Chapter 3 of the Manual

National accounts statistics national accounts and the ICP main expenditure aggregates valuation
Expenditure classification general framework basic headings
Data sources

ICP 2004 is a joint project involving both price statisticians and national accountants.
To calculate the PPPs, the national accounts experts provide the expenditure weights while the price statisticians provide the prices.
A main objective of ICP 2004 is to compare the real GDP of participating countries.
This requires good estimates of the level of
GDP in national currencies.

ICP 2004 will be based on the 1993 SNA, but some approximations are inevitable. For example:
Non-profit institutions not distinguished
No estimates for valuables, patented entities...
No work in progress for agriculture
FISIM not allocated to users
No estimates for illegal activities

GDP must cover informal activities: crops and livestock for own consumption market traders, taxi drivers, street vendors, personal services …
All levels of government
Software and mineral exploration in capital formation
Significant NPISHs
Foreign trade, including shuttle trade and smuggling

Final Consumption Expenditure
Individual consumption expenditure by households
Individual consumption expenditure by non-profit institutions serving households
Individual consumption expenditure by government
Collective consumption expenditure by government
Gross capital formation
Gross fixed capital formation
Change in inventories
Acquisitions, less disposals, of valuables
Balance of exports and imports
Exports of goods and services (plus)
Imports of goods and services (minus)
Gross Domestic Product

ICP 2004 will compare actual final consumption between countries - not final consumption expenditure
Actual final consumption consists of: actual individual consumption of households actual collective consumption of government

Final consumption expenditure Actual final consumption
Households
NPISHs
Individual consumption expenditure by households
Actual individual consumption equals individual consumption expenditure by households, plus individual consumption expenditure by
NPISHs plus individual consumption expenditure by government
Individual consumption expenditure by
NPISHs
None
Government Individual consumption expenditure by government
Actual collective consumption
Collective consumption expenditure by government equals collective consumption expenditure by government

But expenditure weights will refer to final consumption expenditure
Participating countries will need to supply weights for final consumption expenditure.
Conversion to actual final consumption will be done by the ICP organisers.
Participating countries will need to distinguish between individual and collective consumption expenditures of government.

Actual expenditures food, clothing, transport, rent, services … .
Imputed expenditures: rents of owner-occupiers food and other goods for own consumption goods and services provided as income in kind
FISIM (if allocated to consumers)

Non-Profit Institutions Serving Households
(NPISH) are mainly funded by households either residents or foreign households.
Examples: religious organisations (mosques, temples, churches, schools, clinics, hospitals) trade unions political parties in multi-party states
UNICEF, OXFAM, Red Crescent

Most expenditures on housing, health, recreation and culture, education and social protection are individual.
Two kinds: production of services by government for the benefit of individual households purchase of goods and services by government from other producers which are then passed on to households, either free or at low cost (health and education only)

Mainly fall under the COFOG headings of general public services, defence, public order and safety, economic affairs and environment protection
Only one kind - the production of services by government. Collective consumption does not involve the purchase of goods and services for delivery to households.

Goods that are expected to be used in production for several years
GFCF is always measured net of sales: sales for scrap, sales to abattoirs, exports
1993 SNA includes expenditures on software and on mineral exploration in
GFCF

Work in progress - construction, ships …
Stocks of raw materials, finished goods, goods for resale, goods stored by government as strategic reserves, such as food and fuel.
Estimates may not be comprehensive but should cover important items such as food and fuel stocks, stocks of mining companies, large retailers...

General rule is to use the prices at which sales of goods and services are transacted -
“ purchasers ” (or “ market ” ) prices.
These prices may be reduced by discounts or rebates: bargaining, sales,bulk purchases …
Note that price data for ICP must also reflect discounts or rebates.

Imputed rents of owner occupiers use rents actually paid for similar kinds of dwellings, in similar locations and with similar facilities if not possible, rents are valued at cost consumption of fixed capital, return on capital, regular maintenance, and insurance

Goods produced for own consumption.
Prices in local markets for livestock, vegetables, fruit …
Estimated basic prices for furniture, textiles, hand-tools (retail prices less sales taxes and retail margins)
Goods and services provided as income in kind at purchasers ’ prices if the employer has purchased the goods or services and at producers ’ prices if they have been produced by the enterprise itself.

Individual consumption expenditure of
NPISH
Valued at cost of production compensation of employees, intermediate consumption, consumption of fixed capital, taxes less subsidies on production minus any payments received from households for services provided.

Goods and services purchased by government from other producers which are then passed on to households: purchasers prices
All other consumption expenditure of government at the costs of production (see valuation of
NPISH)

GFCF is valued at purchasers ’ prices but note that these should include not only the cost of transport but also the cost of installation and any fees or taxes for transfer of ownership.
Own-account production of fixed capital assets is valued at basic prices or, if not available, at the costs of production.

The change in inventories must reflect only the physical change - not holding gains or losses due to changes in prices during the year.
The physical quantities of inventories at the beginning and end of the year are usually valued using the average prices over the year or, failing that, mid-year prices.

Exports of goods and services
Free-on-board (f.o.b.) prices
Imports of goods and services
Cost, insurance, freight (c.i.f.) prices

The Expenditure Classification for the
ICP 2004 is based on four international classifications:
COICOP for household expenditure
COPNI for NPISH
COFOG for government
CPA/CPC for gross fixed capital formation

Main Aggregates Categories Groups Classes
11.00 Individual consumption expenditure by households
12.00 Individual consumption expenditure by NPISHs
13.00 Individual consumption expenditure by government
14.00 Collective consumption expenditure by government
15.00 Gross fixed capital formation
16.00 Change in inventories and acquisitions less disposals of valuables
17.00 Balance of exports and imports
GDP
13
1
3
6
5
2
1
31
48
1
6
6
7
2
1
71
109
6
16
5
13
2
1
152
Basic
Headings
148
6
29
7
26
4
2
222

They are the starting point for participating countries to draw up regional lists of the specific goods and services for which they agree to collect prices.
The basic headings will be used as the framework for editing the reported prices
The ICP organisers will calculate PPPs for the basic headings before aggregating them to higher levels for publication

Code
11.00.000.0
11.01.00.0
11.01.10.0
11.01.11.0
11.01.11.1
11.01.11.2
11.01.11.3
11.01.11.4
11.01.11.5
Level
INDIVIDUAL CONSUMPTION EXPENDITURE BY HOUSEHOILDS Main aggregate
FOOD AND NON-ALCOHOLIC BEVERAGES Category
FOOD
Bread and cereals
Group
Class
Rice
Other cereals, flour and other cereal products
Bread
Other bakery products
Pasta products
Basic heading
Basic heading
Basic heading
Basic heading
Basic heading

15.00.00.0
15.01.00.0
15.01.10.0
15.01.13.0
15.01.13.1
15.01.13.2
15.01.13.3
15.01.13.4
15.01.13.5
15.01,13.6
GROSS FIXED CAPITAL FORMATION
MACHINERY AND EQUIPMENT
METAL PRODUCTS AND EQUIPMENT
Special purpose machinery
Agricultural and forestry machinery
Main aggregate
Category
Group
Class
Basic heading
Machine tools
Machinery for metallurgy, mining and construction
Basic heading
Basic heading
Machinery for food, beverage and tobacco processing Basic heading
Machinery for textile, apparel and leather production Basic heading
Other special purpose machinery Basic heading

Examples of basic headings: Government
13.00.00.0
13.02.00.0
13.02.10.0
13.02.11.0
13.02.11 1
13.02.11.2
13.02.11.3
INDIVIDUAL CONSUMPTION EXPENDITURE BY GOVERNMENT Main aggregate
HEALTH Category
HEALTH BENEFITS AND REIMBURSEMENTS Group
Medical products, appliances and equipment
Pharmaceutical products
Other medical products
Therapeutic appliances and equipment
Class
Basic heading
Basic heading
Basic heading
14.00.00.0
14.01.00.0
14.01.10.0
14.01.11.0
14.01.11 1
14.01.11.2
14.01.12.0
14.01.12.1
14.01.12.2
14.01.13.0
14.01.13.1
COLLECTIVE CONSUMPTION EXPENDITURE BY GOVERNMENT Main aggregate
COLLECTIVE SERVICES
COLLECTIVE SERVICES
Category
Group
Compensation of employees
Compensation of employees (defence)
Class
Basic heading
Compensation of employees (non-defence)
Intermediate consumption
Intermediate consumption (non-defence)
Intermediate consumption (non-defence)
Gross operating surplus
Gross operating surplus
Basic heading
Class
Basic heading
Basic heading
Class
Basic heading

Starting point is the existing expenditure breakdown of GDP
Some countries will not even have the breakdown by the main expenditure aggregates. For example:
NPISH expenditures included with households no estimates of change in inventories no information on net acquisitions of valuables

Typical problems with main aggregates
NPISH
In some countries NPISHs may be trivial and can be ignored. In other countries there will be a few large NPISH for which accounts should be compiled
Change in inventories
Estimates need not be comprehensive but should cover strategic food and fuel stocks and stocks held by large enterprises.
Net acquisition of valuables
Can be ignored in most countries.

Household budget/expenditure surveys
Nutrition surveys
Retail trade statistics
 Production statistics - agriculture and industry
 Import and export statistics
 VAT or sales tax statistics
 Information on sales of tobacco and alcohol
 Motor vehicle registrations
 Sales by utility companies and state monopolies
 FAO data base on food balances

All countries will need to use information from a number of more or less reliable sources.
A supply and use table is a good framework for checking and adjusting data coming from different sources.
The essential feature of a supply and use table is that the total supply of goods and services (left side) must equal the total uses
(right side)

Example of a Supply and Use table
Supply Basic headings
Domestic production
(basic prices)
Imports
(c.i.f.)
Net taxes on products
Transport margins
Trade margins
On household consum ption
Other trade margins
Uses
Intermediate consumption
Gross fixed capital formation
Change in inventories
6,500 0 0 65 130 10 1,000 0 0 11.01.12.4
Poultry
11.02.13.1
Beer
8,200 1,200 400 200 1,700 0 0 0 -10
Exports Household consumption
45
350
5,660
11,360
11.07.11.1
Motor cars with diesel engine
11.11.21.1
Accommo dation services
0
450
955
0
30
25
10
0
135
0
5
0
0
0
35
0
0
0
0
0
1,100
475

Government budget (forecast) or expenditure
(actual) records.
To distinguish between individual and collective consumption, assume that most housing, health , recreation and culture, education and social protection are individual.
The production accounts will supply basic headings consisting of compensation of employees, intermediate consumption, gross operating surplus and net taxes on products.

Government accounts
Investment surveys of enterprise
“ Commodity flow ” methods.
Estimate the total supply of goods used for GFCF. Add margins for labour costs, profits and product taxes to obtain
GFCF in purchasers ’ prices.
Particularly useful for estimating the 20 basic headings needed for machinery and equipment in countries where most of these assets are imported.

Weights are needed for all basic headings
If countries do not supply them, the organizers will have to guesstimate them
Countries should do it - not the organizers.
Possibilities: equal division of group or class weights among basic headings other countries ’ weights expert opinion