Understanding the BEA’s GDP Statistics: Essential for the U.S. Economy
August 19, 2014
America’s economy is complicated, diverse, and vast. The problem arises, then, of how to measure the health of such an intricate system. The primary responsibility of the Bureau of Economic Analysis (BEA) is to do just this: the BEA provides information to the public regarding real Gross Domestic Product (GDP) – the output of goods and services produced by labor and property located in the United States and the best known measure of the overall condition of an economy. United States Secretary of Commerce Penny Pritzker said, “Gross Domestic Product is one of the U.S. government’s most valuable data resources” (BEA.gov). The changes in GDP have the power to move markets, shape policy, and identify points of inflection in the economy. Consequently, understanding the BEA’s GDP statistics is integral to understanding the vitality of the US economy.
The BEA collects data for the calculation of GDP primarily from two censuses. The national census is given every ten years and provides a comprehensive report of the economy by surveying private individuals. The economic census is given every five years and surveys businesses only. Through consulting the two censuses, the BEA publishes the real GDP statistic, along with GDP by Industry , GDP by region and GDP adjusted for inflation. The GDP statistics broken down by industry and region allow for a comprehensive comparison between industries (resp. regions).
There are three different ways to calculate GDP: (1) the income approach sums the income earned by firms and households, (2) the expenditure approach sums the market value of all domestic expenditures on final products and services, and (3) the value added approach which measures the difference between the gross output and intermediate consumption costs. These three methods ideally result in the same measure: GDP. When the BEA calculates national GDP, one essential check that the data is sound is whether these three methods of GDP calculation are indeed equal. Discrepancies within these three calculations are indicative of errors in the data or the processing of data.
There are many other controls – conditions which some subset of the data must meet – present which the BEA must take in to consideration. These controls arise primarily from two entities: (1) the structure of the Input-Output (Make-Use) table used to characterize the relationship between industries and commodities or (2) from previously output data from government statistical agencies (BEA and the Bureau of Labor Statistics (BLS)). An example of this is when the BEA publishes data on GDP for the first quarter of 2014 (2014Q1), the sum over all industries of GDP broken down by industry must match the 2014Q1 GDP (see attached table for a breakdown of GDP by industry by year). The sum over all regions of GDP broken down by region must also match the 2014Q1 GDP. It is important to note that consistency is vital for government statistical agencies. Oftentimes the raw unprocessed data does not meet the controls and minor adjustments have to be made to compensate. This process is called balancing and ensures that our published data meets all control values and is consistent with previously published data.
The BEA works closely with the BLS (Bureau of Labor Statistics) and other government agencies, including the IRS (Internal Revenue Service) and the Census Bureau to ensure that all data remain consistent among publications. As a result, and only through this checking and balancing (in the economic sense) procedure, we obtain a clear and reliable view of the US economy.
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