Estimating the Components of U.S.
Quarterly GDP: General methods
and special procedures
Brian C. Moyer
Deputy Chief
National Income and Wealth Division
10th OECD-NBS Workshop on National Accounts
Paris, France
November 6-10, 2006
Overview of quarterly GDP
 Expenditures approach used to estimate
quarterly GDP
GDP = C + I + G + (X - M)
 Quarterly GDP revision cycle
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“Advance” estimate
“Preliminary” estimate
“Final” estimate
Annual revision
Comprehensive revision
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Overview of quarterly GDP
 Source data
 A wide variety of data are used
 Federal agency data—shipments, inventories,
construction-put-in-place, prices, etc.
 Trade source data—motor vehicle unit sales and prices,
consumer spending on services, etc
 BEA’s international transactions accounts
 Trend-based data also used, especially for an
advance estimate
 Assumptions about missing data are published
 Availability and quality of data improve with
each successive revision of the estimate
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Overview of quarterly GDP
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Estimating quarterly GDP
 Annual current-price estimates are
“benchmarked” to the input-output tables in
economic census years
 Annual current-price estimates are
calculated by interpolating between inputoutput tables and by extrapolating forward
from the most recent input-output table
with annual indicators
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Estimating quarterly GDP
 Quarterly current-price estimates are
calculated by interpolating and extrapolating
with seasonally-adjusted quarterly indicators
 Detailed constant-price estimates are
calculated
 Deflation method
 Quantity extrapolation method
 Direct valuation method
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Estimating quarterly GDP
 Detailed constant-price estimates are
aggregated
 Fisher chain-type price and volume indexes
 Chained-volume estimates
 Contributions estimates
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Estimating quarterly GDP
In addition …
 For certain components of GDP, special
procedures are used to prepare the quarterly
estimates
 Consumer spending on goods
 Private investment in equipment
 Change in private inventories
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Consumer spending on goods
 “Retail control method” used to prepare
current-price quarterly indicators for
consumer spending on goods (excluding
motor vehicles)
 Quarterly retail trade survey data are
available only on an industry basis;
estimates of consumer spending must be
prepared on a product basis
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Retail control method
 Transformation matrix
 System of linear equations that relate retail sales
by industry to purchases by product
 Based on relationships in economic census year
 “Control group” used to extrapolate total
consumer spending on goods
 Some products are estimated independently
 Tobacco
 Gasoline and oil
 Prescription drugs
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Private investment in equipment
 “Commodity-flow method” used to prepare
current-price estimates for detailed
components of private investment in
equipment
 Quarterly data on private investment in
equipment are not available; an abbreviated
commodity-flow method provides estimates
based on the supply and use of commodities
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Commodity-flow method
For a detailed component of private
investment in equipment,
net supply = shipments + commodity taxes – exports
+ imports - government purchases – change in
inventories
private investment in equipment = net supply –
intermediate purchases – consumer purchases +
margin + transportation costs
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Change in private inventories (CIPI)
 Inventory stocks are reported by firms at
“book value” using a variety of accounting
methods—LIFO, FIFO, average cost, etc.
 For the NIPAs, CIPI must be valued at current
cost—that is, the change in book value must
be adjusted for holding gains and losses
 CIPI can be negative at both the industry and
aggregate levels
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Estimating CIPI
 Step 1.—Compute a monthly price index by
industry
 Weighted average price index that reflects the
composition of commodities held in inventory by
the industry in a given month
 Composition of commodities based on data from
the economic census
 Commodity price indexes are primarily producer
price indexes
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Estimating CIPI
 Step 2.—Compute an end-of-month price
index, PEt, by industry
Calculated as a two-month moving average of the
monthly price index, computed in step 1
 Step 3.—Compute a monthly average price
index, PAt, by industry
Calculated as a two-month moving average of the
end-of-month price index, PEt
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Estimating CIPI
 Step 4.—Compute a monthly cost index, PCt,
by industry
 Represents the cost of acquiring inventories held
by the industry in a given month
 In general, inventories are acquired over several
months; a “turnover pattern” is applied to the
monthly average price index, PAt
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Estimating CIPI
 Step 5.—Compute monthly current-price CIPI
by industry
 CIPI Non-LIFOt = PAt * [(Bt / PCt) – (Bt-1 / PCt-1)] * (1 - L)
where Bt is the book-value stock of inventories
and L is the percentage of the inventories valued
using the LIFO method
 CIPI LIFOt = (Bt - Bt-1) * L
 CIPIt = CIPI Non-LIFOt + CIPI LIFOt
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Estimating CIPI
 Step 6.—Compute monthly constant-price
CIPI by industry
 Calculated as current-price CIPI deflated with
the industry-based average monthly price index,
PAt
Constant-price CIPIt = (CIPIt / PAt)
 Constant-price CIPI by industry provides the
deflation-level components used to compute
Fisher price and volume indexes for major
aggregates, including gross private domestic
investment and GDP
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Estimating CIPI
 Step 7.—Compute a monthly inventory
valuation adjustment, IVAt, by industry
 Calculated as the difference between currentprice CIPI and the change in book value
IVAt = CIPIt – (Bt – Bt-1)
 Represents the adjustment needed to remove
holding gains or losses
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Estimating CIPI
 Step 8.—Compute constant-price inventory
stocks by industry
 Calculated by accumulating constant-price CIPI
Constant-price inventory stockt =
constant-price inventory stockt-1 + constant-price CIPIt
 Constant-price inventory stocks by industry
provide the deflation-level components used to
compute aggregate chained-volume inventory
stocks (using the Fisher chained-index formula)
 Changes, over time, in the aggregate chainedvolume inventory stocks are the NIPA estimates of
chained-volume CIPI
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