Overview of the 2003

Comprehensive Revision

J. Steven Landefeld
Director

Presentation to the National Association for Business Economics

December 17, 2003

U.S. Bureau of Economic Analysis

 Comprehensive Revision
• Updated concepts, methods, and sources
• Increased consistency
• Expanded and improved presentations
• This revision: major changes affecting a large
number of components, but no significant rewrite
of economic history

2 www.bea.gov
 Comprehensive Revision – The Numbers
• Growth trends
– Relatively the same.
– “New economy” period virtually unchanged. At
3.8% growth (1994-2000).
• Business cycles
– Again, no significant changes in timing or
magnitude of cycles.
– Average decline in post-war recessions were
unrevised at -1.9.
3 www.bea.gov
 Recent Trends
Average annual rates of change of real GDP
(Selected periods)
4.5%
4.0% 3.8% 3.8%
3.4% 3.4% 3.4% 3.4%
3.5% 3.2% 3.2%
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
1929-2002 1959-1992 1992-2002 1994-2000
Prev. published (1996) Revised (2000)

Source: Bureau of Economic Analysis.

4 www.bea.gov
 Business Cycles
Real gross domestic product (Percent change)
8.0%
7.0%
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
-1.0%
-2.0%
-3.0%
1960 1965 1970 1975 1980 1985 1990 1995 2000
Prev. published (1996) Revised (2000)
Source: Bureau of Economic Analysis.

5 www.bea.gov
 Last Recession (2000:IV-2001:III)
• Same length and timing (3 quarters).
• Still mild versus past recessions (-0.6 revised to
-0.5 percent).
• Investment declines are still a large part of the story.
– Decline in investment during the downturn (2000:IV -
2001:III) are slightly smaller (-11.0 revised to -9.2
percent).
– Period leading up to recession was weaker with one
negative quarter in 2000:III.

6 www.bea.gov
 Current Cycle
Real gross domestic product (Percent change, SAAR)
8.0%
7.0%
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
-1.0%
-2.0%
-3.0%
98q4 99q1 99q2 99q3 99q4 00q1 00q2 00q3 00q4 01q1 01q2 01q3 01q4 02q1 02q2 02q3 02q4 03q1 03q2

Prev. published (1996) Revised (2000)

Source: Bureau of Economic Analysis.

7 www.bea.gov
 Current Recovery (2001:III-2003:II)
• Still moderate versus prior expansion periods.
– Real growth of 2.6 percent as compared to
growth of 5.2 percent.
• Small revision to growth means that strong
productivity performance during the recovery will
remain.

8 www.bea.gov
 Current Recovery (2001:III-2003:II)
Average annual rates of change of real GDP
(Selected periods)
6.0%
5.1% 5.2%
5.0%

4.0%

3.0% 2.7% 2.6%

2.0%

1.0%

0.0%
Avg. Past Recoveries * Current Recovery (01:III-03:II)
Prev. published (1996) Revised (2000)

Source: Bureau of Economic Analysis.

* Includes the following recovery periods: 1958:I-1960:I, 1960:IV-1969:III, 1970:IV-1973:IV, 1975:I-1980:I, 1980:III-1981:I, 1982:III-1990:II, and 1991:I-2000:IV.
9 www.bea.gov
 Inflation
• Still moderate over the last decade.
– Inflation, as measured by Gross Domestic
Purchases Prices, unrevised at 1.8 percent,
1992-2002.
• Still moderate during expansion.
– Inflation, as measured by Gross Domestic
Purchases Prices, revised up from 1.5 percent
to 1.6 percent, 2001:III - 2003:II.

10 www.bea.gov
 Inflation
Average annual rates of change in price indexes for gross
domestic purchases, GDP, and PCE (1992-2002)
2.5%

1.9% 1.9% 1.9% 1.9%

2.0% 1.8% 1.8%

1.5%

1.0%

0.5%

0.0%
Purchases GDP PCE
Prev. published (1996) Revised (2000)

Source: Bureau of Economic Analysis.

11 www.bea.gov
 Sources of Growth
• The sources of economic growth over the last
decade for the major moving parts of GDP are
little changed.
– Growth rates for business fixed investment and
imports are unrevised, 1992-2002.
– Consumer spending and residential investment
growth rates are slightly lower.
– Exports and government are slightly higher.

12 www.bea.gov
 Sources of Growth
Average annual rates of change of real GDP and its major
components (1992-2002)
10.0%
8.7% 8.7%

8.0%
6.5% 6.5%

6.0%
5.0% 4.9%
4.2% 4.3%
3.7%3.8%
4.0% 3.2% 3.2% 3.2% 3.2%

2.0%
1.7%
2.0%

0.0%
GDP FSDP PCE NRFI RFI EXPT IMPT GOV
Prev. published (1996) Revised (2000)

Source: Bureau of Economic Analysis.

13 www.bea.gov
 Revisions to Income
• The most significant revisions are to corporate
profits.
– Large upward revision in 2002 reflects improved
method for estimating the costs of stock
options.

14 www.bea.gov
 Revisions to Profits
Corporate profits from current production
(Revisions in level)
$120

$100

$80

$60

$40

$20

$0
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Source: Bureau of Economic Analysis.

15 www.bea.gov
 What Numbers Did Change?
• Banking
• Insurance
• Construction
• Fringe benefits
• Other – From used cars to copy machines

16 www.bea.gov
 Sources of Revisions
Sources of revision to current-dollar GDP
(Billions of dollars)
$150

$100

$50

$0

-$50

-$100
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
GDP Major Definitional Statistical

Source: Bureau of Economic Analysis.

17 www.bea.gov
 Previously Published Insurance Data
PCE household insurance – published
(Billions of dollars, SAAR)
$20

$15

$10

$5

Sept. 11
$0

-$5
Hurricane Andrew
-$10
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
PCE = Premiums - Claims Premiums Claims
Source: Bureau of Economic Analysis.

18 www.bea.gov
 Revised Insurance Data
PCE household insurance – revised
(Billions of dollars, SAAR)
$20

$15

$10

$5

$0

-$5

-$10
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
PCE = Premiums - Normal Claims Premiums Normal Claims
Source: Bureau of Economic Analysis.

19 www.bea.gov
 Revisions to Compensation
Sources of Revisions to Compensation of Employees
(Billions of dollars)
$75

$50

$25

$0

-$25
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
Compensation Wages and Salaries Supplements
Source: Bureau of Economic Analysis.

20 www.bea.gov
 Why Weren’t the Changes Larger?
• Introduction of chain indexes in 1996 avoids
rewrites of economic history due to base changes.
• Practice of bringing in updates and changes
sooner rather than waiting for benchmarks
provides revised data earlier – when its most
relevant – rather than later.
• Investments in data made by Administration and
Congress are beginning to pay off.

21 www.bea.gov
 What Challenges Remain?
• Large gaps in coverage remain.
– Detailed coverage of manufacturing, agriculture, and mining;
but poor coverage of many new and old industries.
• Over 1/4 of GDP estimated using a patchwork of data.
– Census data on finance and insurance, utilities, real estate,
and a large share of transportation are only available once
every 5 years (1992 value of these industries sales was $3
trillion).
– Census data on personal and business services are available
annually, but growth and volatility coupled with lack of
quarterly data has caused services to be a large source of
revisions to GDP.
22 www.bea.gov
 What Challenges Remain
• Monthly payroll data cover only the wages and salaries of
production and non-supervisory workers, who account for a
little over half of wages and salaries in today’s economy.
• Data on producers prices cover roughly 50% of service
industry prices.
• The United States has the world’s finest set of economic
accounts, but incomplete integration and inconsistencies
reduce their usefulness.
• All of these challenges are on BEA/Census/BLS strategic
agendas; but in a world of constrained resources, progress
has been slow.
23 www.bea.gov