The estimates of personal consumption expenditures (PCE) and producers' durable equipment (PDE) and the other components of final uses are presented in the input-output (I-O) accounts as purchases of commodities. In the presentation of PCE and PDE in the national income and product accounts (NIPA's), these commodities are grouped into categories either by type of product or by type of expenditure./1/ Two methods are used to prepare the I-O benchmark estimates of PCE and PDE: The direct-estimation method and the commodity-flow method.
Direct estimation
Selected commodities in the PCE and PDE categories are directly estimated from source data. Direct estimation is used when by definition the commodity is purchased only by persons for consumption or by business for investment; for example, the rental value of owner-occupied dwellings is attributed exclusively to persons. Direct estimation is also used when the underlying estimation method results in a more accurate and reliable estimate; for example, estimates of gasoline and oil purchases by persons are based on unit sales and average prices for these commodities.
Commodity-flow method
The estimates for many commodities in the PCE and PDE categories are calculated using the commodity-flow method. This method, which consists of seven steps, converts domestic output (the value of commodities produced by domestic establishments) in producers' prices to domestic supply (the value of production available for sale to domestic purchasers) in purchasers' prices and therefore includes imports and excludes exports. The domestic supply is then allocated to domestic purchasers—that is, to persons, business, and government.
In step 1, commodities purchased by persons for consumption or by business for investment are identified. The commodities purchased by persons are identified on the basis of the nature of the product from the titles of products included in the quinquennial economic censuses or in the Standard Industrial Classification Manual, 1987. The commodities purchased by businesses are identified on the basis of two criteria: (1) The commodity has a life of more than 1 year and is normally capitalized in business accounting records, and (2) the commodity is not an integral part of a structure and therefore is not included in the value of that structure (for example, an elevator in an apartment building).
In step 2, an estimate of total domestic output—that is, shipments, revenues, or receipts—is prepared for each commodity. The value of the domestic output is in producers' prices—that is, it includes excise taxes and tips but excludes transportation costs and wholesale and retail trade margins.
In step 3, imports are added, and in step 4, trade margins and transportation costs are added. Step 4 converts supply into purchasers' prices, which is the valuation used for the commodity-flow estimates.
In step 5, exports, which include transportation costs and trade margins, are subtracted because they are recorded in the NIPA's as a separate final-demand component.
In step 6, changes in inventories are subtracted, because not all goods that are produced or imported in a period are consumed in the same period. In some commodity-flow estimates, a percentage of domestic supply in purchasers' prices—the result of steps 2 through 6—is then allocated to users.
In step 7, government consumption expenditures and gross investment and purchases by business on current account (intermediate purchases) are subtracted from the domestic supply in purchasers' prices to obtain a residual that reflects purchases either by persons for consumption or by businesses for investment.
Footnotes:
1. Supplementary tables D and E show the I-O commodity compositions of the NIPA PCE and PDE categories. For the other NIPA expenditure components—not shown in tables D and E—private and government structures are presented by type, inventory change is presented by industry of the establishment holding the inventories, and net exports of goods and services and government consumption and investment expenditures are shown by type of product.