What’s the foundation for many economic statistics both inside and outside the Bureau of Economic Analysis (BEA)? It’s something most people have never heard of, yet it is essential for finding out what’s going on inside the world’s largest economy. It’s called the “use table,” and it is a fundamental tool of BEA’s input-output accounts. The use table provides both a broad and a detailed look at the U.S. economy. It is simple, yet complex. The table can answer a question as general as: “So, what was gross domestic product (GDP) in 2010?” ($14.5 trillion) and as specific as: “What was the most energy-intensive industry in 2010?” (water transportation).
The use table is a matrix that shows the commodities used by individual industries in their production processes (intermediate inputs) as well as commodities that are sold directly to consumers and other buyers (final uses). The table also shows each industry’s contribution to GDP (value added). The table serves as a foundation for many other economic statistics, such as BEA’s national income and product accounts and BEA’s Regional Input-Output Modeling System (RIMS II). The Bureau of Labor Statistics (BLS) Producer Price Index also relies on the use table.
Here’s a simplified use table. Even the most complex ones—for example, the “detail” level benchmark use tables—follow the same construction. They’re just larger.
So, how do you read this important table? Let’s start with the columns and rows in the blue intermediates section. The columns list industries, like the auto industry or the restaurant industry. The rows list the commodities—like computers or legal services—that are used by a given industry, hence the term use table. Intermediates are the goods and services that industries use to produce their own goods and services. For example, milk is an intermediate input to the cheese industry (you need milk to make cheese), and architecture services are an intermediate input to the construction industry (you need some sort of blueprint to build that skyscraper). The use table includes all intermediates used in production. You need milk to make cheese, but you also need containers to hold the milk and devices to heat it, ingredients to start the curdling process, salt and other flavorings, and so on.
Intermediate inputs are an important part of the economy, but they are just part of this robust table. As we delve deeper into the use table, we’ll show that the use table doesn’t just show GDP; it provides three different methods of measuring GDP.
The first presentation of GDP is in the measurement of total value added. When industries sell their products, they don’t simply add up the cost of intermediates and sell them for the sum of those costs. The concept of value added is that any good or service is worth more than the sum of its parts. For example, you‘re not merely paying for raw ingredients and services when you buy cheese. You also pay for the labor of the employees who made that cheese; you pay for a variety of taxes, such as sales and excise taxes; and you pay for the capital used in the production of cheese. So, the sum of value added across all industries equals GDP.
Directly below the value-added section is the purple section titled “Total Industry Output.” This is the sum of the intermediate and value-added rows. When you sum this across all industries, you get “Total Output,” the section at the bottom right.
The sections to the right of the intermediates section look at the economy from the perspective of commodities rather than industries. Instead of telling us what commodities an industry uses, these sections tell us how commodities are being used. When you read across any given commodity row, the use table tells you how much of that commodity is being purchased and by whom. In the blue section, these are in the form of intermediates. Cheese makers purchase milk as an intermediate product; but so do coffee shops, bakeries, restaurants, and quite a few other industries.
At this point, you might be saying, “Hey, wait, I buy milk, too, and I just drink it. What about me?” Those kinds of purchases—by individuals and entities who purchase a commodity at its final stage rather than as an intermediate input into some other product—are represented in the “Final Uses” section (the red section to the right of the intermediates). That brings us to the second method by which the use table presents GDP, as a sum of final uses. Final uses include personal consumption expenditures, private and government investment (such as in buildings or durable equipment), government consumption expenditures, and net exports. If you’ve taken macroeconomics and this sounds familiar, it should—it’s the classic GDP equation where GDP equals C + I + G + NX.
The final uses section is in the same red color as the value-added section because when you sum up either the value-added section or the final uses section, you end up with the same total, which equals GDP. Two different ways of looking at the economy, the value-added approach and the final-use (also called the expenditures) approach, and both lead to the same value.
Add up the intermediates and final uses across a given row, and you get “Total Commodity Output.” Another useful attribute of the use table is that the sum of total commodity output is equal to total output—the same total output you get when you sum up total industry output. This gives us the third way to measure GDP in the use table, where you take total output and subtract the sum of intermediates.
As you can see, this one impressive table provides three different ways to measure GDP. It also provides a comprehensive look at what industries need to produce their products and details on how those products are used throughout the economy. The combination of comprehensive detail, mathematical consistency, and simple presentation make the use table one of the most powerful tools in economic analysis.