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proving the data base of the quarterly NIPA estimates include: 1. Strengthening the Bureau of Labor Statistics'

monthly employment and payroll survey (790) by increasing the response rate and the collection of total wage payments including supervisory workers payrolls, retroactive pay

and irregular bonuses, for the entire month; 2. Feasibility studies conducted by the Census

Bureau to determine the effect on revisions and response rate of collecting revised monthly data from the same respondents in its monthly trade,

service, and manufacturing surveys; 3. Institution by the Census Bureau of a quarterly

survey of a sample of State and local governments to collect current data on

expenditures of these governments; 4. Expanding items collected in the Federal Trade

Commission's Quarterly Financial Report to explicitly identify employer contributions, on an accrual accounting basis, to private pension (retirement), health (Blue Cross-Blue Shield, etc.) and welfare (life insurance, day care, etc.)

employee benefit plans; 5. Modifying the new survey of income of com

mercial banks (jointly sponsored by the Federal Reserve Board, Comptroller of the Currency, and Federal Deposit Insurance Corporation) to obtain quarterly tabulations of net income 65 to 70 days after the reference quarter and net income for domestic entities of the banking companies, as distinct from their foreign

affiliates; 6. Strengthening the sampling and statistical meth

odology of BEA's plant and equipment survey,

and 7. Consistent treatment of military goods with

long production lead time (e.g., ships, aircraft, missiles, etc.), whether on a cost-plus or fixedprice contract, to conform with the treatment of other industries by recording in the Census Bureau's Manufacturer's Shipments, Inventories, and Orders series unfinished items as work in process inventories and the actual shipment of goods as liquidation of inventories

of finished goods. During the course of the Data Improvement Study, the Census Bureau commissioned the National Bureau of Economic Research (NBER) to make an intensive study of means to provide more accurate measures of business inventories. Experimental surveys, company visits, delineation of conceptual

issues, and so forth, were undertaken as part of the NBER study, which is planned for publication in 1978. The Advisory Committee's recommendations for the improvement of inventory data, of course, are not as extensive as those that will be emanating from the NBER study. However, the Committee's review has aimed at identifying major existing weaknesses and recommendations which appear to be essential to a basic program for improving inventory statistics.

Some of the recommendations include: in the Census Bureau's monthly and annual survey of manufacturing firms, the collection of companywide information on inventories including inventories held in facilities other than production plants and the introduction of a full probability sample of companies in the monthly survey; in the Census Bureau's monthly retail trade survey, suggested methods to maintain an adequate sample, the collection of sales and inventory data from identical respondents, collection of consistent information from the same firms on purchases, sales and gross mark-up as an alternative method of estimating change in retail inventories, and an alternative estimate based on using a screened sample of firms that report inventories from actual records; and the expansion of the Agriculture Department's surveys of crop inventories to include those owned by farmers but held in off-farm storage facilities and the expansion of Agriculture's semiannual survey of cattle inventories to a quarterly survey.

Improvements for Annual Nonfarm Data Sources

The annual revision of the NIPA estimates prepared each July provides more accurate readings on the state of the economy than the estimates prepared every quarter. Revised estimates are made for the recent year as well as the two preceding years to incorporate additional and revised information that has since become available such as benchmark and other types of revisions, statistics of income data, and annual survey data. The annual data are considered more reliable than quarterly data as they include more observations, are under less severe time constraints resulting in improved accuracy in reporting and tabulation, and often contain more detailed information for allocating goods and services to final markets and industries.

The July revisions also are important because the quarterly estimates are extrapolated from these annual levels. Therefore, deficiencies in annual data affect the accuracy of the current quarterly estimates especially as to levels. To minimize such error, it is desirable to have as much data as possible for inclusion in the first July revision. Deficiencies in the

existing data include: annual series not available in time for inclusion in the first July revision; lack of adequate annual benchmarks for some important quarterly series; insufficient detail on sales of products by type; and the lack of both quarterly and annual data resulting in interpolations and extrapolations from quinquennial benchmark estimates.

To strengthen the annual data base, the Committee recommended such improvements as:

1. Speeding up the tabulation of the Census

Bureau's Annual Retail Trade Survey so that the data are available for inclusion in the first July revision and obtain increased detail on types of product sold;

2. Speeding up the tabulation of the Census

Bureau's Governmental Finances Survey so that the data are available for the first July revision;

3. Implementation by the Census Bureau of

annual sample surveys of the real estate industries and nonprofit organizations once the quinquennial census of services has been similarly expanded;

Improvements for the Census Bureau's Economic
Census Programs

The censuses of agriculture, mineral industries, construction industries, manufactures, retail and wholesale trade, selected services, transportation, and State and local governments are conducted every 5 years by the Bureau of the Census. These censuses are the major source of information used to construct quinquennial input-output (I-O) tables which provide benchmark estimates for the GNP components of personal consumption expenditures and producers' durable equipment. The I-O tables estimate the flows of goods and services through their intermediate industry uses and distribution channels until they are sold to final users. The tables also are an important tool for economic analysis in their own right.

The majority of estimating problems in constructing the 1-O tables result from (1) insufficient data for allocating certain goods and services between intermediate and final users and among classes of these two broad groups, and (2) insufficient data in certain cases for estimating the transportation and distribution costs of goods. These data gaps generally can be reduced through more information on purchases of goods and services, more comprehensive reporting by establishment on product line of sales by class of customer, fuller information on gross margins, and extensions of coverage of the censuses to include industries for which little or no data are currently collected.

Major recommendations for the economic censuses, some of which are being implemented in the 1977 censuses, include: 1. Collecting data on materials and services

purchased by establishments as part of each

economic census; 2. Extending coverage of selected services to all

services for profit; 3. Establishing a quinquennial census of not-for

profit organizations and of the real estate

industry; 4. Transforming the present census of transp

ortation into a census of transportation industries with a full complement of questions

on inputs and outputs by relevant subindustries; 5. Collecting data on supplements to wages and

salaries (e.g., employer contributions to Social Security, private pension, health and welfare

funds) in all economic censuses; 6. Collecting additional information on

inventories in appropriate censuses including

4. Collecting data in the Census Bureau's Annual

Survey of Manufactures on inventories held in manufacturers' sales branches and other auxiliaries in addition to that collected on inventories held in processing establishments for a companywide measure of inventories;

5. Institution by the Federal Trade Commission of

an annual survey to collect from a sample of corporations included in the Quarterly Financial Report survey selected items from their audited operating statements and balance sheets. The data from the survey should be available for inclusion as an interim benchmark of the corporate profits estimates in the first July revision;

6. Modification of corporate and noncorporate

business tax returns by the Internal Revenue Service to collect information on inventory valuation—the basis and methods of cost determination; and

7. Tabulation by the Internal Revenue Service of

Schedule M accompanying corporate tax returns which reconciles taxable profits and balance sheets with stockholder reports.

book values at begining and end of year, basis of valuation, stage of fabrication, commodity

mix, and turnover period; and 7. Collecting data on force account construction

and transportation payrolls.

Improvements for Farm Sector Data

land costs for nonresidential buildings and

multifamily housing; 2. BLS should increase the coverage of equipment

items in the wholesale price index to give more comprehensive measures of price change for

capital investment; 3. BLS and BEA should conduct a joint research

project to develop better measures for deflating the service and income components of

international transactions; 4. The existing development project for preparing

quarterly measures of defense purchases in constant price should be made a permanent part

of the BEA program; and 5. BEA should reconsider the possible intro

duction of productivity measures for deflating Federal Government employee compensation.

A separate chapter of the report was devoted to the farm sector because of the size and volatility of the industry and the significant effect it can have on the Nation's economy. The improvements recommended by the Committee are aimed primarily at substituting direct quarterly information for indirect extrapolations of annual data.

The Committee recognized the difficulty of collecting some of the recommended new data because of conceptual and measurement problems, particularly where seasonal factors are involved. Some of the higher priority recommendations are to: 1. Speed up the collection of data on the

movement of crops to market for soybeans,

corn, wheat, and sorghum; 2. Collect quarterly data on farm crops owned by

farmers but stored in off-farm elevators and

warehouses; 3. Collect quarterly data on interstate sales and

purchases of feeder and stocker cattle; and 4. Speed up the Economic Survey of Agriculture.

Improving the Rest of the World Account

Recommended improvements for the current account of the balance of payments used in the GNP net export component include: 1. strengthening existing survey data by im

provements of definition, sampling coverage, timeliness, response rates and reporting

accuracy; 2. instituting benchmark surveys to verify the

universe coverage of some of the services

elements, and 3. conducting and extending bilateral

reconciliation of international trade and service transactions data with other countries.

Price Needs for Improving GNP Accounts in Constant Prices

Data Needs in Flow of Funds Accounts

Because of extensive use of constant dollar GNP estimates for analyses of output, inflation and productivity, an evaluation was made of price data needs for deflating current-dollar GNP. The Bureau of Labor Statistics (BLS) is the primary source of price information. It has an ongoing program for improving its price indexes which includes a more current updating of the goods and services included in the consumer price index, probability sampling and increased use of transactions prices in the wholesale price index, and greatly expanding the pricing program for industrial sectors and exports and imports. This program was supported by the Committee and a recommendation made that the necessary funds be provided to the BLS over an extended period for these improvements to be accomplished. The Committee recommended such additional improvements as: 1. The Census Bureau should develop quarterly

output construction price indexes excluding

The flow of funds accounts are prepared by the Federal Reserve Board and can be regarded as an extension of the investment and saving account of NIPA. The NIPA are the data source for the nonfinancial segment of the flow of funds system.

Major recommendations cited in this chapter include: 1. Tabulation of quarterly and annual reports of

registered companies by the Securities and Exchange Commission to provide an integrated statement of income, balance sheets and source

of financing; 2. Collection of quarterly data on cash and

security holdings of State and local governments by the Census Bureau; and

National Economic Accounts

Measures of Economic and Social Well-Being.The national economic accounts have been criticized for not measuring the total societal costs and benefits associated with producing goods and services. Research in the United States (largely outside of government) and abroad to establish a conceptual framework and method of quantifying such factors as the damages from pollution and crime and the value of shorter workweeks has indicated the paucity of underlying data for preparing such estimates.

BEA has developed a series on pollution abatement expenditures within the framework of the national economic accounts. It also has begun research and development work to include the following: a more comprehensive measurement of the Nation's tangible and intangible resources, for example, the stock of government capital and of consumer durable goods and the investment in human capital; the services provided by these resources; changes in working conditions, for example, those resulting from expenditures for occupational safety and health; and the impact of production and consumption on the physical environment and on social conditions, for example, the use of leisure time.

An advisory committee should be established to work with BEA in developing, evaluating and further expanding the estimates of economic and social wellbeing. It also should specify the additional data required to prepare such measures as well as recommend which series should be prepared on a regular basis. The committee should include representatives from Government and the private sector.

National Wealth Estimates.-Annual estimates of tangible assets should be developed for the household ownership of consumer durables and government ownership of plant and equipment in historical cost, constant cost, and current cost valuations. These would supplement the present measures of stocks of business fixed investment and housing. Initial research and development work would have been accomplished as part of the above economic and social well-being program. Such measures of the stocks of consumer durables and government capital would be used for estimating the stream of services provided by these assets over the years and for projecting future needs of these assets.

Quarterly Real Product by Industry.- Estimates of quarterly GNP by industry in current and constant dollars should be developed. These would provide more timely measures than the presently available annual estimates of industry output based on the value

3. Basic research on the measurement of land

values with respect to use, ownership, encumbrances, and intangibles related to natural resources and leases.

General Recommendations

The Advisory Committee also proposed several recommendations that are more broadly related to the data base used in deriving the national accounts. One of these, that BEA provide a revised quarterly GNP estimate 75 days after the quarter, has been implemented. Others include:

1. Preparation and publication of a handbook on

the GNP accounts detailing up-to-date concepts, sources of data and estimating methodology (work on this handbook is now underway);

2. Reduction in the amount of time needed to

complete the quinquennial benchmark estimates and the implementation of benchmark revisions at regular 5-year intervals;

3. Extension of the monthly personal income ac

counts to encompass the broad aggregates for the disposition of personal income, i.e. monthly estimates of personal taxes, personal consumption expenditures (with breakdowns for motor vehicles, other durables, nondurables and services) and personal saving;

4. BEA append to the release of its 15-day

estimate, or some other vehicle, a brief statement of the judgments used in preparing the quarterly NIPA estimates and their economic or statistical rationale; and

5. Creation of a capacity somewhere in the Federal

Statistical System for carrying out timely surveys on economic subjects on short notice when unexpected changes in the economic climate and business behavior create the need for information that is not being collected.

Major Data Gaps and Recommendations

A number of proposals have been made for the further development of the economic accountsnational, regional and international. The items discussed below are representative of the more important of these proposals. They are in addition to those in the above noted GNP Data Improvement Project.

current and constant dollars comparable to the gross national product should be developed. On the product side, the component estimates would include consumer expenditures, private investment, government purchases, foreign transactions, and interstate trade flows; and on the income side, employee compensation, proprietors' income, rental income, corporate profits, net interest, indirect business taxes, and capital consumption allowances.

The expansion of the presently available measures of personal income at the State level to a comprehensive set of regional economic accounts would provide the basis for systematically tracing the impacts of national economic policies on regional economies, and of assessing the effects of State economic policies on regional and national economies. These would include, for example, the capability for analyzing the regional production and employment implications of consumer expenditures and plant and equipment investment stemming from changes in Federal personal and business income taxes. Similarly, they would permit analyses of the effect of State and local government tax and expenditure policies on regional and national employment and income. The information in these accounts also would aid in developing more refined measures for allocating Federal grants to States and in analyses of the factors determining industrial location.

Regional Input-Output Tables.- Input-output tables for each State which would be consistent with the quinquennial national input-output benchmark tables should be prepared every 5 years. They would be used for such analyses as tracing the output and employment effects for individual industries in the State of expenditures for defense procurement, environmental protection, housing construction, etc., and for examining the possible consequences of shortages of materials and supplies whether resulting from inadequate capacity, strikes, or other causes. The tables would be available approximately 8 years after the reference year, for example, by the conventional mehodology of initially preparing the national input-output table followed by a disaggregation for individual State tables. An alternative approach would be to first prepare the State tables and then sum to the national, which if feasible would over the same 8-year period reduce the lag for the State tables.

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added concept of production for conducting analyses of industry productivity, costs and prices on a current basis. Such analyses would more clearly identify the factors accounting for inflationary pressures in individual industries for use in formulating wageprice policies.

Monthly Estimates of GNP.-In 1971 BEA initiated a program for estimating GNP on a monthly basis. The purpose was to provide more timely measures of the economy's performance which would be useful to policymakers as well as to provide more reliable quarterly GNP estimates. The figures have not been published because of data limitations for some components of GNP (e.g., inventories) which lead to erratic movements in the total series. However, the preparation of monthly GNP estimates has been useful for improving the reliability of the quarterly GNP estimates.

Although monthly estimates of total GNP are not suitable for publication, some components may be of sufficient quality to permit their publication. In fact, the GNP Data Improvement Project recommended that the presently published monthly measures of personal income be expanded to include monthly published estimates of disposable personal income, personal consumption expenditures, and personal saving. Implementation of the Data Improvement Project recommendations over the years would provide the potential for publishing monthly estimates for additional components of the GNP as the underlying data become more reliable. The suitability of such published estimates should be reviewed on a periodic basis.

Regional Economic Accounts

Elected officials and economic policymakers increasingly point to the need for improved regional statistics as it is continually demonstrated that State and local area economics diverge significantly from national economic developments with respect to long-run growth rates, sensitivity to national business cycles, and responsiveness to national fiscal and monetary policies. In addition, the methods of allocating Federal revenue sharing and other grant program funds to States and local areas are complex issues which occupy all levels of government and are critically dependent on regional data.

Below is a recommended expansion of the regional program to provide a better analytic and policymaking linkage between the regional and national economies.

State Income and Product Accounts.-Annual estimates of gross income and product for each State in

'Daniel H. Garnick, “Issues in Estimating Gross State Product,” Federal Data for University Research, Association for University Business and Economic Research, Idaho State University, pp. 2334, 1975.

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