# Presentation: 404116

## Overview of the 2003 Comprehensive Revision 

- J. Steven Landefeld*Director*

## Comprehensive Revision

- Updated concepts, methods, and sources
- Increased consistency
- Expanded and improved presentations
- This revision: major changes affecting a large number of components, but no significant rewrite of economic history

## Comprehensive Revision – The Numbers

- Growth trends
- Relatively the same.
- “New economy” period virtually unchanged.  At 3.8% growth (1994-2000).
- Business cycles
- Again, no significant changes in timing or magnitude of cycles.
- Average decline in post-war recessions were unrevised at -1.9.

## Recent Trends

- _	__	_
*Source:  Bureau of Economic Analysis.*

- Average annual rates of change of real GDP
- (Selected periods)

## Business Cycles

- -3.0%

- -2.0%

- -1.0%

- 0.0%

- 1.0%

- 2.0%

- 3.0%

- 4.0%

- 5.0%

- 6.0%

- 7.0%

- 8.0%

- 1960

- 1965

- 1970

- 1975

- 1980

- 1985

- 1990

- 1995

- 2000

- Prev. published (1996)

- Revised (2000)

- _	__	_
*Source:  Bureau of Economic Analysis.*

- Real gross domestic product (Percent change)

## Last Recession (2000:IV-2001:III)

- Same length and timing (3 quarters).
- Still mild versus past recessions (-0.6 revised to
- 	 -0.5 percent).
- Investment declines are still a large part of the story.
- Decline in investment during the downturn (2000:IV - 2001:III) are slightly smaller (-11.0 revised to -9.2 percent).
- Period leading up to recession was weaker with one negative quarter in 2000:III.

## Current Cycle

- _	__	_
*Source:  Bureau of Economic Analysis.*

- Real gross domestic product (Percent change, SAAR)

## Current Recovery (2001:III-2003:II)

- Still moderate versus prior expansion periods.
- Real growth of 2.6 percent as compared to growth of 5.2 percent.
- Small revision to growth means that strong productivity performance during the recovery will remain.

## Current Recovery (2001:III-2003:II)

- _	__	_
*Source:  Bureau of Economic Analysis.*
**  Includes the following recovery periods:  1958:I-1960:I, 1960:IV-1969:III, 1970:IV-1973:IV, 1975:I-1980:I, 1980:III-1981:I, 1982:III-1990:II, and 1991:I-2000:IV.*

- Average annual rates of change of real GDP
- (Selected periods)

## Inflation

- Still moderate over the last decade.
- Inflation, as measured by Gross Domestic Purchases Prices, unrevised at 1.8 percent, 1992-2002.
- Still moderate during expansion.
- Inflation, as measured by Gross Domestic Purchases Prices, revised up from 1.5 percent to 1.6 percent, 2001:III - 2003:II.

## Inflation

- _	__	_
*Source:  Bureau of Economic Analysis.*

- Average annual rates of change in price indexes for gross domestic purchases, GDP, and PCE (1992-2002)

## Sources of Growth

- The sources of economic growth over the last decade for the major moving parts of GDP are little changed.
- Growth rates for business fixed investment and imports are unrevised, 1992-2002.
- Consumer spending and residential investment growth rates are slightly lower.
- Exports and government are slightly higher.

## Sources of Growth

- _	__	_
*Source:  Bureau of Economic Analysis.*

- Average annual rates of change of real GDP and its major components (1992-2002)

## Revisions to Income

- The most significant revisions are to corporate profits.
- Large upward revision in 2002 reflects improved method for estimating the costs of stock options.

## Revisions to Profits

- _	__	_
*Source:  Bureau of Economic Analysis.*

- Corporate profits from current production(Revisions in level)

## What Numbers Did Change?

- Banking
- Insurance
- Construction
- Fringe benefits
- Other – From used cars to copy machines

## Sources of Revisions

- _	__	_
*Source:  Bureau of Economic Analysis.*

- Sources of revision to current-dollar GDP(Billions of dollars)

## Previously Published Insurance Data

- _	__	_
*Source:  Bureau of Economic Analysis.*

- PCE household insurance – published(Billions of dollars, SAAR)

- Sept. 11

- Hurricane Andrew

## Revised Insurance Data

- _	__	_
*Source:  Bureau of Economic Analysis.*

- PCE household insurance – revised(Billions of dollars, SAAR)

## Revisions to Compensation

- _	__	_
*Source:  Bureau of Economic Analysis.*

- Sources of Revisions to Compensation of Employees(Billions of dollars)

## Why Weren’t the Changes Larger?

- Introduction of chain indexes in 1996 avoids rewrites of economic history due to base changes.
- Practice of bringing in updates and changes sooner rather than waiting for benchmarks provides revised data earlier – when its most relevant – rather than later.
- Investments in data made by Administration and Congress are beginning to pay off.

## What Challenges Remain?

- Large gaps in coverage remain.
- Detailed coverage of manufacturing, agriculture, and mining; but poor coverage of many new and old industries.
- Over 1/4 of GDP estimated using a patchwork of data.
- Census data on finance and insurance, utilities, real estate, and a large share of transportation are only available once every 5 years (1992 value of these industries sales was $3 trillion).
- Census data on personal and business services are available annually, but growth and volatility coupled with lack of quarterly data has caused services to be a large source of revisions to GDP.

## What Challenges Remain

- Monthly payroll data cover only the wages and salaries of production and non-supervisory workers, who account for a little over half of wages and salaries in today’s economy.
- Data on producers prices cover roughly 50% of service industry prices.
- The United States has the world’s finest set of economic accounts, but incomplete integration and inconsistencies reduce their usefulness.
- All of these challenges are on BEA/Census/BLS strategic agendas; but in a world of constrained resources, progress has been slow.