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purpose is available. This data will provide for more accurate deflation than is possible using the unit value indexes previously employed for this purpose. Resources currently available to the program will provide for the coverage of about 50% of the value of all imports and 65% of the value of all U.S. exports of products. The international price index program should be expanded to cover 100% of the value of imports and exports. The completion of this program, conducted by BLS on the basis of a sample of transactions from export declarations and import records held by the U.S. Customs Service, could permit the discontinuance of the unit value indexes compiled by the Census Bureau. However, only a few countries have a pricing system for exports and imports other than unit values. Accordingly, the need for unit value indexes may continue after the international price program has been completed.

1. Restating the normative values which form the

basis of much of the budget into current terms and then pricing and updating the cost of these values on the basis of a specification pricing program conducted in conjunction with the CPI. This approach would be comparable to the basic program formulation initiated in 1946 and updated in 1959 and in 1966. It suffers from all of the deficiencies noted in Appendix 4 to The Measure of Poverty, primarily that there are no objective criteria to guide BLS in determining what items must be purchased by a family in order to enjoy a stated living standard which in turn is also subjectively determined, except that the data base would be current and would be

maintained on a current basis. 2. Basing the series on actual expenditure

patterns at various income levels developed through the most recent Consumers' Expenditure Survey (CES) and updating the results through data collected in the proposed continuing CES. This approach would eliminate all normative judgments. It would suffer, as does the current approach, in not appropriately providing for place-to-place comparisons of the cost of maintaining the “same” purchasing patterns. This is a necessary concomitant of developing budgets based on actual expenditures since the expenditure patterns in different areas reflect regional differences in clothing and housing requirements and in food and recreation among other expenditure elements. Also, different purchasing patterns may result either because of preference or because some items freely available in one place may be either unavailable or available only at a high price in other areas. Thus, budgets for different places based on actual expenditure patterns in each place may not reflect the relative difference in cost of an identical or comparable living

standard in the various places. The Family Budget Subcommittee and the Statistical Policy Coordination Committee should provide guidance to BLS as to the appropriate changes that should be made in the family budget program so as to achieve the purpose(s) for which the program is used.

Producer Price Program

The producer price program has three major elements: the Producer Price Index, formerly called the Wholesale Price Indexe (WPI), the stage of processing indexes, and the industry sector price indexes (ISPI). These series suffer from several conceptual, statistical, and operational inadequacies:

1. The PPI data are used as precursors of change

in the CPI. This is without regard to the fact that the data are not designed to be used for this purpose. Some price indexes necessary to better understanding of the price mechanism are missing entirely: e.g., input materials indexes, final demand indexes, and industry

based stage of processing indexes; 2. The PPI is based on a hodgepodge of prices to

different sectors—some of which are final demand sectors, and some of which are not. Further, the aggregation structure by total shipments in the PPI's leads to multiple

counting of price changes; 3. Many major industry sectors are either

unpriced or have poor coverage: ISPI's are available for only about one-fourth of the four-digit manufacturing and mining industries; PPI's are available for less than half of the total value of shipments in agriculture, manufacturing and mining; and almost nothing is priced in the service or construction

sectors; 4. Prices collected are heterogeneous in nature

some are spot market prices, some contract prices, others are based on prices of delivered

International Price Index Program

It is expected that data from this program will be used, among other purposes, to deflate the value of all exports and imports in the gross national product accounts as soon as sufficient information for that

The procedure can be carried out by BLS on the basis of the establishment universe material currently in its possession. This revision, which is now being phased in, is expected to continue for many years. When the revision is completed the data are expected to be significantly more complete, accurate, and useful than the present data. Nevertheless, the availability of sales volume data, as would be available if the Standard Statistical Establishment List information were available to BLS, would enhance the sample procedure by allowing for direct stratification of establishments on the basis of volume instead of employment (as in the BLS universe material) as a proxy for volume (see related chapter on standards development). It is believed that this approach would produce statistically reliable data in considerably more detail which can be aggregated in more meaningful ways than is now the case. However, the extent to which the availability of the Standard Statistical Establishment List would enhance the BLS effort is, in fact, not known, and furthermore there appears to be little question that the BLS approach will produce statistically reliable data in considerably more detail and aggregated in more meaningful ways than is now the case.

While the comprehensive revision being implemented will provide for a vast improvement in the quality of price data now available, there are some difficult data problems which would still remain. For example, price indexes do not now include "build-to-order” commodities such as commercial aircraft, ships, and some computers. The very nature of a build-to order commodity introduces severe technical questions of measurement and quality adjustment. Efforts toward developing a conceptual framework for the pricing of such commodities should continue.

Tuesday Spot Market Price Index

orders, list prices, nominal or trade journal

prices; 5. Sampling is judgmental and many items are

priced on the basis of very few quotes. Probability sampling (with expanded samples) would provide measures of reliability. Although not all bias can be removed, it is

likely that probability sampling will reduce it. Because of these limitations, gaps exist in our knowledge about both specific price movements and the total structure of price relationships. In addition, the current data may be misleading, but the degree of misrepresentation, if any, cannot be assessed.

To correct these deficiencies the producer price program should be improved using the recommendations in The Ruggles' report for the Council on Wage and Price Stability. To this end, the Bureau of Labor Statistics has launched a comprehensive program to revise the producer price program and its components and provide accurate measures of price change for the major sectors of the American economy. To achieve this objective, the revised program will provide a complete system of price measures consisting of the following major elements: 1. Output price indexes for all major industrial

sectors; 2. Detailed commodity indexes and service

indexes covering both primary and secondary

production; 3. Stage-of-processing indexes which accurately

reflect processing flows in the economy; 4. Input materials price indexes for all major

industry sectors; and 5. Final demand price indexes of major industry

sectors.

The indexes will be based on a statistical sample of establishments within four-digit SIC's and within each establishment on a probability selection of commodities or services with each sample being stratified by size of firm and sales volume. The data obtained after initial selection should be specification priced and should permit the completion of the types of indexes noted earlier. (This type of approach seems to be consonant with the recommendations contained in the 1977 study, "Review and Evaluation of the Wholesale Price Index” conducted by Professor Richard Ruggles under the auspices of the National Bureau of Economic Research for the Council on Wage and Price Stability. The BLS approach to the revision of this program is comparable to virtually all of the other suggestions in the Ruggles report.)

This index which shows changes in prices for 23 commodities is not based on direct transactions data, but rather on reports of prices as reported through trade and government sources. Moreover, spot prices reflect only the price that a seller in a spot market is willing to accept at that moment, and does not reflect actual transactions. Spot prices, moreover, do not generally reflect total transactions prices in the regular course of commercial events. The items priced, however, are considered to be highly price sensitive. Presently the Bureau of Economic Analysis uses data from this Index in developing preliminary estimates for the current month in several Business

See separate chapter.

Conditions Digest series. However, the producer price program when revised will provide reliable monthly data for all or many of the commodities included in the Tuesday Spot Market Index. When those data are

available the long-term value of this measure to the Federal Government and its relative importance in terms of all other statistical program priorities should be reassessed.

Chapter 15. PRODUCTION AND DISTRIBUTION STATISTICS

Introduction

portation, Federal Trade Commission, Corps of

Engineers, Department of Energy, Federal Reserve The production and distribution of goods and

Board, Small Business Administration, U.S. Forest services is the most basic economic fact of life, ever

Service, and many others. since man first bartered one product for another. Although the measurement of production did not

Users of Production and Distribution start until much later (probably with a flour miller

Statistics making marks on the wall), statistics of production and distribution have been kept for centuries.

Production and distribution statistics are used by

almost every organization-public, private, national, Early statistics were probably limited to a count of products made and sold and the number of persons

international, state, or local-concerned with the

economy of the United States as well as many organiemployed. These two statistics are still the main

zations concerned with the social aspects of the measures of production and distribution today. The complexity of today's marketplace has meant that

nation. They are used in projections and analytic each and every different product cannot be counted

studies of capital, energy, labor, and civil defense separately, and dollar values are now used more and

requirements; defense mobilization; pollution

control; international trade agreements; taxation; more to measure the production of a group of similar

small business definition and evaluation; products.

macroeconomic projections; production bottlenecks; Production, for purposes of this section, means antitrust actions; and input-output, industrialthose goods which are produced or those services occupational, and import-export models. In most which are performed by labor and capital resources cases the information is used directly, but in many and managerial skills and enter directly or indirectly others the use is through the Gross National Product (through intracompany sales or consumption in the (GNP), Industrial Production Index, or the same plant) into commercial trade. Distribution Wholesale Price Index. In some series, these statistics means the offering of goods or services at a specific are not used directly, but are needed to complete the time and place, in a particular quantity or amount by measures of the economy at a higher level of agcompanies with wholesale or retail trade or trans- gregation. portation activities.

Many aspects of production and distribution are of special importance or of current interest. They are

Basic Source Program covered separately in the chapters on agricultural commodities, construction, transportation, energy,

Collectively, the quinquennial economic census is health, and education.

the largest Federal program of production and

distribution statistics. In addition to this census, The areas that are the subject of this chapter are various Census Bureau monthly, quarterly, annual, mining and manufacturing, wholesale and retail trade or occasional programs fill in the data needs where (including international trade in these commodities), more frequent data are required. Most of these communication and public utilities, finance, intermediate series are benchmarked to annual insurance, real estate, services including repair, and and/or quinquennial series. public administration.

The quinquennial censuses provide the basic The agencies collecting production and statistical profile of the Nation's businesses. Included distribution data are the Bureau of the Census, in these censuses are the censuses of agriculture, Bureau of Mines, Interstate Commerce Commission, mineral industries, construction, manufactures, U.S. International Trade Commission, Social wholesale trade, retail trade, services and Security Administration, Department of Trans- governments; the census of transportation collects shipments data from shippers rather than the trans- In the manufacturing area, a series of Current portation industry. This program includes the Industrial Reports provide intercensal figures on the material needed to tie together most of the overall production of about half of the 11,000 different commeasures of the economy. The Census Bureau col- modities collected in the census of manufactures. lects data on labor and capital input to industry with These reports are monthly, quarterly, or annual survey items on employees, wages, and capital depending on the frequency of the need for such data. expenditures for the above industries. In some of the The Current Industrial Reports series provide data for censuses the consumption of raw materials, water, industrial mobilization needs, basic data for energy, and supplies; the production of goods and evaluation of the impact of imports on U.S. industry, services; as well as inventories of and orders for go- basic production data for the Industrial Production ods is measured. The Census Bureau also collects Index, international trade negotiations, as well as information on the sales of these goods to ultimate data to measure the labor productivity of the nation. consumers. It provides the profile of how, what, and where these goods and services flow through the

The enterprise statistics program of the Bureau of

the Census is a basic source of data to analyze the economy. The input-output table (described in the chapter on national accounts) is based in very large

interrelationship of corporations across industries as

well as the relationships to other corporations, part on the economic censuses.

subsidiaries, joint ventures, and so forth. These measures of the basic economy, combined with profits, social insurance and other transfer The Bureau of Mines collects annual and some payments (described in other chapters), and imports monthly production, inventory, consumption and and exports show a relatively complete picture of the

foreign trade data on most minerals. They use data supply and demand and flows of the economy. The

on world totals to evaluate future world production economic censuses also provide benchmarks or and trade. They also are concerned with competing weights for many measures of the economy tabulated items such as scrap, and further processed goods such by other agencies.

as refined petroleum products and cement. Some

reconciliation is made with the censuses of In addition to providing basic overall measures of

manufactures and mineral industries data, but adthe economy, the economic censuses provide a

ditional work is necessary to reconcile the definitions separate profile of each industry. The Census Bureau

and concepts. These data serve similar purposes for tabulations show geographic dispersion,

mining as the Current Industrial Reports mentioned concentration, and the scale of the operation for all

previously serve for manufacturing. They also are an manufacturing industries and some of these measures

important measure of energy production (see chapter for most of the nonmanufacturing industries.

on energy statistics). The retail sales figures are an important measure of The Interstate Commerce Commission collects the basic strength of the economy and consumer

data on the movement of broad classes of comconfidence and are a major input to the GNP

modities (see the chapter on transportation for adestimates. These weekly and monthly series of sales

ditional comment) as well as statistics on the number by various groupings of stores are a major indicator

and types of equipment in use. Similar data are colof demand in the rest of the economy.

lected by agencies with responsiblities for air and

water carriers. The Department of Transportation Inventory data are collected monthly from

sponsors the collection and publication by the Census manufacturers, wholesalers, and retailers. They are

Bureau and State governments of urban originkey economic indicators (particularly when

destination data. Other Federal agencies including combined with sales figures) and are essential data

the Civil Aeronautics Board, Department of items for the GNP estimates. Inventories are difficult

Agriculture, Bureau of Mines, and Corps of to measure because of the absence or inadequacy of

Engineers also collect data on the movement of company records of stocks, differences in valuation

goods. methods, determination of the ownership of inventories to avoid missing or double coverage of

The U.S. International Trade Commission collects goods on consignment or returned or goods received detailed production and external trade data on but not invoiced or paid, inconsistent reporting synthetic organic and related chemicals on a between shipments and inventories in the continuing basis and many other commodities on an manufacture of military hardware, and "in transit" as needed basis. This collection is for the analysis of considerations. New orders and backlogs of orders goods to recommend possible changes in the tariff are also collected in many sectors of manufacturing rates or quotas. Other agencies, including the Census on a monthly basis.

Bureau, Agriculture, and Environmental Protection

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