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Preview of the 2015 Annual Revision of the National Income and Product Accounts

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On July 30, the Bureau of Economic Analysis will release its annual update of the national income and product accounts (NIPAs) in conjunction with the advance estimate for the second quarter of 2015. As is usual for annual NIPA revisions, the revised estimates will incorporate newly available source data that are more complete, more detailed, and otherwise more reliable than those that were previously incorporated.

This year’s annual revision will introduce the following:

  • An improved treatment of federal refundable tax credits in the personal income and outlays account and the government receipts and expenditures account.
  • Two new aggregates—the average of gross domestic product (GDP) and gross domestic income (GDI) and final sales to private domestic purchasers—that will facilitate the analysis of macroeconomic trends.
  • Improvements to the seasonal adjustment of GDP components, including federal defense spending on services, and of the source data underlying several other NIPA components.
  • An expanded presentation of payments and receipts of transfers and taxes between the United States and the “rest of world” that will harmonize the NIPA presentation of these transactions with the presentation in BEA’s international transactions accounts (ITAs).
  • An improved presentation of exports and imports that provides detail on exports of petroleum and products that will align the NIPA presentation of trade in industrial supplies and materials with the presentation in the ITAs.

Read the entire article in the June Survey of Current Business.

A Snapshot of the Seasonal Adjustment Process for GDP

A lot of work goes into measuring a $17 trillion economy. And, at the Bureau of Economic Analysis it’s a process that never really stops.

In addition to calculating Gross Domestic Product, a key economic indicator of how the U.S. economy is faring, BEA also produces thousands of related data points each month that flow from our GDP reports and give us rich detail about consumer spending, business investment and government activity.

The vast majority of data that feeds into BEA’s calculation of GDP is based on data collected by other sources – a mix of government agencies and some private entities. Just to give you a flavor, BEA’s data sources include 190 surveys or administrative data sources provided by 38 federal agencies as well as data from more than 100 private companies that help fill in some of the data gaps.

These source data represent a mix of frequencies – monthly, quarterly, annual, and in some cases, once every five years. Some of the data are seasonally adjusted by the source agencies and some aren’t.  For some components of GDP, monthly or quarterly source data aren’t available, and BEA must extrapolate the estimates based on trends or on indirect indicators.  (More information on BEA’s data sources can be found here.)

Against that backdrop, how does BEA go about seasonally adjusting GDP?

The approach that BEA uses is described as an “indirect” approach.  All the pieces that make up GDP are first seasonally adjusted and then aggregated to arrive at a seasonally adjusted, topline GDP number.

Here’s a snapshot of how BEA’s indirect process works:

  • Detailed components of GDP are estimated from seasonally adjusted source data. Whenever possible, BEA uses source data have been seasonally adjusted by the source agency, in effect applying the same seasonal adjustments made by the source agencies.  A majority of the source data for quarterly estimates of nominal GDP come from Census Bureau surveys that have been seasonally adjusted by Census.
  • In cases where the source data are not available on a seasonally adjusted basis from the source agency, BEA performs its own seasonal adjustment.
  • The components of GDP are then estimated from the seasonally adjusted source data. BEA reviews and checks the resulting estimates for seasonality.
  • The components are then aggregated to calculate GDP and other higher level aggregates. For values measured in current dollars, the aggregation is simple addition. Estimates of real (inflation adjusted) GDP are based on the chained Fisher quantity index formula.

The main rationale for using this indirect approach is that it allows users to decompose GDP and trace the estimates of the components back to the source data – without having to deal directly with not seasonally adjusted data. Having the ability to move easily from seasonally adjusted source data to GDP components to GDP itself is an important element of providing transparency to our users.  Many users have told us that they find it valuable to maintain that consistency between the GDP estimates and the seasonally adjusted source data.

A potential drawback of this indirect approach is that it raises the risk of residual seasonality. That’s because seasonally adjusting the individual components might not necessarily remove all seasonality from the aggregates. As a result, BEA is working to improve its estimates of GDP by identifying and mitigating potential sources of residual seasonality

Broad Growth Across States in 2014

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  • Real GDP increased in 48 states and the District of Columbia in 2014. Leading industry contributors were professional, scientific, and technical services; nondurable goods manufacturing; and real estate and rental and leasing.
  • Professional, scientific, and technical services was the largest contributor to U.S. real GDP by state growth in 2014. This industry contributed to real GDP growth in 46 states and the District of Columbia. It was a large contributor to growth in three states – California, Massachusetts, and Utah.
  • Nondurable goods manufacturing was the leading contributor to growth in the Great Lakes region and made a substantial contribution to growth in Louisiana and Montana.
  • Real estate and rental and leasing contributed to real GDP growth in 32 states and the District of Columbia.
  • Mining was the leading contributor to growth in the five fastest growing states – North Dakota, Texas, West Virginia, Wyoming, and Colorado.
  • In contrast, agriculture, forestry, fishing, and hunting subtracted from real GDP growth in six of eight BEA regions and 39 states in 2014.
  • Real GDP decreased in Alaska and Mississippi in 2014. Alaska’s decrease was primarily due to a decline in mining while the decrease in Mississippi was mainly due to a decline in construction.
  • Per capita real GDP ranged from a high of $66,160 in Alaska to a low of $31,551 in Mississippi. Per capita real GDP for the U.S. was $49,649.

For more information, read the full report.