Federal Economic Statistics Advisory Committee December 11 2020 Susan E Fleck PhD Office of Prices and Living Conditions US Bureau of Labor Statistics INTRODUCTION GDP C I G X ID: 1029789
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1. Net Input Price Indexes – Accounting for Imports in the Cost of ProductionFederal Economic Statistics Advisory CommitteeDecember 11, 2020Susan E. Fleck, PhDOffice of Prices and Living ConditionsU.S. Bureau of Labor Statistics
2. INTRODUCTION
3. GDP = C + I + G + X - M
4. GDP = C + I + G + X – M
5. Intermediate Demand Measures Inputs into Domestic Production
6. Net Input Price Indexes Based on Detailed ProductsInputEnergyMaterialsServicesDomesticImport
7. Net Input Price Indexes Publication FormatInputGoodsServicesConstructionDomesticImport
8. What Do Industry Net Input Price Indexes Offer Relevant, reliable, and accessibleParse out imported intermediates by domestic use in greater detail than other intermediate input price indexes.Use unpublished BLS detailed price indexesPosted monthlyBreak out by Domestic/Import, Goods/Service
9. HISTORICAL CONTEXT
10. Brief History
11. Brief History
12. 2007 Redux – Import Price Indexes in the News
13. 2007 Redux – Globalization and U.S. Statistics$1 million budget proposalDo statistical measure of the United States economy correctly interprets the impact of imports and outsourced production; Do statistical measures of the United States economy result in an accurate report of United States gross domestic product (GDP), productivity, and other aspects of economic performance; Is the impact of imports on United States manufacturing levels and competitiveness accurately reported; and Do the methods used for accounting for imported goods and United States wages result in overstating economic growth, domestic manufacturing output, and productivity growth?What actions should be taken to produce more accurate import price indices on a regular basis; and What other measures of economic analysis should be used to accurately reflect the globalization of economic activity and offshoring of domestic production?
14. Offshoring Price Index Bias ExampleM 1M 2M 3M 4M 5M 6Chair A - Domestic $10$10$10$10$10$10Chair B - Domestic $10$10----Chair B - Imported --$5$5$5$5Chair C - Domestic $10$10$10$10--Chair C - Imported ----$5$5Chair D - Imported $5$5$5$5$5$5Producer Price Index100.0100.0100.0100.0100.0100.0Import Price Index100.0100.0100.0100.0100.0100.0Net Input Price Index100.0100.0100.0100.0100.0100.0Buyer’s Input Price Index100.0100.085.785.771.471.4
15. New Net Input Price Index on BalanceDoes not address sourcing substitution biasExcludes labor and capital investment Does not account for imported servicesExcludes domestically produced services where no PPI is publishedResponds to industry data user needsBased on official PPIs and MPIsUpdated Monthly with PFEIsCost effectiveFair proxy of a buyer’s price index
16. DETAILS
17. Net Input Price Index –Example of Relative Importance, Dec 2019 IN337Inputs to 337, furniture and related product manufacturing, excl capital investment and labor100.000 IN3371Inputs to 337, domestically produced products86.562 IN33711Inputs to 337, domestically produced goods57.751 PPI-091503Paper boxes and containers3.103 PPI-072304Laminated plastics plates, sheet (excluding packaging), and shapes2.941 PPI-092201Particleboard and fiberboard2.406 PPI-081106Softwood lumber, not edge worked2.328 IN33712Inputs to 337, domestically produced services28.812 PPI-576101Paper and plastics products wholesaling5.668 PPI-573101Building materials, paint, and hardware wholesaling3.591 PPI-572101Furnishings wholesaling2.424 IN3372Inputs to 337, imported goods13.438 MPI-337215Showcase, partition, shelving, and locker manufacturing2.228
18. Net Input Price Index –Example of Relative Importance, Dec 2019 IN337Inputs to 337, Furniture and related product manufacturing, excl capital investment and labor100.000 IN3371Inputs to 337, domestically produced products86.562 IN33711Inputs to 337, domestically produced goods57.751 PPI-091503Paper boxes and containers3.103 PPI-072304Laminated plastics plates, sheet (excluding packaging), and shapes2.941 PPI-092201Particleboard and fiberboard2.406 PPI-081106Softwood lumber, not edge worked2.328 IN33712Inputs to 337, domestically produced services28.812 PPI-576101Paper and plastics products wholesaling5.668 PPI-573101Building materials, paint, and hardware wholesaling3.591 PPI-572101Furnishings wholesaling2.424 IN3372Inputs to 337, imported goods13.438 MPI-337215Showcase, partition, shelving, and locker manufacturing2.22897 PPIs47 PPIs26 MPIs
19. Attributes of Combined Input Indexes Industry Inputs exc. intraindustry transactionsBusinessApproximately 3-digit NAICSDec 2018 onwardMonthly (NSA)Modified LaspeyresOPLC Net Input Price IndexesInputs to sectoral outputPrivate BusinessApproximately 3-digit NAICS1987 onwardAnnualTornquistOPT Combined Input Intermediate Price IndexInputs to gross outputTotal economyApproximately 3-digit NAICS1947 onward, Annual; 2005Q1 onward, Quarterly (SA)FisherBEA Intermediate Input Price Index
20. 2019Q1=100
21. 2019Q1=100
22. 2019Q1=100
23. Relevance of Net Input Price IndexesIndustry level analysisPrice transmission analysis Deflation of industries with no marketable output (ie social assistance)Contract price adjustmentDeflation of inputs to domestic production23
24. Where to Find the Net Input Price IndexesWebsite: https://www.bls.gov/ppi/a-new-bls-satellite-series-inputs-to-industry-price-indexes.htmArticle: https://www.bls.gov/opub/mlr/2015/article/new-ppi-net-inputs-to-industry-indexes.htm
25. Next StepsCollect feedback: Satellite_Series_Feedback@bls.govCompare with other intermediate input price index measuresEvaluate resources required to publish at different levels of detail (4-digit NAICS, NIPA, grouping by E-M-S) Evaluate proposed improvements to MPIs using administrative trade data to mitigate new goods and country substitution bias for imported intermediates
26. Thank youAnd thanks to the Producer Price Index and Import/Export Price Index staff for their work over the past four years to develop the approach for this new data product.
27. Methodology: weights – domestic inputs where refers to the domestically produced weight of commodity c in the input index for industry i refers to use of commodity c by the industry i is the total use of commodity c by all 1 through n industries included in the use tableis the domestic wherever-made value of shipments for commodity c. 27
28. Methodology: weights – imported inputs where refers to the foreign produced weight of commodity c in the input index for industry i refers to use of commodity c by the industry i is the total use of commodity c by all 1 through n industries included in the use tableis the value of imports for commodity c. 28