Gross-Domestic-Product-by-Industry Accounts

Annual Industry Accounts Methodology

The annual input-output (I-O) accounts and the GDP-by-Industry accounts are created using an integrated methodology that makes the annual estimates of gross output, intermediate inputs, and value added by industry more timely and consistent than previously possible.[1]  Industry estimates are published for 65 detailed industries, as defined by the 1997 North American Industry Classification System (NAICS).  Commodity estimates are published at the same level of detail plus four unique commodities.[2]  Extensive estimates of final uses and value added are also included in the annual publication.  Compared to previous methodologies, the integrated methodology is applied at a finer level of industry and commodity detail to enhance the accuracy of aggregate level estimates.

The integrated annual I-O accounts and GDP-by-industry accounts are prepared in five steps.

Step one.  Industry estimates of current-dollar value added are extrapolated forward by the percentage changes in the annual estimates of gross domestic income (GDI) from the NIPAs.  The GDI-by-industry estimates consist of compensation of employees, taxes on production and imports less subsidies, and gross operating surplus.  Additionally, BEA uses data on employment to convert the corporate data on profits before tax, net interest, and capital consumption allowances from an enterprise basis to an establishment basis.  Finally, the statistical discrepancy, the difference between GDI and GDP from the NIPAs, is distributed among the industries.  In general, annual revisions to the industry estimates of value added largely reflect revisions to the components of GDI and to the statistical discrepancy from the annual NIPA revision.

Step two.  Industry estimates of gross domestic output.  The extrapolators for these estimates are prepared using a wide array of source data, which include surveys from the Bureau of the Census and the Bureau of Labor Statistics, 2002 Economic Census data for manufacturing, and other data.[3]  Annual revisions to industry estimates of gross output are due to revisions in these source data.   

Step three.  The initial commodity composition of intermediate inputs is calculated for each industry by a process that uses the previous year’s direct requirements coefficients.  First, the industry’s gross output for a given year is revalued in the commodity prices of the previous year.  Next, the revalued gross output is multiplied by the industry’s direct requirements coefficients from the previous year.[4]  Finally, the resulting commodity estimates of intermediate inputs for the industry are revalued in the commodity prices of the current year. 

Step four.  The domestic supply of each commodity and the commodity composition of each GDP expenditure component are estimated.  The initial commodity compositions for these expenditure components are estimated using commodity-flow relationships from the revised 1997 benchmark I-O accounts.  The annual I-O use tables are then balanced using a bi-proportional adjustment procedure to ensure that intermediate and final use of commodities is consistent with domestic supply, that intermediate use is consistent with gross output and value added, and that final use is consistent with the final expenditure components from the NIPAs.  The measures of gross output, intermediate inputs, and value added are then incorporated into the GDP-by-industry accounts.

Step five.  Price and quantity indexes for the GDP-by industry accounts are prepared in three steps.  First, indexes are derived for gross output by separately deflating each commodity produced by an industry that is included as part of its gross output.  Next, indexes for intermediate inputs are derived by deflating all commodities that are consumed by an industry as intermediate inputs in the annual I-O use tables.[5]  Finally, indexes for valued added by industry are calculated using the double-deflation method in which real value added is computed as the difference between real gross output and real intermediate inputs.[6]