Introduction to Supply and Use Tables, part 1 Structure 1

Transcription

1 Introduction to Supply and Use Tables, part 1 Structure 1 Introduction This paper continues the series dedicated to extending the contents of the Handbook Essential SNA: Building the Basics 2. The aim of this paper is to provide some background to understand the compilation of supply and use tables (SUTs). In previous papers we explored the compilation of GDP (Gross Domestic Product) as calculated by the output approach and by the expenditure approach. Most of the transactions involved in these compilations are productive transactions. Examples are output, intermediate consumption, final consumption, gross capital formation, exports and imports. Other transactions that we explored are product taxes and subsidies, which are distributive transactions, and value added and the external balance of goods and services, which are balancing transactions. The SNA records such transactions, which involve the exchange of goods, services and assets between institutional units, in a sequence of accounts. An example that we discussed in an earlier paper 3 (see figure 1) is the production account, which presents some of the above transactions by institutional sectors (corporations, government, households and the rest of the world or ROW). Figure 1 Production account with ROW included Whereas the SNA accounts break down transactions by institutional sectors, the GDP by output approach breaks down transactions by industry, and the GDP by expenditure approach breaks down the major expenditure categories by their own classifications (such as COICOP for household consumption). Figure 2 compares the transactions and classifications for the two GDP compilation methods. An important point is that transactions and classifications are not necessarily related. So the same value of total output (3604 in figure 1) can be presented in different ways: by institutional sector in the production account and by industry in the GDP by output tables. 1 This paper was developed by DevStat Servicios de Consultoría Estadística in consortium with ICON Institute, under the project Essential SNA: Building the Basics, supported by EUROSTAT, for which information can be found at the following link: 2 Henceforth called the Handbook ; this paper is based on the second (2012) edition; it can be found at the following link: 3 See the following papers: Introduction to the SNA 2008 Accounts, part 1: Basics; Introduction to the SNA 2008 Accounts, part 2: Current Accounts; Introduction to the SNA 2008 Accounts, part 3: Accumulation Accounts 1

2 GDP by output method GDP by expenditure method Transactions Output (P) Final consumption (P) Intermediate consumption (P) Value added (B) Product taxes and subsidies (D) Gross capital formation (P) Exports (P) Imports (P) Classifications 4 ISIC (Industries) COICOP (Household consumption) COFOG (Government consumption) HS (Exports, imports) Table 2 Transactions and classifications for GDP compilation procedures (P = Productive transaction; D = Distributive transaction; B = Balancing transaction) There is yet another dimension according to which the transactions of table 2 can be broken down: by products. The presentation of the transactions occurring in the GDP by output and by expenditure tables with an additional product breakdown occurs in supply and use tables, the subject of this paper. As we will see, many of the issues discussed in previous papers on GDP by output and by expenditure approach come back in a more integrated way in the SUT framework. Also, the SUT serves as the recommended foundation for the SNA sequence of accounts. Since this paper will exceed the intended length of papers in the series, we will distribute its content over three parts, of which the current document is the first 5. Here we will introduce the basic terminology and structure of the SUT. The next parts (separately distributed) will contain an exploration of SUT compilation in part 2 and the links between SUT and input-output tables in part 3. Starting point: GDP compilation The output approach to GDP compilation is based on transactions in the production account: output which measures the amount of goods and services produced during the accounting period, and intermediate consumption (IC) which measures the costs of the required inputs to generate the output, such as raw materials, energy etc. The difference between output and intermediate consumption is known as value added (VA): Value Added = Output - Intermediate consumption GDP by the output approach is constructed from value added by adding taxes on products and by subtracting subsidies on products. The difference between taxes and subsidies is net taxes. GDP(O) = Value Added + Net taxes Using the numerical examples contained in SNA 2008 we have: Example data: Output = 3604, Intermediate consumption = 1883, Taxes = 141, Subsidies = 8 GDP(O) = ( ) + (141-8) = 1854 The expenditure approach compiles GDP by adding together the expenditure categories on which income generated from value added is spent. Value added created by production is used up either on 4 See Handbook, V.1 for more information on these classifications. 5 The other parts are: Introduction to Supply and Use Tables, part 2 Data sources and Compilation; Introduction to Supply and Use Tables, part 3 Input-Output Tables 2

3 final consumption or on gross capital formation, with additional flows from and to ROW supplying imports and using up exports: GDP(E) = Final consumption + Gross capital formation + Exports Imports Introducing net exports for exports minus imports we have: GDP(E) = Final consumption + Gross capital formation + Net exports Example data: Final consumption = 1399, Gross capital formation = 414, Exports = 540, Imports = 499 GDP(E) = ( ) = 1854 Another way of looking at this compilation is by equating total supply by product with total use by product. Supplies can come from domestic output, from imports from ROW or from net product taxes. Uses are intermediate consumption, final consumption, gross capital formation and exports. We therefore have: Or, in components: Total supply by product = Total use by product Output + Imports + Net taxes = IC + Final consumption + Gross capital formation + Exports (1) Rearranging IC and imports gives: Output IC + Net taxes = Final consumption + Gross capital formation + Exports Imports Remembering that value added equals output minus IC and that net exports are exports minus imports: Value added + Net taxes = Final consumption + Gross capital formation + Net exports The left-hand side is GDP(O), the right-hand side GDP(E), so this last equation tells us once more that both ways of calculating GDP yield the same result: GDP(O) = GDP(E). Supply and use tables: an introduction The confrontation by product between supply and use in equation (1) above is the starting point for supply and use table (SUT) compilation. The supply table consists of a tabular presentation of the transactions output, imports and net taxes: Output Imports Net taxes Here the dimensions of the cells are still undetermined, for now we can take them to be single numbers. Using the above example, the supply table is given by:

4 Transactions recorded in the supply table typically come from the resources side (right-hand side) of the accounts. The use table consists of the demand categories, and of value added, coming from the uses side (lefthand side) of the accounts: IC Final consumption Gross capital formation Exports VA Again, taking the cells to be single numbers and using the above examples: Before expanding the cells from single numbers to collections of numbers, let us first examine the relationships between the two tables. Equating both tables horizontally yields again the decomposition of GDP(O) by expenditure categories (after rearranging IC and imports): Output Imports Net taxes = IC Final consumption Gross capital formation Exports VA Using the numerical examples: = Here the sum of the cells on the left (total supply) is equal to the sum of the cells on the right (total use). The equality applies only to the first row. Resources and uses are balanced horizontally or by rows. Of course, since there is still only a single row, this is the overall balance between GDP(O) and GDP(E). Another way of stating this balance is by saying that the statistical discrepancy (GDP(O) - GDP(E)) is zero. The single cell with value added (1721) is not equal to anything horizontally. Equating the tables vertically gives: Output Imports Net taxes = IC Final consumption Gross capital formation Exports VA Here the equality applies only to the first column, this is the definition of value added as output minus IC, rearranged as output = IC + VA. Using the numerical examples: = The vertical or column balance can be interpreted in two ways. Either it serves to calculate VA as the difference between output and IC, as in the GDP(O) approach. Or it calculates VA independently, from data on the VA components (such as compensation of employees) as in the GDP by income 4

5 approach, GDP(I), and then serves to state the balance between GDP(O) and GDP(I). The GDP by income approach is the third method for compiling GDP and focuses on the distributive transactions involved in income generation 6. Figure 3 gives an example, based on the SNA data. D1 Compensation of Employees 1150 D29 Other Taxes on Production 94 D39 Other Subsidies on Production -36 B2n Operating Surplus / Mixed Income, net 291 B1n Value added, net 1499 K1 Consumption of Fixed Capital 222 B1g Value added, gross 1721 D21 Taxes on products 141 D31 Subsidies on products -8 Gross Domestic Product 1854 Figure 3 GDP by income approach Breakdown by industries We will first expand the output and IC cells horizontally by industry, i.e. from single numbers to rows of numbers, each number being output, IC or VA for a particular industry. Industries (activities) are classified by the ISIC Rev.4 industry classification. We can use a breakdown by industries at any level of detail. But we will follow SNA 2008 and use the following breakdown, which we have aggregated into five industries: Agri(culture), Man(ufacturing), Serv(ices) 1, Serv(ices) 2 and Serv(ices) 3 7. Example SNA 2008 Agri Agriculture, forestry and fishing Man Manufacturing and other industry Construction Serv 1 Trade, transport, accommodation and food Serv 2 Information and communication Finance and insurance Real estate activities Business services Serv 3 Public Administration Education, human health and social work Other services Table 4 Industries used in the examples Using this breakdown and applying it to output we get the following supply table: By industry Total Imports Net taxes Agri Man Serv 1 Serv 2 Serv 3 Output Table 5 Supply table by industries Applying the breakdown by industry to intermediate consumption and value added we get the following use table: 6 We will devote a future paper to the GDP by income approach. 7 The examples come from chapter 14 of SNA The aggregation only serves to keep the tables small and hence easy to inspect. SNA also makes the distinction between market output, non-market output and output for own final use. Again, to keep the tables small, we will not follow SNA in this respect. 5

6 By industry Total Final Gross capital Exports Agri Man Serv 1 Serv 2 Serv 3 consumption formation IC VA Table 6 Use table by industries Note that transactions other than output, IC and VA are not expanded by industry. Breakdown by products Instead of expanding by industries horizontally, we can expand the output, IC and all other cells except VA vertically by product, i.e. from single numbers to columns of numbers, each number being the transaction value for a particular product. Products are classified by the CPC product classification. We can use a breakdown by products at any level of detail. But we will follow SNA 2008 and use the following breakdown, which we have aggregated into five product groups: Agri(culture), Man(ufacturing), Serv(ices) 1, Serv(ices) 2 and Serv(ices) 3. Example SNA 2008 Agri Agriculture, forestry and fishery products (0) Man Ores and minerals; electricity, gas and water (1) Manufacturing (2-4) Construction (5) Serv 1 Trade, accommodation, food & beverages; transport services (6) Serv 2 Finance and Insurance (7 less 72-73) Real estate services; and rental and leasing services (72-73) Business and production services (8) Serv 3 Community and social services (92-93) Other services (94-99) Public administration (91) Table 7 Product groups used in the examples (with corresponding CPC codes) Using this breakdown and applying it to output, imports and net taxes we get as supply table: Output Imports Net taxes Agri Man Serv Serv Serv CIF/FOB adjustment on imports -10 Direct purchases abroad by residents (DP.R) 43 Total Table 8 Supply table by products Two extra rows are added to the supply table, one for the CIF/FOB adjustment for imports and one for direct purchases abroad by residents. Imports are usually valued CIF (i.e. they include cost, insurance and freight) at the point of entry into the importing economy. One must be careful to avoid double recording of transport and insurance services. If these services are rendered by nonresidents they are included in the imports of market services. If these services are rendered by residents they are included in the domestic output of these services. Total imports may therefore be higher than they should be because these services may be included in the CIF values for goods and in the imports of services. The CIF/FOB adjustment is added (example: -10) as a row to ensure that total 6

7 imports are valued FOB ( free on board, i.e. not including cost, insurance and freight), the equivalent valuation to basic prices for domestic output. Purchases of residents abroad are treated as both imports and household final expenditure by the SNA, assuming that these purchases are mostly by household residents. Thus a value (example: 43) has to be entered in the import column of the supply table and also entered in the column of household final expenditure in the use table. Applying the breakdown by product to intermediate consumption and the final consumption categories we get the following use table: IC Final consumption Gross capital formation Exports Agri Man Serv Serv Serv Direct purchases abroad by residents (DP.R) 43 Purchases of non-residents at home (DP.NR) Total Table 9 Use table by products Purchases of residents abroad are added to household final expenditure, as noted before. Also, according to SNA, purchases of non-residents at home should be treated as exports and these purchases have to be deducted from household final expenditure (example: 29). Note that VA is not expanded by product. We have omitted the VA single cell from table 9. Breakdown by industries and by products Next, we want to combine the expansions by industries and by products. For output and IC this gives industry by product tables. For imports, net taxes, final consumption, gross capital formation and exports the expansion is by product only and for value added the expansion is by industry only. Supply Margins Net Supply Output by industries Output CifFob Imports (pp) Taxes (bp) Agri Man Serv 1 Serv 2 Serv 3 Total (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (1) Agri (2) Man (3) Serv (4) Serv (5) Serv (6) CifFob (7) DP.R (8) Total Table 10 Supply table by industries and by products Note that the layout of the supply table has changed slightly. The Net taxes column has been moved to the left to come before the output table. A CifFob column is added before the imports column, showing how the total CIF/FOB adjustment (10) is split between a freight transport part (-6), included 7

8 in the first services product row Serv 1 and an insurance part (-4), included in the second services product row Serv 2. Remember that these services are subtracted, because they are already included in the import entries, which are valued CIF, i.e. they include the costs of insurance and freight transport. The total for this column is zero, as is the total for the CifFob row, since they involve rearrangements of data only. Output is valued at basic prices, i.e. excluding all product taxes (but including subsidies when relevant) and excluding any margins for transport or trade services that may be added to come to the price that final users pay for the product. The sum of output, valued in basic prices, and imports, now CIF corrected, is total (product) supply in basic prices ( bp ), which is given in column (4). Since we want to compare total supply with total use (as in equation (1)) we want to bring the valuation of the supply table in line with the valuation of the use table, which is valued in purchasers prices ( pp ), i.e. including all product taxes (but excluding subsidies when relevant) and including any margins for transport or trade services. The supply table already has a column (3) for net taxes. The new column (2) has been added to contain margins for transport or trade services. Such margins only apply to goods, which in our example are only the agriculture and manufacturing rows Agri and Man. Note that the margins added on product rows need to be subtracted again for the corresponding service rows (trade or transport, both included in the first service row Serv 1 ), making the total for the margin column zero. Again, these adjustments involve rearrangements of data only. The sum of supply in basic prices, net taxes and trade and transport margins gives total supply in purchasers prices, which has been added to the supply table as column (1). The use table is now as follows: Use Intermediate consumption by industries Total Exports FCE GCF Total (pp) Agri Man Serv 1 Serv 2 Serv 3 HH GG Economy (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (1) Agri (2) Man (3) Serv (4) Serv (5) Serv (6) DP.R (7) DP.NR (8) Total (9) GVA (10) CE (11) Taxes (12) OS Table 11 Use table by industries and by products (note: column (12) adds total product net taxes = 133 to column 7 for rows (9) and (11); this net taxes column is not displayed in the table) Also here the layout has changed somewhat. The exports column (8) has moved to the left, and final consumption is split into household final consumption ( HH FCE ) and general government final 8

9 consumption ( GG FCE ) 8. Column (1) gives total use in purchasers prices and column (12) gives the totals for the VA components for the total economy. Finally, VA is now called GVA (gross value added) and is split up into components: compensation of employees ( CE ), net taxes on production 9 ( Taxes in row 11) and gross operating surplus ( OS ). The term gross means including consumption of fixed capital (CFC). This transaction serves to reflect the decline in the value of the fixed assets. This is similar to depreciation as used in business accounting. However, CFC in national accounts is not a method for allocating the costs of past expenditures on fixed assets over subsequent accounting periods. Rather, it is the decline in the future benefits of the assets due to their use in the production process. Gross value added is the balancing transaction for which the difference between output and IC includes an amount for CFC. When the amount for CFC is deducted from gross value added we get net value added. SUT Balances We can now reformulate the single cell balances introduced earlier into the full industries by products framework. Table 12 gives the horizontal or row balances, but now for each individual product row. Here we have aggregated final consumption, gross capital formation and exports into one Final demand column. These balances are called product balances 10. Discr Supply Use Supply Margins Taxes Supply Output Imports Use IC Final demand (pp) (bp) (pp) (S1)-(U1) (S1) (S2) (S3) (S4) (S10) (S12)+(S13) (U1) (U7) (U8)+..+(U11) (1) Agri (2) Man (3) Serv (4) Serv (5) Serv Table 12 Product balances For each product, a product discrepancy is defined as total supply in purchasers prices minus total use in purchasers prices. Balancing the SUT by products means making all product discrepancies equal to zero. The reason that product discrepancies are not zero when the SUT is compiled is that basic data come from different data sources. We will come back to this in part 2 of this paper. Table 13 gives the vertical or column balances, but now for each individual industry column. These are called industry balances. Agri Man Serv 1 Serv 2 Serv 3 (1) (2) (3) (4) (5) (S8) Output (bp) (U8) IC (pp) (U9) GVA (S8)-(U8)-(U9) Discr Table 13 Industry balances 8 In SNA 2008 there seems to be a discrepancy between the SUT values in chapter 14 and the sequence of accounts values in Annex 2. Chapter 14 gives Gov = 368 and HH = = 1031; Annex 2 gives Gov = 352 and HH = = 1047 (our HH sector includes NPISH). 9 Taxes and subsidies on production (58) are different from taxes and subsidies on products (131). 10 SNA 2008 actually defines supply and use tables in terms of product balances, see SNA 2008,

10 For each industry an industry discrepancy is defined as total output in basic prices minus the sum of IC in purchasers prices and gross value added. Balancing the SUT by industries means making all industry discrepancies equal to zero. Again, the reason that industry discrepancies are not zero when the SUT is compiled is that basic data come from different data sources. Of course, if there are no data sources for the GVA components, and GDP is not compiled by income approach, then GVA is calculated residually as output minus IC, and the SUT will always be balanced by industry. Finally, balancing the full SUT means achieving both product balances for all products and industry balances for all industries. We will come back to this in part 2 of this paper. Concluding remarks The example in the previous section was rather artificial, with only five industries and five product groups. In general SUTs are not symmetric, and typically have many more product rows than industry columns. Also, some transactions may be split up further such as output into market output, nonmarket output and output for own final use. But the general structure of SUTs, as recommended by SNA, is as given in this paper. In part 2 of this paper we will review the data sources needed for SUT compilation and look briefly at the balancing process. Also, we will see how to express the use table in basic prices, and how to come to SUTs in constant prices. In part 3 we will introduce the input-output table and see how this table is related to the SUT. To find out more, The 2008 SNA, European Commission, IMF, OECD, UN, World Bank, 2009, Chapter 14 The supply and use tables and goods and services account Handbook of Input-Output Table Compilation and analysis, Series F, No. 74, UN