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Lucas HittU.S. Bureau of Economic Analysis
November 6, 2014
The Economy: How Do We Know What We Know?
www.bea.gov
Let’s Talk About Economic Data
Federal Economic Statistics
National Accounting
Lessons from the Great Recession & Evolutions to Come
BEA 101
Online & Other Resources
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Origin of the GDP Accounts
“One reads with dismay of Presidents Hoover and then Roosevelt designing policies to combat the
Great Depression of the 1930’s on the basis of such sketchy data as stock price indices, freight car loadings, and incomplete indices of industrial production. The fact was that comprehensive
measures of national income and output did not exist at the time. The Depression, and with it the
growing role of government in the economy, emphasized the need for such measures and led to the development of a comprehensive set of national
income accounts.”
Richard T. Froyen 3
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National Accounts & GDP: 75 Years of Responding to Policy Needs and Changes in
the Economy
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Contribution of the National Accounts to Stability and Economic Growth
“Much like a satellite in space can survey the weather across an entire continent so can the GDP give an overall picture of the state of the economy. It enables the President, Congress, and the Federal Reserve to judge whether the economy is contracting or expanding, whether the economy needs a boost or should be reined
in a bit, and whether a severe recession or inflation threatens. Without measures of
economic aggregates like GDP, policymakers would be adrift in a sea of unorganized data.
The GDP and related data are like beacons that help policymakers steer the economy toward the
key economic objectives.”
Paul Samuelson and William Nordhaus
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Contribution of the National Accounts to Stability and Economic Growth
National accounts, in combination with better informed policies and institutions, contributed to a reduction in the severity of business cycles and strong post-war economic growth.
1854 – 1945: Twenty two financial panics and depressions, longer and deeper than post-war recessions, with an average duration of 21 months. During the great depression U.S. GDP contracted by
26 percent. 1945-2013: Eleven recessions, with an
average duration of 11 months. During the great recession U.S. GDP contracted by
4.3 percent. 6
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Contribution of the National Accounts to Stability and Economic Growth
Post WW II era a period of unprecedented growth. Real GDP per capita and real wealth has more
than doubled during the post war era.
Dramatic improvement in standards of living
that contributed to large improvements in
social conditions, cutting poverty in half, raising
life expectancy, and adding to leisure time.
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Challenges: Looking Forward
Addressing gaps revealed by the Great Recession Improved measures on key issues including
innovation, health care, pensions, and human capital
Improved measures of economic welfare, including distribution of income
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Gaps Revealed by the Great Recession
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Gaps Revealed by the Great Recession
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Gaps Revealed by the Great Recession
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Post Financial Crisis & Great Recession Challenges: How Did We “Miss” the
Stock Price Bubble?
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Source: BEA, S&P
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Better Understanding the Impact of Innovation on Growth
Intellectual property products (new category including R&D, software and entertainment, literary and artistic originals) increased the growth rate of real GDP by .19 percentage point, a 7.6% share of growth.
From 1995-2012, incorporating R&D investment increased the growth rate of real GDP by.07 percentage point, a 2.8% share of growth.
Even if IP spillovers are as large as direct effects, the contribution of IP appears to explain only part of the 1/3 of long-term share of growth accounted for by multi-factor productivity.
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In comparison, private investment in commercial and other types of structures accounted for just over .4 percent of average real GDP growth from 1995-2012.
The contribution to average real GDP growth from IP products is larger than private investment in computers and peripheral equipment.
Recognition of private R&D as investment raises
private fixed investment by 10 percent in 2012.
Better Understanding the Impact of Innovation on Growth
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Entertainment, Literary and Artistic Originals
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Theatrical Movies
Long-Lived Television
Books
Music
Misc.
Total Investment in 2012: $74.8 billionSource: BEA
Share of Investment in Entertainment, Literary and Artistic Originals by Type
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Improved Measures of Economic Welfare: Happiness & the Financial Crisis
Source: BEA, Gallup
Unemployment rate
Gallup Well-being Index
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Improved Measures of Economic Welfare: Distribution of Income
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Source: BEA & Census Bureau
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About BEA
The Bureau of Economic Analysis (BEA) is an Executive-branch agency.
BEA is one of the world’s leading statistical agencies BEA is very small (500 employees) compared to other
statistical agencies. Most input data collected for purposes other than the
development of our statistics.
No BEA employee is a political appointee.
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BEA’s Role in the Federal Statistical System
Comprehensive Measures of the U.S. Economy Double-entry sets of economic accounts National, International, Regional, and Industry
Accounts Except for its International Surveys, BEA
accounts are built on a mosaic of public and private data collected for other purposes
Mine-Shaft Canary for U.S. Statistics
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Source Data for BEA Accounts
Other source agencies: EIA - DoE NASS, ERS, NCES, and HHS-CMS Lots of private data
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BEA’s National Economic Accounts
The National Income and Product Accounts (NIPAs) are a set of economic accounts that track economic flows within the U.S. economy. Two key NIPA measures are:
Gross domestic product (GDP): Measures the total value of goods and services produced within the U.S. in a period.
Gross domestic income (GDI): Measures the incomes earned and the costs incurred in producing those goods and services.
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Expenditure Components of GDP (2013)
GDP = C + I + G + X - M
= GDP
Consumption
68.4%
Government
18.6%
Investment
15.9%
Exports
13.5%
Imports
16.4%
+ + + -
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Dating the Business Cycle
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How are GDP Estimates Used?
Policymaking Academic research Business decisions
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The Right Trade Off Between Accuracyand Timeliness?
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BEA’s International Economic Accounts
Balance of payments (International transactions accounts) Trade balance Current-account balance
International investment position Operations of multinational companies International services
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BEA-Developed Source Data
BEA surveys provide important international data Direct investment (U.S. and abroad)
Operations of multinational companies (MNCs)
Trade in services Mandatory surveys are sent to:
U.S. MNCs and U.S. affiliates of foreign companies.
U.S. companies that import or export services
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How are International Statistics Used?
Macroeconomic policy decisions
Determining market size, share, and direction
Analyzing size and composition of inbound and outbound direct investment
As a measure of globalization
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Monthly Exports and Imports: Goods & Services
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BEA’s Industry Economic Accounts
Input-Output Accounts (Benchmark & Annual Tables) GDP-by-industry statistics
Gross Output
Intermediate Inputs
Value Added
KLEMS Travel and Tourism Satellite Account Research and Development Satellite Account
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Natural Resource
and MiningConstruc-
tionManufac-
turing
Transpor- tation and
Utilities Trade Services Other
Total Interme-
diate Uses
Personal Consump-
tion Expendi-
tures
Private fixed
investment
Change in private
inventories
Exports of goods and services
Imports of goods and services
Government consumption expenditures
and gross investment
Total final uses
(GDP)
Natural Resource and
Mining 82 11 286 63 2 10 10 463 49 30 -7 25 -119 -22 442
Construction 8 1 12 12 4 74 42 153 663 217 879 1,032
Manufactured Products 58 232 1,337 74 103 406 200 2,410 1,248 566 14 495 -1,015 84 1,393 3,803
Transportation and Utilities 22 21 158 96 77 150 69 593 333 19 0 59 -13 2 400 994
Trade 14 74 201 12 47 86 30 463 1,093 123 2 68 20 10 1,317 1,780
Services 84 146 544 154 381 2,487 440 4,235 4,695 290 0 165 -42 28 5,135 9,370
Other 1 0 31 31 23 77 27 190 80 -83 4 98 -166 1,636 1,569 1,760Total Intermediate Inputs 268 485 2,570 442 636 3,290 817 8,508 7,499 1,608 14 910 -1,335 1,977 10,672 19,180Compensation of employees 61 368 765 260 700 2,809 1,135 6,097
Taxes on production and imports, less subsidies 10 5 33 49 276 364 -12 724
Gross operating surplus 116 109 483 164 285 2,487 207 3,851
Total Value Added 187 483 1,280 473 1,261 5,659 1,330 10,672
455 968 3,851 915 1,897 8,949 2,146 19,180
TOTAL COM-
MODITY OUTPUT
VALUE ADDED
FINAL USES (GDP)INDUSTRIES
TOTAL INDUSTRY OUTPUT
COMMODITIES
Industry Output = Commodity Output
Total Industry Output = Intermediate Industry Purchases
+ Value Added
Input-Output (Use) Table
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GDP by Industry
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How are Industry Statistics Used?
Study production capacity and productivity across industries
Examine effects of a strike or a natural disaster on the U.S. economy
Measure the impact of trade policies
Assess cross-industry impacts of economic and regulatory changes
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BEA’s Regional Economic Accounts
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Gross Domestic Product State/Territory, Metropolitan Area
Personal Income State, Metropolitan Area, County
Regional Input-Output Multipliers (RIMS II)
www.bea.gov
How are Regional Statistics Used?
Analysis of state and local economic impacts of national or state economic trends
Project tax revenues, the need for public services, or promote economic development opportunities
Conduct market research
Allocate federal funds to states
bea.gov
BEA Regional Income & Product Account Estimates Used to Distribute $ 320 Billion in Federal Funds, FY2012
All other
$23,098
Medicaid$204,053Medicaid
$262,389
Medicaid Grants$262,389
Medicaid Grants
$262,389
Medicaid Grants
$262,389Medicaid Grants
$262,389
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111 Largest CountiesAccount for ½ U.S. Personal
Income
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Personal Income
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Regional Example: Oklahoma City Compensation
71 % growth
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2008 2009 2010 20110
50
100
150
200
250
300
350
Industry GDP
Regional Example: Hawaii GDP
125 % growth
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BEA’s New Regional Data Products
BEA is releasing several new statistical products in 2014, as a part of an ongoing effort to better measure the dynamic regional economies.
Quarterly GDP by State
Real Personal Income for State and Metropolitan Areas
Personal Consumption Expenditures by State
U.S. Quarterly GDP by Industry
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BEA home page features
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Automated Feeds
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Research
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Economy at a Glance
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Follow us @BEA_News to get the latest updates on BEA
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Media
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Questions
Contact Information:
Lucas HittChief of CommunicationsU.S. Bureau of Economic Analysis
202-606-9223
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