but incomplete integration and inconsistencies reduce their usefulness.

• All of these challenges are on BEA/Census/BLS strategic agendas; but in a world of constrained resources, progress has been slow.

U.S. Bureau of Economic Analysis Presentation to the National Association for Business Economics...

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