Core Program

The functions of the Bureau of Economic Analysis (BEA) in the Department of Commerce are to prepare the economic accounts of the United States and to interpret economic developments in the light of these accounts and other information.

The accounts provide a quantitative view of the economic process in terms of the production, distribution, and use of the Nation's output. This picture is disciplined-it appears in the framework of an interrelated system of credits and debits-and realistic, in the sense that it focuses on the institutions and transactions that determine the working of the economy. The accounts are as follows:

The national income and product accounts, focusing on the gross national product (GNP), provide a bird's-eye view of the economic process. The wealth accounts show the business and other components of tangible national wealth.

The balance of payments accounts give detail on U.S. transactions with foreign countries.

The interindustry accounts show how the Nation's industries interact to produce GNP.

The regional accounts provide detail on economic activity by region, State, metropolitan area, and county.

The accounts are supplemented by various tools for forecasting economic developments:

Surveys of the investment outlays and programs of
U.S. business,

Econometric models of the United States, and

A system of leading, lagging, and coincident business cycle indicators.

Most of BEA's work is published in its monthly magazine, Survey of Current Business. Other BEA publications are: Business Statistics a biennial supplement to the Survey; Business Conditions Digest, a monthly compendium of economic indicators; and Long Term Economic Growth, a periodic supplement

containing historical series pertinent to the study of economic growth. BEA Staff Papers report on BEA research that is more specialized or less wellestablished than that published in the Survey. For use within the Government, BEA prepares analyses bearing on the formulation of fiscal, monetary, and other economic policies.

The economic accounts are among the most important and widely used statistical outputs of the Federal Government. The accounts are used primarily in analyzing the current economic situation and in testing the economic relationships for projecting future economic activity and the economic impact of alternative Federal policies.

Major users include Federal policymakers such as the Council of Economic Advisers, Federal Reserve Board, Treasury Department, Council on Wage and Price Stability, Office of Management and Budget, and Department of Commerce, who use the national economic accounts to monitor the stability and growth patterns of the economy as a basis for fiscal, monetary, and wage-price policymaking. The Economics, Statistics, and Cooperatives Service in the Department of Agriculture uses the accounts in preparing projections of the demand for food and fibers. The Office of Policy Development and Research within the Department of Housing and Urban Development uses the accounts in analyzing and projecting the effect of the economy and Government policies on the housing market. The Department of the Interior's Bureau of Mines uses the accounts in preparing projections of the demand for mineral base materials. Within the Department of Labor the data are used in analyzing and projecting changes in the employment level, composition of the labor force and prices. The estimates of real gross national product originating in private or individual sectors are an input for the Bureau of Labor Statistics (BLS) series on output per hour (productivity) and the accounts serve as the framework for the BLS medium and long-term projections of U.S. economic growth. The Office of Management and Budget uses the accounts to analyze the effect of economic assumptions on Federal tax receipts, expenditures for transfer payments, etc., needed to derive the

President's budget estimates. The Federal budget includes a table which shows the budget as a percentage of GNP and a special analysis which presents Federal expenditures and receipts in terms of the national accounts. Similar data are published in the Economic Report of the President.

Within the Congress the accounts are used by the Joint Economic, Ways and Means, Finance and Budget Committees and the Congressional Budget Office in evaluating economic performance and in analyzing the probable economic impact of alternative budget levels and proposed legislation.

The data are also used by State and local governments, the business community, professional and labor organizations, academicians, and organizations primarily engaged in economic research.

National Income and Product and Wealth Accounts These accounts include the following elements: 1. Monthly personal income.-Personal income is the most comprehensive monthly indicator of economic activity and consumer purchasing power currently available. The estimates are prepared in considerable detail by type of income (wages and salaries, dividends, proprietors' income, etc.).

2. GNP estimates.-These estimates show GNP by type of expenditure, type of product, and sector, in current and constant dollars; gross domestic product in current and constant dollars; net national product by sector in current and constant dollars; implicit price deflators and alternative price measures for GNP and its components; personal consumption expenditures by major type in current and constant dollars; national income by type of income and industry division; corporate gross product in current and constant dollars; gross auto product in current and constant dollars; corporate profits by broad industry group, and corporate income taxes, dividends, and retained earnings; personal income and its disposition; the relationship between GNP, national income, and personal income; government receipts and expenditures; foreign transactions; and gross saving and investment.

Provisional summary measures are prepared quarterly to provide this information on a timely basis-initially 15 days after the quarter and then in successive revisions 45 days and 75 days after the quarter. Much more detail is published annually because of the more complete and reliable underlying data, at which time the

earlier estimates are also revised. Comprehensive GNP benchmark revisions are prepared for the quinquennial years of the economic censuses. The revisions reflect both conceptual changes to the accounts and improvements in the source data. They are made mainly for the period since the preceding benchmark, although where appropriate they are carried back to earlier years to maintain a consistent time series.

3. Government budgets in the GNP framework.The Federal, State and local budgets prepared within the GNP framework provide a means of gauging the effect of government fiscal policies on the economy. Detailed reconciliations between this concept of the Federal budget and the budget prepared by OMB are published twice a year, once on a fiscal year basis including the projection for current and coming years in the President's budget, and the other as an historical quarterly series. Also, an analysis of the impact of the Federal budget on the economy is published annually.

4. GNP by industry.-Annual estimates of GNP by industry in current and constant dollars, and implicit price deflators are published annually.

5. Fixed business capital.-Estimates of the nonresidential fixed business capital of the United States are made annually. These cover gross and net capital stocks, depreciation, discards, and average ages of net and gross capital stocks. The estimates are provided by legal form of organization in historical-cost, constant-cost, and current-cost valuations, by type of structure and equipment, for farm, manufacturing, and for all other industries combined.

Estimates of the value of the Nation's stock of housing are made annually. These estimates show, in historical-cost, constant-cost, and current-cost valuations, the value of the farm and nonfarm housing stock, by type of structure-one- to four-dwelling unit structures, structures containing five or more dwelling units, mobile home, and owner and tenant-occupied dwelling units.

6. Business sales and inventories.-Estimates of final sales and inventories of business, in current and constant dollars, and inventory-sales ratios are published quarterly. Estimates of manufacturing and trade firms' sales and inventories, in constant dollars, and inventorysales ratios are also published quarterly.

7. Size distribution of personal income.

Estimates of the size distribution of the personal income component of the GNP statistics are published for selected years and are being developed to be provided as an annual series.

Estimates of the national income and product accounts are based on data primarily collected by Federal agencies such as the Bureau of the Census, Bureau of Labor Statistics, Federal Trade Commission, Internal Revenue Service, Treasury Department, Office of Management and Budget, and BEA itself. Data for the agricultural sector (with the main exception of the census of agriculture) are collected and processed into the farm income estimates by the Economics, Statistics, and Cooperatives Service of the Department of Agriculture. A limited amount of data provided by private organizations such as the Motor Vehicles Manufacturers' Association and the American Telephone and Telegraph Company is also used.

Interindustry Accounts

The accounts include the following elements: 1. Input-output tables.-Input-output tables depict how the industries of the Nation interact in producing GNP. They show, for each industry, the amount of its output that goes to each other industry as raw materials or semifinished products, as well as the amount that goes to the final markets-consumers, business investors, government, and foreigners. They also show for each industry its consumption of the output of every industry, and its value added (the sum of compensation of employees, profits, proprietors' income, capital consumption allowance, etc.).

Comprehensive benchmark input-output tables are prepared approximately every 5 years for the same years as the quinquennial economic censuses. A relatively new program is summary annual input-output tables prepared in less industrial detail to update the benchmark tables.

The estimates are based primarily on data collected in the economic censuses conducted by the Census Bureau. The Bureau of Mines in the Department of the Interior and the Economics, Statistics and Cooperatives Service of the Department of Agriculture assist in preparing the input-output relationships in the mining and agricultural sectors, respectively.

2. Capital flow tables.-Tables showing flows from producing to using industries are prepared

for the same year as the benchmark inputoutput tables.

Regional Economic Accounts

This work consists of estimates, analysis and projections of personal income, population and employment by region, State, metropolitan area and county.

Estimates are prepared of total personal income, with total income subdivided by type of income and by major industry of origin, at the State level, for more than 3,100 U.S. counties and county equivalents, and for each standard metropolitan statistical area (SMSA). Estimates of personal income by State are published quarterly and annually. The county and SMSA estimates are published annually and, in addition, estimates of per capita personal income are provided.

The estimates of personal income by county are the basic source data for the annual estimates of State and county money income prepared by BEA for the Census Bureau's intercensal demographic estimates required for the general revenue sharing program.

Analyses are carried out to identify and measure the factors that determine area differences in levels and growth rates of total personal and per capita income and of industrially detailed earnings and employment. These analyses are needed to improve the techniques for preparing the State and local area economic projections, and to assess, in advance of adoption, the area effects of alternative development programs.

Economic projections, primarily of personal income, employment, earnings of persons (by industry), and population are prepared every 5 years for each State and for more than 900 geographic areas which cover the United States. During the interim period, economic projections are made for selected State and local areas.

International Economic Accounts

The outputs of this activity include balance of payments accounts, which give detail on U.S. transactions with foreign countries; and the international investment estimates, which measure the international investment position of the United States. For the most part estimates are published quarterly and/or annually. They include:

1. Balance of payments. accounts.-This work consists of the preparation, development, and analysis of accounts, which provide a comprehensive and systematic view of economic

transactions between the United States and foreign countries. Major types of transactions covered are merchandise trade, travel, transportation, income on international investment, U.S. Government military and other services, U.S. private services, private remittances, foreign aid programs, short- and long-term private capital flows, and changes in foreign official assets in the United States and U.S. official reserve assets.

2. International investment estimates.-This work consists of the preparation, development, and analysis of estimates of U.S. direct investment abroad; foreign direct investment in the United States; income flows associated with these investments; and other economic transactions of multinational enterprises, including their trade, employment, taxes, and plant and equipment expenditures.

Major sources of the data base for foreign transactions are the Census Bureau, BEA, and the Treasury Department.

Analysis of Business Trends

The outputs of this activity include surveys of business investment, econometric models of the U.S. economy, estimates of the costs of pollution abatement, a system of business cycle indicators, and GNP-related measures to help evaluate national wellbeing. The work consists of:

1. Surveys and analyses of expenditures for plant and for equipment.-Quarterly data are collected and published covering: expected capital expenditures for the current quarter and each of the next two quarters for all nonfarm industries; actual expenditures for the same industries; the initiation and carryover of new investment projects by manufacturing and public utility companies; and an evaluation by manufacturing companies of the adequacy of their existing plant and equipment taking into account their expectations of sales over the next 12 months. The first annual data for capital expenditures expected for the new year are published in January. Annual estimates of actual and expected business sales, percent change in the prices of capital goods purchased, and for manufacturing and utilities only, percent change in the prices of goods and services sold, are also published in January.

The existence of the plant and equipment survey mechanism also permits special surveys to be conducted relating to current economic

problems. Examples of such surveys include one conducted to assess the effects of stringent financial conditions in 1967 on plant and equipment outlays, and another to estimate the shift to last-in, first-out inventory accounting during the sharp price inflation of 1974 for use in preparing the GNP inventory valuation adjustment.

2. Quarterly data are collected and published on capacity utilization rates, both operating and preferred, by manufacturing industries.

3. Econometric models.-Short-term forecasts of economic activity are made using a quarterly model of the U.S. economy consisting of about 150 equations. Medium-term projections of economic activity are made using an annual model of the U.S. economy consisting of about 100 equations.

4. Environmental statistics.-Annual estimates of capital expenditures and operating costs for pollution abatement are prepared within the framework of the national economic accounts and published annually. These estimates are classified by sector of the economy (consumers, business, and government), and by the element of the environment affected (air, land, and water). Annual estimates of actual and expected business capital expenditures for pollution abatement covering all nonfarm industries are also published.

5. GNP-related measures of national well-being.Research is underway to develop the concepts, statistical methodology, and measures relevant for evaluating national well-being within the framework of the GNP accounts.

6. Statistical indicators.-This work consists of the preparation, development, and analysis of a system of leading, lagging, and coincident business cycle indicators, and data which depict long-term economic trends.

Role of Advisory Groups

The national economic accounts have been a basic development of the U.S. economic statistical system over the last 45 years. The evolution of an integrated set of economic accounts within the context of a decentralized statistical system has also provided a major impetus for improvements in Federal data collection. Thus, over the years, the role of the accounts in identifying priorities for improving economic data