scb_051991

Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

May 1091 / Volume 71 Niimber

SURVEY OF CURRENT BUSINESS

U.S. Department of CommerceEoberfc A. Mosbacfeer / SecretaryEconomics and Statistics AdministrationMichael R Barby / Under Secretary for

Bureau of Economic AnalysisAllan H. Yotasg / DirectorCarol S. Carson / Deputy Director

Editor*inCkiefi Bouglas E FoxZ&lsp&l*. Scott

Publication Staff; W, Kcmnie Aster,M, Greteheii ftibsoa, Bt& & Iteming,Donald J. Parschalk

SURVEY OF CURRENT BUSINESS. Published monthlyby $ie Buteati of Economic Analysis of the tS.Department of Commerce. Editorial correspon-dence should be addressed to the Editor-in-Chief,SURVEY OF CsteN* I&JSIKBSS, Bureau of EconomicAnalysis, U.S. Department of Commerce, Wash*ingfconBC 0230,

Annual subscription: Seeo&d-eiass mail$23,00 domestic, $28*76 foreign; first-class mail$52.00, Single copy-$6,50 domestic, $8,13 foreign.

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Secoiid-class postage paid at Washington, DCand at additional mailing offices. (USPS 307*790),

The Secretary of Commerce has determinedthat the publication of tills periodical is necessaryin the transaction of the public business requiredby law of this Department,

1 Business Situation2 Real GNP5 Corporate Profits6 Government Sector

8 National Income and Product Accounts8 Selected NIPA Tables

22 NIPA Charts24 Reconciliation and Other Special Tables

30 U.S. Business Enterprises Acquired or Established byForeign Direct Investors in 1990

40 Valuation of the U.S. Net International Investment Position

C-pages: Business Cycle Indicators(See page C-l for contents)

S-pages: Current Business Statistics(See page S-36 for contents and subject index)

Inside back cover: BEA Information

NOTE.This issue of the SURVEY went to the printer on June 10,1991.It incorporates data from the following monthly BEA news releases:

Gross National Product (May 29),Personal Income and Outlaws (May 30), andComposite Indexes of Leading, Coincident, and lagging

Indicators (May 31).


the BUSINESS SITUATION

PRELIMINARY estimates show thatreal GNPa measure of U.S. produc-tiondecreased at an annual rate of2.6 percent in the first quarter of1991, 0.2 percentage point less thanreported in the advance estimates is-sued a month ago. Real gross do-mestic purchasesa measure of U.S.demanddecreased 4.0 percent, 0.2percentage point more than previouslyreported. The revisions in the twomeasures differed because of a siz-able upward revision in net exports.1Among the components that are in-cluded in both measures, downward re-visions in nonresidential fixed invest-ment and inventory investment (thatis, change in business inventories)were partly offset by upward revisionsin government purchases and personalNOTE.Daniel Larkins was primarily respon-sible for preparing the section on revisions inthe national income and product accounts, thesection on real GNP (with contributions fromLarry R. Moran, Ralph W. Morris, and MiraA. Piplani), and the section on corporate prof-its; David T. Dobbs prepared the section on thegovernment sector.

1. Revisions in net exportsthat is, exports minusimportslead to revisions in GNP but not in grossdomestic purchases. Gross domestic purchases is calcu-lated as the sum of personal consumption expenditures(PCE), gross private domestic investment (GPDI), andgovernment purchases. GNP is calculated as the sumof these three components plus exports minus imports(thereby including U.S. production of goods and serv-ices marketed outside the United States and excludinggoods arid services in PCE, GPDI, and governmentpurchases that are not U.S. produced).

consumption expenditures (see table 1on page 24).

The price index for gross domesticpurchases (fixed weights) increased 3.6percent in the first quarter; the in-crease was the same as that reported inthe advance estimates issued a monthago. The GNP price index (fixedweights), up 5.1 percent, was also un-revised. As explained in the April"Business Situation," the unusuallylarge difference between the changesin these two price measures largelyreflects prices of imported petroleum,which tumbled in the first quarter.(Import prices are subtracted out in de-riving GNP prices but not in derivinggross domestic purchases prices.)

Revisions in components of realGNP.Net exports was revised up$4.2 billion in the first quarter; therevision reflected a larger downwardrevision in imports than in exports.Merchandise trade accounted for mostof these revisions.

Among the other components ofGNP, real inventory investment wasrevised down $3.0 billion; both farmand nonfarm inventories were reviseddown. Nonresidential fixed investmentwas revised down $2.2 billion; the re-vision was more than accounted for byproducers' durable equipment (mainlyaircraft). Government purchases wasrevised up $1.6 billion; Federal pur-chases (mainly for national defense)more than accounted for the revision.

CHART 1

Looking Ahead... U.S. International Investment Position. Estimates of the U.S. international

investment position will appear in the June SURVEY. They will include esti-mates for 1982-90 in current prices using the current-cost and market-valuemethods for valuing foreign direct investment in the United States and U.S.direct investment abroad described in this issue (see the article beginningon page 40).

Benchmark Input-Output Accounts. The 1982 benchmark input-outputaccounts will be presented in the July SURVEY.

National Income and Product Accounts Revision. The next comprehen-sive, or benchmark, revision of the national income and product accounts isscheduled for release in November 1991 (see the box on page 9).

Real Product:Change From Preceding Quarter

Billion 1982 $5040

30

20

10

-10

-20-305040

30

20

10

-10

-20-303020

10

0

-10-203020

10

0

-10

-20

-30-404030

20

10

0

-10-203020

10

0

-10

-20

GROSS NATIONAL PRODUCT

II.I.IIPERSONAL CONSUMPTION EXPENDITURES

ML.L1 II II 11

j FIXED INVESTMENT-Ji ii ii i|IH' ."

-32.8

: CHANGE IN BUSINESS INVENTORIES

IiHi I it It 1

INET EXPORTS M. J It

IGOVERNMENT PURCHASEST

1988 1989 1990 1991Based on Seasonally Adjusted Annual Rates

U.S. Department of Commerce, Bureau of Economic Analysis 91-5-1


SURVEY OF CURRENT BUSINESS May 1991

Within personal consumption expendi-tures, upward revisions in nondurablegoods and in services were largely off-set by a downward revision in durablegoods. (The newly available sourcedata for the preliminary first-quarterestimates are listed in the box on page2).

Real GNPReal GNP decreased 2.6 percent in

the first quarter after decreasing 1.6percent in the fourth.2 As described inlast month's "Business Situation," thedecreases in both quarters were con-centrated in motor vehicles and con-struction; the rest of the economythat is, GNP excluding motor vehiclesand constructionincreased 1.2 per-cent after increasing 2.5 percent (table1).

Before discussing first-quarter de-velopments in terms of the conven-tional GNP components, it is use-ful to consider recent changes in realGNP expressed on a command basis.Command-basis GNP measures U.S.production in terms of its purchasingpower; thus, changes in command-basis GNP reflect changes in the U.S.terms of trade, which BEA measuresas the ratio of the implicit price de-flator for exports to the implicit pricedeflator for imports. (Command-basisGNP and the terms-of-trade ratio areshown in table 1.11 of the "SelectedNIPA Tables.") In the first quarter, theU.S. terms of trade improved consid-erably, largely in response to plungingprices of imported petroleum; as a re-sult, command-basis GNP decreasedonly 0.5 percent (compared with the2.6-pereent decrease in real GNP). Inthe fourth quarter, the terms of tradehad deteriorated, largely because of asurge in the price of imported petro-leum; as a result, command-basis GNPdecreased 3.9 percent (compared withthe 1.6-percent decrease in real GNP).Personal consumption expenditures

Real personal consumption expend-itures (PCE) decreased 1.3 percent inthe first quarter after falling 3.4 per-cent in the fourth (table 2). Thelast time PCE decreased for two con-secutive quarters was in 1980. Thedecreases in the last two quarterswere accounted for by goods; servicesincreased in each quarter.

The decreases in PCE were consis-tent with weakness in many of the fac-

2. The regularly featured estimate of real GNP isbased on 1982 weights. An alternative estimate of realGNP based on 1987 weights decreased 2.4 percent in thefirst quarter after decreasing 3.1 percent in the fourth(see tables 4 and 5 on page 26).

tors usually associated with consumerspending. In the first quarter,

Real disposable personal incomedecreased for the third consecutivequarter;

The unemployment rate increasedfor the third consecutive quarter,

to its highest level since the firstquarter of 1987; andThe Index of Consumer Sentiment(prepared by the University ofMichigan's Survey Research Cen-ter) remained low, despite its firstincrease in five quarters.

Table 1.Gross National Product, Motor Vehicle Output, and Construction Output[Seasonally adjusted at annual rates]

Gross national product . . ....Motor vehicle output .Construction output

Gross national product less motor vehicleand construction output

Billions of 1982 dollars

Level

1991: I

4,126.5120.6335.0

3,670.9

Change from preceding quarter

1990

II

4.515.3

-10.3

-.5

III

14.95.5

-8.1

17.5

IV

-16.6-27.3-11.4

22.1

1991

I

-26.9-20.7-16.7

10.5

Percent change from preceding quarter

1990

II

0.448.3

-10.4

-.1

m

1.414.2-8.4

1.9

IV

-1.6-50.7-12.0

2.5

1991

I

-2.6-46.9-17.7

1.2

NOTE.Motor vehicle output is derived by summing auto output (table 1.18 of the "Selected NIPA Tables") and truck output (table 1.20). Con-struction output may be approximated by "structures," shown in table .1.4 of the "Selected NIPA Tables." This approximation excludes maintenanceand repair expenditures and includes brokers' commissions as well as mining exploration, shafts, and wells; nevertheless, it probably tracks move-ments in construction output closely. The value of motor vehicle and construction output includes the value of inputs, such as steel, obtained fromother industries and from foreign suppliers as imports.

Table 2.Real Personal Consumption Expenditures[Seasonally adjusted at annual rates]

Personal consumption expenditures

DurablesMotor vehicles and partsFurniture and household equipmentOther durables

Nondurables .. .Food . . . .Clothing and shoesEnergy'Other nondurables

ServicesHousing .... . .Household operation

Energy2Other

TransportationMedical careOther services


Level

1991: I

2,664.9

401.3155.4177.768.3

896.8453.5166.8110.7165.8

1,366.7378.1166.780.286.4

101.2310.8410.0


1990

II

1.5

-10.8-6.1-1.4-3.3

-4.41.9

-2.9-.6

-2.7

16.6.6

5.74.7.9.9

4.64.7

III

18.0

2.71.8-.31.2

5.2.1

3.11.3.8

10.0.3

1.6.3

1.41.25.31.6

IV

-23.2

-13.9-10.2-3.4-.3

-15.2-5.8-3.8-4.2-1.5

5.9.9

-.5.1

-.61.12.71.7

1991

I

-8.7

-14.3-14.0

1.4-1.6

-4.4-.1

-3.8-.6

.1

10.00

-2.9-2.6-.4-.83.5

10.3


1990

n

0.2

-9.5-12.6-3.1

-17.0

-1.91.7

-6.5-2.1-6.2

5.1.6

14.826.54.33.76.44.9

III

2.7

2.64.1-.77.1

.2.3.1

7.44.61.9

3.0.3

3.91.56.74.97.31.6

IV

-3.4

-12.3-20.9-7.4-1.7,

-6.5-5.0-8.4

-13.8-3.5

1.81.0

-1.2.5

-2.74.43.61.7

1991

I

-1.3

-13.1-29.2

3.2-8.8

-1.9-.1

-8.6-2.1

.2

3.00

-6.7-12.0-1.8-3.14.6

10.71. Gasoline and oil, and fuel oil and coal.2. Electricity and gas.NOTE.Percent changes in major aggregates are found in table 8.1 of the "Selected NIPA Tables." Dollars levels are found in table 2.3.

NOTE.Quarterly estimates in the national income and product accounts are expressed atseasonally adjusted annual rates, and quarterly changes are differences between these rates.Quarter-to-quarter percent changes are annualized. Real, or constant-dollar, estimates areexpressed in 1982 dollars and are based on 1982 weights. (Alternative measures based on morecurrent weights are shown in tables 3 and 4 on page .)

The preliminary GNP estimate for the first quarter incorporates the following revised oradditional source data that were not available when the advance estimate was prepared a monthago.

Personal consumption expenditures: Revised retail sales for February and March.Nonresidential fixed investment: Construction put in place in February (revised) and

March, revised manufacturers' shipments of equipment for February and March, and partialinformation on plant and equipment expenditures for the quarter.

Residential investment: Construction put in place for February (revised) and March.Change in business inventories: Manufacturing and trade inventories for February (revised)

and March.Net exports of goods and services: Merchandise exports and merchandise imports for February

(revised) and March.Government purchases of goods and services: Federal outlays for March, and State and local

construction put in place for February (revised) and March.Wages and salaries: Revised employment, average hourly earnings, and average weekly

hours for February and March.GNP prices: Detailed merchandise export and import price indexes for October through

March, values and quantities of petroleum imports for March, and residential housing pricesfor the quarter.


May 1991 SURVEY OF CURRENT BUSINESS

Expenditures for durable goods fell13.1 percent in the first quarter afterdropping 12.3 percent in the fourth.Virtually all of the first-quarter de-crease and most of the fourth-quarterdecrease was accounted for by con-sumer purchases of new cars andtrucks. Two factors contributed to theweak sales of new cars. First, new-carprices jumped in the first quarter, atleast partly reflecting a scaling back ofsales-incentive programs by domesticmanufacturers and the imposition of atax on luxury cars in January. Second,some consumers may have purchasedused cars instead of new cars. Manu-facturers made available to consumersmany of the cars that they had re-purchased from businesses as part of

attractive fleet-marketing programs of-fered in the second half of 1990; theserepurchased vehicles, known as pro-gram cars, have fewer miles and moreoptional equipment than most usedcars and are less expensive than mostnew cars.

Expenditures for nondurable goodsdecreased 1.9 percent in the first quar-ter after falling 6.5 percent in thefourth. Clothing and shoes decreasedthe same amount in both quarters, butenergy and food decreased much lessin the first quarter than in the fourth.The decreases in energy reflected verymild winter weather across most of theNation.

Expenditures for services increased3.0 percent in the first quarter after in-

Table 3.Real Gross Private Domestic Fixed Investment[Seasonally adjusted at annual rates]

Gross private domestic fixed investment ..

Nonresidential

Nonresidential buildings excludingfarms

Public utilitiesMining exploration, shafts and wellsOther

Producers' durable equipmentInformation processing and related

equipmentIndustrial equipmentTransportation and related equipmentOther . . .

ResidentialSingle-family structuresMultifamily structuresOther


Level

1991: 1

649.9

497.4

114.0

72.120.616.64.7

383.4

196.565.863.158.1

152.469.114.169.2


1990

II

-11.7

-6.2

-2.9

-.5.2

-2.4-.2

-3.3

-.3-3.8

1.1-.2

-5.5-5.8

.2

.2

III

1.1

10.9

1.5

.50

.7

.3

9.5

-.2-.3

10.1-.3

-9.8-6.9-1.2-1.8

IV

-9.6

.1

-6.0

-6.1-.2

.5-.2

6.1

13.00

-7.5.7

-9.7-6.0-.3

-3.4

1991

I

-32.8

-22.0

-2.4

-2.0.1

-.4-.1

-19.7

-4.4-4.5-3.9-6.8

-10.9-9.1-1.0-.8


1990

II

-6.5

-4.7

-9.0

-2.54.0

-43.2-15.4

-3.3

-.6-18.9

7.1-1.2

-11.2-21.9

5.01.1

III

0.6

8.9

5.1

2.50

18.928.1

10.2

-.4-1.779.1-1.8

-19.8-27.0-25.9-9.2

IV

-5.4

.1

-18.2

-27.1-3.812.7

-15.1

6.3

30.70

-34.64.4

-20.6-25.6-7.6

-17.3

1991

I

-17.9

-15.9

-8.0

-10.42.0

-9.1-8.1

-18.2

-8.5-23.2-21.3-35.8

-24.1-39.0-24.0-4.5

NOTE.Percent changes in major aggregates are found in table 8.1 of the "Selected NIPA Tables." Dollar levels are found in table 5.13.

CHART 2Housing Starts

Million of units2.0 f ~

1.5

1.0

0.5

1987 1988 1989 1990Seasonally Adjusted at Annual Rates

1991

U.S. Department of Commerce, Bureau of Economic Analysis

creasing 1.8 percent in the fourth. Thefirst-quarter increase was more thanaccounted for by "other" servicesespecially brokerage services associ-ated with a sharp step-up in stockmarket volume. A decrease in house-hold operation primarily reflected asharp drop in purchases of electricityand natural gas.Nonresidential fixed investment

Real nonresidential fixed investmentdecreased 15.9 percent in the firstquarter after changing little in thefourth. Structures decreased less thanin the fourth quarter, but producers'durable equipment fell sharply after amoderate increase (table 3).

The decreases in fixed investmentwere consistent with weakness inmany of the factors that are associatedwith investment spending. In the firstquarter,

The rate of capacity utilization inmanufacturing dropped more than2 percentage points after a similardrop in the fourth quarter;

Corporate profits decreased for thethird.consecutive quarter; and

Real final sales decreaseditssecond decrease in four quarters.

However, two factors associated withinvestment spending are encouraging:Interest rates (as measured by theyield on new issues of high-grade cor-porate bonds) dropped more than 50basis points in the first quarter af-ter falling almost 3.0 basis points inthe fourth, and corporate cash flowincreased for the second consecutivequarter.

Structures decreased 8.0 percent inthe first quarter after decreasing 18.2percent in the fourth. Most of the first-quarter decrease was accounted forby construction of commercial build-ings, which had fallen sharply in thefourth quarter to its lowest level in 7years. Construction of industrial build-ings rebounded after a fourth-quarterdrop.

Producers' durable equipment (PDE)decreased 18.2 percentthe largestdrop in more than 10 yearsafter in-creasing 6.3 percent. The drop con-trasts sharply with a Census Bureausurvey of plant and equipment ex-penditure plans, conducted in Jan-uary and February, that found thatbusinesses expected a substantial in-crease in PDE in the first quarter.All major categories of equipmentand all but 3 of the 23 subcate-gories of equipmentcontributed tothe decrease.



Residential InvestmentReal residential investment de-

creased 24.1 percent in the first quar-ter after decreasing 20.6 percent inthe fourth. Single-family construc-tion and multifamily construction de-creased more in the first quarter thanin the fourth; the "other" compo-nent (which includes additions andalterations, major replacements, mo-bile homes, and brokers7 commissions)decreased less than in the fourthquarter.

Single-family construction decreased39.0 percent in the first quarter afterdecreasing 25.6 percent in the fourthquarter and more than 20 percentin each of the preceding two quar-ters. The free-fall in single-familyconstruction mirrors a sharp falloff insingle-family starts (chart 2). In thefirst quarter, single-family starts were724,000 units (seasonally adjusted an-nual rate), 359,000 units below theiryear-earlier level.

Multifamily construction decreased24.0 percent after a decrease of 7.6 per-cent. High vacancy rates continue toplague the multifamily housing sector;in the first quarter, the rate moved upto 9.4 percent.

The "other" component of residentialinvestment decreased 4.5 percent af-ter decreasing 17.3 percent. In bothquarters, the decreases were partlyattributable to brokers' commissions.Sales of new and existing homes de-creased in both quarters despite fallingmortgage interest rates (chart 3). Themortgage commitment rate fell 45 ba-sis points in the first quarter to 9.50percent, its lowest rate in 4 years.

In addition to the drop in mortgagerates, three other developments in thefirst quarter suggest that the troublesin the single-family market may benearing an end:

Sales of new single-family housesincreased in February and March,

Average sales prices of new and ex-isting single-family houses firmed,and

Single-family housing permits in-creased sharply in February andheld on to most of that gain inMarch.

Inventory investment

Real inventory investmentthat is,the change in business inventoriesincreased $2.7 billion in the first quar-ter after decreasing $31.1 billion in the

fourth (table 4). The increase reflecteda slowing of inventory liquidation from$26.4 billion in the fourth quarter to$23.7 billion in the first. Much of theliquidation in the last two quarters wasaccounted for by retail auto dealers,who reduced inventories by $18.2 bil-lion in the first quarter after reducingthem $10.4 billion in the fourth. Ex-cluding retail auto dealers (and farms),liquidation was $8.6 billion in the firstquarter and $18.1 billion in the fourth.

Manufacturing inventories decreased$2.0 billion after decreasing $18.3 bil-lion. Inventories of durables de-cumulated substantially again; mostcategories decreased. Inventoriesof nondurables increased sharply af-ter a decrease; the turnaround waswidespread.

Wholesale trade inventories in-creased somewhat more than in the

fourth quarter. The pickup was ininventories of merchant wholesalersof durable goods, mainly foreign carsand machinery, equipment, and sup-plies. Inventories of nonmerchantwholesalers decreased again; the de-creases were largely in inventoriesheld in petroleum bulk stations andterminals.

Farm inventories increased $3.1 bil-lion in the first quarter after increasing$2.1 billion in the fourth. The first-quarter increase largely reflected weakmarket sales of livestock; crop inven-tories decreased, reflecting a pickup inmarket sales.

The first-quarter decreases in non-farm inventories and in final sales leftthe constant-dollar ratio of nonfarm in-ventories to final sales unchanged at2.79.

Table 4.Change in Real Business Inventories[Billions of 1982 dollars; seasonally adjusted at annual rates]

Change in business inventories

Farm

NonfarmManufacturingWholesale tradeRetail trade

Auto dealersOther retail trade

Other

Addendum:Nonfarm less auto dealers

Level

1990

I

-2.2

6.0

-8.21.72.0

-25.6-22.6-3.013.7

14.4

n

9.5

-2.1

11.6-2.62.97.62.84.83.7

8.7

III

4.7

0

4.73.71.5.8

3.2-2.4-1.3

1.5

IV

-26.4

2.1

-28.5-18.3

3.2-9.3

-10.41.1

-4.1

-18.1

1991

I

-23.7

3.1

-26.8-2.05.1

-23.4-18.2-5.2-6.5

-8.6


1990

n

11.7

-8.1

19.8-4.3

.933.225.47.8

-10.0

-5.7

HI

-4.8

2.1

-6.96.3

-1.4-6.8

.4-7.2-5.0

-7.2

IV

-31.1

2.1

-33.2-22.0

1.7-10.1-13.6

3.5-2.8

-19.6

1991

I

2.7

1.0

1.716.31.9

-14.1-7,8-6.3-2.4

9.5

NOTE.Dollar levels for most inventories are found in table 5.11 of the "Selected NIPA Tables."

CHART 3Selected Interest Rates

Percent141

12

10

Prime Rate

Mortgage Commitments

H HI I I I1987

I I m i l m I I1988 1989 1990 1991

Data: FRB.U.S. Department of Commerce, Bureau of Economic Analysis



Net exports

Real net exports increased $15.2 bil-lion in the first quarter after increas-ing $37.7 billion in the fourth (table5). Exports decreased $4.2 billion;an increase in merchandise exportswas more than offset by a decreasein exports of services. Imports de-creased $19.4 billion, as merchandiseand services fell.

Merchandise exports increased $7.5billion (or 7.1 percent) in the firstquarter after a larger increase in thefourth. Nonagricultural exports in-creased $6.3 billion; capital goods (ex-cept autos) accounted for most of theincrease, but industrial supplies andmaterials, which had increased verysharply in the fourth quarter, also con-tributed to the increase. Agriculturalexports increased $1.2 billion after asmall decrease.

Merchandise imports decreased $7.2billion (or 5.5 percent) in the first quar-ter after decreasing $18.1 billion in thefourth. A partial rebound in petro-leum imports after a record decreasewas more than offset by a sharp dropin nonpetroleum imports. The drop,following little change in the fourth

quarter, was widespread across majorend-use categories; only capital goods(except autos) increased.

Exports and imports of servicesposted unusually large decreases in thefirst quarter: Exports dropped $11.7billion, and imports dropped $12.2 bil-lion. In both cases, the drops largelyreflected decreases in factor incomeand in foreign travel (related to the warin the Persian Gulf).Government purchases

Real government purchases de-creased 1.5 percent in the first quar-ter after increasing 4.7 percent in thefourth (table 6). Both Federal Gov-ernment purchases and State and localgovernment purchases contributed tothe downswing.

Federal defense purchases increased1.7 percent in the first quarter af-ter increasing 12.1 percent in thefourth. The slowdown was con-centrated in purchases of militaryhardware and in petroleum prod-ucts. A first-quarter upswing in de-fense purchases of servicesmainlyin compensation of military person-nel (including reservist pay and haz-

Table 5.Real Net Exports of Goods and Services[Seasonally adjusted at annual rates]

Net exports of goods and services

Exports

AgricultureNonagriculture

Services

ImportsMerchandise

PetroleumNonpetroleum

Services ..


Level

1991: I

6.4

643.0441.339.5

401.8201.7

636.6501.287.4

413.8135.4


1990

II

-9.2

-8.0-4.0-3.5-.5

-4.0

1.2-2.6-3.9

1.23.8

HI

-1.9

10.42.6

-1.33.97.8

12.311.34.07.21.1

IV

37.7

16.712.8-.3

13.13.9

-21.0-18.1-17.6

-.4-2.9

1991

I

15.2

-4.27.51.26.3

-11.7

-19.4-7.24.1

-11.3-12.2


1990

n

-5.0-3.7

-28.6-.5

-7.6

.7-2.0

-14.61.2

10.9

m

6.92.5

-12.44.2.

16.4

7.69.1

17.67.13.0

IV

11.012.7-3.114.47.7

-11.8-13.1-53.5

-.4-7.5

1991

I

-2.67.1

13.16.5

-20.2

-11.3-5.521.2

-10.2-29.2

NOTE.Percent changes inmajor aggregates) and table 4.4 (for are found in table 8.1 of the "Selected NIPA Tables." Dollar levels are found in table 4.2 (foritegory detail).

Table 6.Real Government Purchases of Goods and Services[Seasonally adjusted at annual rates]

Government purchases of goods andservices

Federal . . . ;National defenseNondefense

Commodity Credit Corporation

Other :

State and local ....Structures ..Other


Level

1991: I

829.1

348.8266.882,1

-1.583.6

480.363.9

416.4


1990

II

12.3

12.92.1

10.8

8.12.7

-.7-2.4

1.7

III

2.5

.11.7

-1.6

.2-1.8

2.4.5

1.9

IV

9.6

3.97.5

-3.6

-3.8.2

5.74.21.5

1991

I

-3.2

-1.11.1

-2.1

1.0-3.1

-2.1-3.3

1.2


1990

n

6.2

16.43.3

67.4

13.2

-.6-14.0

1.7

m

1.2

.12.7

-7.0

-7.9

2.03.21.9

IV

4.7

4.612.1

-15.4

.9

4.929.5

1.5

1991

'

-1.5

-1.31.7

-9.6

-13.6

-1.7-18.2

1.2

NOTE.Percent changes in major aggregates are found in table 8.1 of the "Selected NIPA Tables." Dollar levels are found in table 3.8B.

ardous duty pay), installation sup-port, weapons support, and person-nel supportlargely reflected expend-itures related to Operation DesertStorm.

Federal nondefense purchases de-creased for the third consecutive quar-ter. The level of Commodity CreditCorporation (CCC) inventories de-creased in both the fourth and firstquarters$2.5 billion and $1.5 billion,respectively. These decreases largelyreflected net withdrawals of crops un-der the commodity loan program. Fed-eral nondefense purchases excludingCCC transactions decreased 13.6 per-cent in the first quarter after littlechange in the fourth. All componentsexcept structures contributed to thedecrease.

State and local government pur-chases decreased 1.7 percent in thefirst quarter after increasing 4.9 per-cent in the fourth. The downswingwas in structures, mainly highwayconstruction.

Corporate ProfitsProfits from current production.

profits before tax plus inventory val-uation adjustment (IVA) and capi-tal consumption adjustment (CCAdj)decreased $0.9 billion in the first quar-ter of 1991 after decreasing $11.8 bil-lion in the fourth quarter of 1990 (table7). The first-quarter decrease wasmore than accounted for by profits ofdomestic nonfinancial corporations andreflected a decrease in the real grossproduct of these corporations; prof-its of domestic financial corporationsand profits from the rest of the worldincreased.

Cash flow from current production,a profits-related measure of internallygenerated funds available to corpora-tions for investment, increased $15.1billion after increasing $3.5 billion.The first-quarter increase, togetherwith a drop in current-dollar nonres-idential fixed investment, lifted cashflow as a percent of nonresidential in-vestment to 81 percentmidway be-tween its average level for 1989-90(77 percent) and its average level for1986-88 (85 percent).

Profits by industry.Profits beforetax (PBT) with IVA is the best availablemeasure of Industry profits because es-timates of the CCAdj by industry arenot available. For domestic corpora-tions, PBT with IVA decreased slightlyin the first quarter; a $1.5 billion de-



crease in the profits of nonfinancialcorporations was partly offset by a $1.0billion increase in the profits of fi-nancial corporations. On the basis ofpreliminary and incomplete informa-tion, it appears that drops in the profitsof manufacturing and of "other" non-manufacturing industries were largelyoffset by increases in the profits oftrade and of transportation and pub-lic utilities. (Industry estimates will bepublished in the June SURVEY.)

Profits from the rest of the world in-creased $1.4 billion. This componentof profits measures receipts of profitsfrom foreign affiliates of U.S. corpora-tions less payments of profits by U.S.affiliates of foreign corporations. In thefirst quarter, receipts increased aboutas much as payments decreased.

Profits before tax and related meas-ures.PET decreased $21.4 billion.The difference between the $0.9 billiondecrease in profits from current pro-duction and the $21.4 billion decreasein PBT reflected a change in the IVA.

The IVA is an estimate of inventoryprofits with the sign reversed. In-ventory profits decreased $22.1 billion,reflecting a decrease in prices of in-ventoried goods, especially petroleumand petroleum products. The Producer

Table 7.Corporate Profits

Profits from current productionDomestic . . ......

Financial . . ...Nonfinancial

Rest of the world

Inventory valuation adjustmentCapital consumption adjustmentProfits before tax

Profits tax liabilityProfits after tax

Profits by industry:Profits before tax with IVA

DomesticFinancialNonfinancial

ManufacturingTrade .7.Transportation and public

utilitiesOther

Rest of the worldReceipts (inflows)Payments (outflows)

Unit prices, costs, and profits ofdomestic nonfinancial corporations:Unit priceUnit labor costUnit nonlabor costUnit profits from current production ...

Level

1991: I

Change frompreceding

quarter

1990:IV 1991: I

Billions of dollars

288.0218.722.8

195.869.4

8.3-3.0

282.7115.1167.6

291.1221.7

19.8201.9

69.472.12.7

1.208.813.316.080

-11.8-22.3-2.6

-19.710.4

6.0-3.4

-14.4-12.6-1.8

-8.4-18.8-2.9

-15.9-18.1

3.3

-261.5

10.44.0

-6.5

Dollars

0.006.007.006

-.007

-0.9-2.1

1.1-3.3

1.4

22.1-1.6

-21.4-11.4-10.0

.8-.61.0

-1.5

1.4.6

-.7

0.017.009.009.000

Price Index, a major source for inven-tory prices, decreased an an annualrate of almost 8 percent (not seasonallyadjusted) in the first quarter.

Government SectorThe fiscal position of the government

sector improved in the first quarter of1991. The Federal Government deficitdecreased $66.3 billion; this large dropmainly reflected contributions fromU.S. coalition partners for OperationDesert Storm. The State and localgovernment surplus increased $4.7 bil-lion. The resulting combined deficitof the Federal Government and Stateand local governments decreased $71.0billion, to $87.6 billion (table 8).

FederalThe Federal Government deficit de-

creased $66.3 billion, to $118.0 billion,as expenditures decreased and receiptsincreased.

Receipts.Receipts increased $12.3billion in the first quarter after increas-ing $0.6 billion in the fourth. The step-up was accounted for by contributionsfor social insurance and by indirectbusiness tax and nontax accruals.

Contributions for social insuranceincreased $13.2 billion after increas-ing $1.6 billion. Contributions wereboosted by four changes in Federal pro-grams that became effective January1, 1991: An increase in the tax basefor the old age, survivors, and disabil-

Table 8.Government Sector Receipts and Expenditures[Billions of dollars, seasonally adjusted at annual rates]

NOTE.Levels of these and other profits series are found in tables1.14, 1.16, 6.18B, and 7.18 of the "Selected NIPA Tables."

IVA Inventory valuation adjustment

Government sector

ReceiptsExpenditures *

Surplus or deficit ( )

Federal Government

Receipts

Personal tax and nontax receiptsCorporate profits tax accrualsIndirect business tax and nontax accrualsContributions for social insurance

Expenditures

Purchases of goods and servicesNational defenseNondefense .

Of which: Commodity Credit Corporation inventory changeTransfer payments

To persons

Of which: Contributions for Operation Desert StormGrants-in-aid to State and local governmentsNet interest paidSubsidies less current surplus of government enterprises

Subsidies ;Of which ' Agricultural subsidies

Less: Current surplus of government enterprises

Surplus or deficit ( )

State and local governments

Receipts

Personal tax and nontax receiptsCorporate profits tax accrualsIndirect business tax and nontax accrualsContributions for social insuranceFederal grants-in-aid

Expenditures

Purchase of goods and servicesOf which' Structures ,.

Transfer payments to personsNet interest paidLess' Dividends received by governmentSubsidies less current surplus of government enterprises

SubsdiesLess' Current surplus of government enterprises

Less' Wage accruals less disbursements

Surplus or deficit ( )Social insurance fundsOther

Changes from preceding quarter

1990

I

36.855.4

-18.6

24.8

4.05.21.9

13.8

43.0

10.68.02.7

-3.015.619.8-4.3

7"62.86.94.84.5

-2.1

-18.2

19.0

1.61.28.4.9

7.0

19.4

16.15.14.5-.3

.2-.6

.6

-.4

.7-1.1

II

30.928.12.9

25.2

18.52.7-.14.1

22.9

11.32.48.94.97.01.15.9

2.96.2

-4.5-6.8-7.0-2.3

2.3

8.6

2.9.6

1.4.8

2.9

8.1

5.0-2.94.1-.4

.3-.3

.3

.6

.8-.2

m

38.317.320.9

20.1

8.05.0.5

6.6

-.2

3.93.0.9

2.32.84.7

-1.9

-1.75.5

-10.7-8.3-8.6

2.4

20.3

16.4

5.0.9

11.3.8

-1.7

15.8

12.5.9

4.3-.4

.2-.4

.4

.6

.7-.1

IV

3.455.6

-52.2

.6

5.4-10.1

3.61.6

39.2

11.812.4-.6

-1.85.4

13.2-7.8

-17.06.03.1

12.815.014.72.2

-38.6

8.8

1.7-2.5

2.9.7

6.0

22.4

18.25.24.8-.4

.2

-13.6

.6-14.2

1991

I

14.8-56.2

71.0

12.3

.1-9.0

8.113.2

-53.9

5.95.9

-60.225.0

-85.1-73.7

7.9.8

-8.5-2.8-3.2

5.6

66.3

10.4

2.2-2.3

2.0.7

7.9

5.7

2.1-4.04.6-.4

.3-.4

.4

4.7

.74.1

Level

1991:1

1,822.91,910.6

-87.6

1,138.8

505.695.172.7

465.5

1,256.8

443.5330.8112.7-1.4

458.4534.3-75.9-90.7143.7193.8

17.429.510.412.0

-118.0

827.9

213.320.1

388.762.1

143.7

797.5

697.480.1

174.4-42.6

10.8-20.9

.821.7

30.4

71.1-40.7

NOTE.Dollar levels are found in table 3.2 and 3.3 of the "Selected NIPA Tables."



ity insurance portion of social securityfrom $51,300 to $53,400 ($1.8 billion);an increase in the tax base for themedicare portion of social security from$51,300 to $125,000 ($5.8 billion); anincrease in medicare monthly insur-ance premiums from $28.60 to $29.90per month ($0.9 billion); and an in-crease in the contribution for militaryretirement ($1.2 billion).

Indirect business tax and nontax ac-cruals increased $8.1 billion after in-creasing $3.6 billion. The accelerationwas due to excise tax increases enactedin the Omnibus Budget ReconciliationAct of 1990: Effective December 1,1990, excise taxes on gasoline, dieselfuel, and aviation increased, and ef-fective January 1, 1991, excise taxeson alcohol, tobacco, and certain otheritems increased.

Personal tax and nontax receipts in-creased $0.1 billion after increasing$5.4 billion. Income tax receipts in-creased $6.2 billion, about one-half asmuch as in the fourth quarter. The de-celeration was largely attributable tolower net final settlements being re-ceived with 1990 income tax returns.Among legislative changes, tax reduc-tions of $6.0 billion attributable toindexation were largely offset by taxincreases of $5.5 billion attributableto provisions of the Omnibus BudgetReconciliation Act of 1990.

Corporate profits tax accruals de-clined $9.0 billion after declining$10.1 billion. Both declines re-flected continuing declines in corporateprofits.

Expenditures.Expenditures de-creased $53.9 billion in the first quar-ter after increasing $39.2 billion inthe fourth. The drop was more thanaccounted for by a large decline intransfer payments to foreigners.

Transfer payments to foreigners de-creased $85.1 billion after decreasing$7.8 billion. The first-quarter declineincluded $73.7 billion in contributionsfrom U.S. coalition partners for Oper-ation Desert Storm expenses, which

as payments from foreignersare en-tered with a negative sign. Otherforeign transfer payments declined af-ter unusually large foreign assistancepayments in the fourth quarter.

Subsidies less the current surplusof government enterprises decreased$8.5 billion after increasing $12.8 bil-lion. The downswing was largely at-tributable to government payments tofarmers, which declined $3.2 billionafter increasing $14.7 billion. A step-up in the current surplus of govern-ment enterprises reflected a Januaryincrease in deposit insurance premi-ums and a February increase in postalrates.

Transfer payments to persons in-creased $25.0 billion after increasing$13.2 billion. The first-quarter in-crease included $3.3 billion for unem-ployment benefits and $17.8 billion forcost-of-living adjustments (COLA's).The largest COLA's were for socialsecurity ($13.4 billion), civilian andmilitary retirement ($2.9 billion), andsupplemental security income ($0.7billion).

Purchases of goods and services in-creased $5.9 billion after increasing$11.8 billion. Defense purchases in-creased $5.9 billion after increasing$12.4 billion. A pay raise for defenseemployees accounted for $3.7 billionof the first-quarter increase; purchasesfor Operation Desert Storm had ac-counted for much of the fourth-quarterincrease. Nondefense purchases wereunchanged after decreasing $0.6 bil-lion; an acceleration in purchases ofagricultural commodities by the Com-modity Credit Corporation and the payraise for Federal employees were offsetby increased sales from the StrategicPetroleum Reserve and by declines inother programs.

Among other expenditures, grants-in-aid to State and local governmentsincreased $7.9 billion after increasing$6.0 billion; grants for medicaid, aidto families with dependent children,social services, mass transit, and edu-cation all increased. Net interest paid

increased $0.8 billion after increasing$3.1 billion.

Cyclically adjusted surplus or defi-cit.When measured using cyclical ad-justments based on a 6-percent un-employment rate trend GNP, the Fed-eral deficit on the national income andproduct accounts basis decreased from$179.1 billion in the fourth quarter to$89.9 billion in the first (see table 3 onpage 25). The cyclically adjusted deficitas a percentage of the 6-percent un-employment rate trend GNP decreasedfrom 3.2 percent in the fourth quarterto 1.6 percent in the first.

State and local

The State and local government sur-plus increased $4.7 billion, to $30.4billion, as receipts increased more thanexpenditures.

Receipts increased $10.4 billion inthe first quarter after increasing $8.8billion in the fourth. Grants-in-aidincreased $7.9 billion after increasing$6.0 billion. Personal tax and non-tax receipts increased $2.2 billion afterincreasing $1.7 billion. Indirect busi-ness tax and nontax accruals increased$2.0 billion after increasing $2.9 bil-lion. Contributions for social insuranceincreased $0.7 billion, the same as inthe fourth quarter. Corporate profitstax accruals declined $2.3 billion af-ter declining $2.5 billion; both declinesreflected decreasing profits.

Expenditures increased $5.7 billionin the first quarter after increasing$22.4 billion in the fourth. The de-celeration was primarily in purchasesof goods and services, which increased$2.1 billion after increasing $18.2 bil-lion. Within goods and services, pur-chases of structures decreased $4.0 bil-lion after increasing $5.2 billion; mostof the turnaround was accounted for byhighway construction. All other cat-egories of expenditures combined in-creased $3.6 billion, slightly less thanin the fourth quarter.


8 SURVEY OF CURRENT BUSINESS May 1991

NATIONAL INCOMEAND PRODUCT ACCOUNTS

Selected NIPA TablesNew estimates in this issue: First quarter 1991, revised; for gross domestic product of nonfinancial corporate business in 1982 dollars (table 1.1.6)

and current-dollar cost and profit per unit of constant-dollar domestic product of nonfinancial corporate business (table 7.18), revised from 1977 forward.The selected set of 54 national income and product accounts (NIPA) tables shown in this section presents quarterly estimates, which are updated

monthly. (In most of these tables, annual estimates are also shown.) For more information on the presentation of the estimates, see "National Incomeand Product Accounts Estimates: When They are Released, Where They Are Available, and How They Are Presented" in the July 1988 SURVEY.

The tables shown are available the day of the GNP news release on printouts and diskettes on a subscription basis or from the Commerce Department'sEconomic Bulletin Board. Estimates for 1986-89 are in the July 1990 issue of the SURVEY; estimates for 1985 are in the July 1988 issue; estimatesfor 1984 are in the July 1987 issue; estimates for 1983 are in the July 1986 issue. Estimates for 1929-82 are in National Income and ProductAccounts, 1929-82: Statistical Tables. For more information, write to National Income and Wealth Division (BE-54), Bureau of Economic Analysis, U.S.Department of Commerce, Washington, DC 20230.

NOTE.This section of the SURVEY is prepared by the National Income and Wealth Division and the Government Division.

Table 1.1.Gross National Product[Billions of dollars]

Gross national productPersonal consumption expenditures 1 .

Durable goods .... . .Nondurable goodsServices'

Gross private domestic investmentFixed investment

NonresidentialStructuresProducers' durable equipment ....

ResidentialChange in business inventories

NonfarmFarm

Net exports of goods and services l

Exports lImports '

Government purchases of goods andservicesFederal ...

National defenseNondefense . . . . . . .

State and local

1989

5,200.83,450.1

474.61,130.01,845.5

771.2742.9511.9146.2365.7231.0

28.323.35.0

-46.1626.2672.3

1,025.6400.0301.198.9

625.6

1990

5,465.13,657.3

480.31,193.71,983.3

741.0746.1524.1147.0377.1222.0-5.0-7.4

2.4-31.2672.8704.0

1,098.1424.0313.6110.4674.1

Seasonally adjusted at annual rates1989

IV

5,289.33,518.5

471.21,148.81,898.5

762.7737.7511.8147.1364.7225.925.024.1

.9-35.3642.8678.1

1,043.3399.9299.2100.7643.4

1990

I

5,375.43,588.1

492.11,174.71,921.3

747.2758.9523.1148.8374.3235.9-11.8-17.0

5.3-30.0661.3691.3

1,070.1410.6307.2103.4659.6

II

5,443.33,622.7

478.41,179.01,965.3

759.0745.6516.5147.2369.3229.1

13.413.0

.5-24.9659.7684.6

1,086.4421.9309.6112.3664.6

HI

5,514.63,693.4

482.31,205.02,006.2

759.7750.7532.8149.8383.0217.9

9.06.82.2

-41.3672.7714.1

1,102.8425.8312.6113.2677.0

IV

5,52733,724.9

468.51,216.02,040.4

6983729.2524.0142.1381.9205.2-30.8-32.4

1.5-28.8697.4726.2

1,132.9437.6325.0112.6695.3

1991

I"

5,561.73,744.5

453.41,212.32,078.8

664.2695.4504.2139.8364.4191.2-31.2-34.1

2.912.1

687.5675.4

1,140.9443.5330.8112.7697.4

1. See the box on page 21 of the July 89 SURVEY OF CURRENT BUSINESS.NOTE.Percent changes from preceding period for selected items in this table are shown in table 8.1.

Table 1.3.Gross National Product by Major Type of Product[Billions of dollars]

Gross national productFinal salesChange in business inventories

GoodsFinal salesChange in business inventories

Durable goodsFinal salesChange in business inventories

Nondurable goodsFinal salesChange in business inventories

Services ,Structures

1989

5,200.85,172.5

28.32,072.72,044.4

28.3906.6894.7

11.91,166.01,149.6

16.42,671.2

456.9

1990

5,465.15,470.2

-5.02,143.32,148.3

-5.0928.0939.1-11.1

1,215.31,209.3

6.02,864.5

457.4


IV

5,289.35,264.3

25.02,085.92,060.9

25.0907.4894.2

13.21,178.61,166.7

11.92,747.5

455.9

1990

I

5,375.45,387.2

-11.82,111.02,122.8

-11.8919.9941.4-21.6

1,191.21,181.4

9.82,791.3

473.0

II

5,443.35,429.9

13.42,146.62,133.1

13.4930.1930.1

01,216.41,203.0

13.42,834.2

462.5

III

5,514.65,505.6

9.02,170.42,161.4

9.0953.2943.4

9.81,217.21,218.0

-.82,889.6

454.6

IV

5,52735,558.2

-30.82,145.02,175.9

-30.8908.7941.2-32.5

1,236.31,234.7

1.72,943.0

4393

1991

V

5,561.75,592.9

-31.22,138.22,169.4

-31.2878.8917.9-39.1

1,259.41,251.5

7.93,004.6

418.9

Table 1.2.Gross National Product in Constant Dollars[Billions of 1982 dollars]

Gross national productPersonal consumption expenditures ' .

Durable goodsNondurable goodsServices *

Gross private domestic investmentFixed investment

Nonresidential

Producers' durable equipment ....Residential

Change in business inventoriesNonfarmFarm

Net exports of goods and services 1

Exports '

Government purchases of goods andservicesFederal

National defenseNondefense

State and local

1989

4,117.72,656.8

428.0919.9

1,309.0716.9693.1506.1122.4383.7187.023.818.75,0

-54.1593.3647.4

798.1334.9256.378.7

463.2

1990

4,15732,681.6

427.4911.1

1,343.1688.7692.3515.4120.9394.6176.8-3.6-5.1

1.5-33.8631.5665.3

820.8343.7258.785.0

477.1


IV

4,133.22,669.9

423.1923.0

1,323.8709.1690.2508.4123.1385.4181.818.915.33.6

-47.9611.6659.4

802.2332.7255.5

77.2469.5

1990

I

4,150.62,677.3

437.6915.6

1,324.2700.7702.9514.6123.8390.8188.3-2.2-8.26.0

-35.4628.1663.5

807.9333.0254.478.6

475.0

n

4,155.12,678.8

426.8911.2

1,340.8700.7691.2508.4120.9387.5182.8

9.511.6-2.1

-44.6620.1664.7

820.2345.9256.589.4

474.3

HI

4,170.02,696.8

429.5916.4

1,350.8697.0692.3519.3122.4397.0173.0

4.74.70

-46.5630.5677.0

822.7346.0258.2

87.8476.7

IV

4,153.42,673.6

415.6901.2

1,356.7656.3682.7519.4116.4403.1163.3-26.4-28.5

2.1-8.8

647.2656.0

832.3349.9265.7

84.2482.4

1991

r

4,126.52,664.9

401.3896.8

1,366.7626.1649.9497.4114.0383.4152.4-23.7-26.8

3.16.4

643.0636.6

829.1348.8266.882.1

480.3

1. See the box on page 21 of the July 89 SURVEY OF CURRENT BUSINESS.NOTE.Percent changes from preceding period for selected items in this table are shown in table 8.1.

Table 1.4.Gross National Product by Major Type of Product inConstant Dollars

[Billions of 1982 dollars]

Gross national productFinal salesChange in business inventories

GoodsFinal salesChange in business inventories

Durable goodsFinal salesChange in business inventories

Nondurable goods ..Final salesChange in business inventories

ServicesStructures

1989

4,117.74,094.0

23.81,829.51,805.7

23.8907.5897.7

9.8922.0908.0

13.91,915.6

372.7

1990

4,157.34,160.9

-3.61,829.31,832.9

-3.6920.6930.1-9.5

908.7902.8

5.91,961.0

366.9


IV

4,133.24,114.4

18.91,823.11,804.3

18.9904.4894.2

10.2918.7910.1

8.61,939.7

370.4

1990

I

4,150.64,152.8

-2.21,825.41,827.6

-2.2914.3932.1-17.7911.0895.5

15.51,943.7

381.5

II

4,155.14,145.6

9.51,831.31,821.8

9.5919.1919.5

-.3912.2902.4

9.81,952.5

371.2

III

4,170.04,165.3

4.71,839.71,835.0

4.7941.1932.9

8.3898.5902.1-3.6

1,967.3363.1

IV

4,153.44,179.8

-26.41,821.01,847.4

-26.4908.0936.0-28.1913.0911.4

1.61,980.7

351.7

1991

V

4,126.54,150.2

-23.71,798.11,821.8

-23.7878.7910.6-31.9919.3911.2

8.21,993.4

335.0

NOTE.Percent changes from preceding period for selected items in this table are shown in table 8.1. NOTE.Percent changes from preceding period for selected items in this table are shown in table 8.1.


May 1991 SURVEY OF CURRENT BUSINESSTable 1.5.Relation of Gross National Product, Gross Domestic Purchases,

and Final Sales to Domestic Purchasers[Billions of dollars]

Gross national productLess: Exports of goods and services * ....Plus: Imports of goods and services l ....Equals: Gross domestic purchases2 ....Less: Change in business inventoriesEquals: Final sales to domestic

purchasers3

1989

5,200.8626.2672.3

5,246.928.3

5,218.6

1990

5,465.1672.8704.0

5,496.4-5.0

5,501.4


IV

5,289.3642.8678.1

5324.625.0

5,299.6

1990

I

5375.4661.3691.3

5,4053-11.8

5,417.1

n

5,4433659.7684.6

5,468.213.4

5,454.7

III

5,514.6672.7714.1

5,555.99.0

5,546.9

IV

5,5273697.4726.2

5,556.1-30.8

5,586.9

1991

i'5,561.7

687.5675.4

5,549.7-31.2

5,580.8

1. See the box on page 21 of the July 89 SURVEY OF CURRENT BUSINESS.2. Purchases in the United States of goods and services wherever produced.3. Final sales in the United States of goods and services wherever produced.

NOTE.Percent changes from preceding period for selected items in this table are shown in table 8.1.

Table 1.7.Gross National Product by Sector[Billions of dollars]

Gross national productGross domestic product

BusinessNonfarm

Nonfarm less housingHousing

Statistical discrepancyHouseholds and institutions

Private households ;Nonprofit institutions

GovernmentFederalState and local

Rest of the worldAddendum:

Gross domestic business product lesshousing

1989

5,200.85,163.24,418.14,346.63,915.3

431.288.6

-17.0203.6

10.3193.3541.6168.6373.037.6

3,978.4

1990

5,465.15,423.44,619.24,527.84,068.8

459.193.1-1.7

224.810.8

214.0579.4178.5400.941.7


IV

5,28935,246.54,483.14,399.53,955.8

443.786.7-3.0

210.310.4

199.9553.0169.7383.342.8

1990

I

5375.45,333.84,551.84,455.84,007.6

448.195.3

.7215.0

10.5204.5567.0176.6390.441.6

n

5,44335,411.74,613.54,522.14,067.5

454.794.6-3.2

221.410.8

210.6576.7179.2397.531.6

III

5,514.65,471.74,659.64,571.44,106.9

464.493.1-4.9

229.310.9

218.4582.8178.3404.542.9

IV

5,52735,476.54,652.14,562.14,093.1

469.089.6

.4233.411.0

222.4591.0179.8411.250.8

1991

I"

5,561.75,506.54,662.44,562.34,089.7

472.692.08.1

237.811.1

226.7606.3188.5417.8553

Table 1.6.Relation of Gross National Product, Gross Domestic Purchases,and Final Sales to Domestic Purchasers in Constant Dollars


Gross national productLess: Exports of goods and services l ....Plus: Imports of goods and services * ....Equals: Gross domestic purchases2 ....Less: Change in business inventoriesEquals: Final sales to domestic

purchasers3

1989

4,117.7593.3647.4

4,171.823.8

4,148.1

1990

4,1573631.5665.3

4,191.1-3.6

4,194.7


IV

4,133.2611.6659.4

4,181.118.9

4,162.2

1990

I

4,150.6628.1663.5

4,185.9-2.2

4,188.1

II

4,155.1620.1664.7

4,199.79.5

4,190.1

III

4,170.0630.5677.0

4,216.54.7

4,211.8

IV

4,153.4647.2656.0

4,162.2-26.4

4,188.6

1991

lr

4,126.5643.0636.6

4,120.1-23.7

4,143.9

1. See the box on page 2i of the July 89 SURVEY OF CURRENT BUSINESS.2. Purchases in the United States of goods and services wherever produced.3. Final sales in the United States of goods and services wherever produced.

NOTE.Percent changes from preceding period for selected items in this table are shown in table 8.1.

Table 1.8.Gross National Product by Sector in Constant Dollars[Billions of 1982 dollars]

Gross national productGross domestic product

BusinessNonfarm .

Nonfarm less housing

FarmStatistical discrepancy

Households and institutionsPrivate householdsNonprofit institutions

GovernmentFederalState and local

Rest of the worldAddendum:

Gross domestic business product less

1989

4,117.74,087.63,557.93,492.93,196.0

296.978.8

-13.8146.2

9.5136.6383.5126.5257.030.2

32526

1990

4,157.34,125.43,581.13,502.53,200.4

302.180.0-1.3

154.59.7

144.8389.7127.6262.131.9


IV

4,133.24,099.53,564.43,487.53,187.8

299.779.3-2.4

149.29.7

139.6385.9126.8259.233.7

1990

I

4,150.64,118.23,580.03,500.33,199.1

301.279.1

.6150.8

9.7141.2387.4127.0260.432.4

II

4,155.14,130.63,587.23,510.33,208.4

301.879.4-2.5

153.69.8

143.7389.9128.2261.724.5

III

4,170.04,137.53,590.83,514.33,211.9

302.480.2-3.7

156.79.8

146.9390.0127.4262.732.6

IV

4,153.44,115.23,566.73,485.13,182.1

303.181.2

.3157.0

9.7147.3391.5127.8263.638.2

1991

r

4,126.54,085.63,534.63,447.23,143.5

303.781.36.2

158.09.7

148.3393.0128.7264.440.8

NOTE.Percent changes from preceding period for selected items in this table are shown in table 8.1. NOTE.Percent changes from preceding period for selected items in this table are shown in table 8.1.

Comprehensive Revision of the NIPA'sRevised and updated estimates of the national income and product accounts (NIPA's) re-

sulting from a comprehensive, or benchmark, revision are scheduled for release at the end ofNovember 1991 and will appear in the November SURVEY OF CURRENT BUSINESS. These esti-mates will incorporate statistical revisions resulting from (1) newly available source data, suchas the 1982 benchmark input-output tables, the 1987 Economic Censuses, and several annualsurveys for 1989 and 1990, (2) changes in methodology, and (3) a shift, from 1982 to 1987, inthe base period used to express constant-dollar GNP in prices of a single period. The estimateswill also reflect changes in definitions and classifications. In addition, table formats will berevised and new series presented. The most important of the new series will be alternativemeasures of constant-dollar GNP; these measures, described in the April 1989 SURVEY, involveapproaches to weighting that use prices for more than one year. The changes to be introducedin the comprehensive revision will be described in a SURVEY article this summer.

In general, the statistical revisions will affect the estimates back to 1978, the changes hidefinitions and classifications will affect the estimates as far back as necessary, and the shiftin base period will affect the estimates back to 1929. The estimates released in November willbe limited to 1959 forward and will exclude the GNP by industry series; estimates for earlierperiods and for the industry series will be released during 1992.

The annual NIPA revision covering 1988-90, which would usually be released in July 1991,will be postponed and combined with the comprehensive revision. The July SURVEY will includetables showing detailed annual estimates for 1990 on an unrevised basis (in addition to thosethat appear monthly in the "Selected NIPA Tables").


10 SURVEY OF CURRENT BUSINESS May 1991Table 1.9.Relation of Gross National Product, Net National Product,

National Income, and Personal Income[Billions of dollars]

Gross national productLess: Capital consumption allowances

with capital consumption adjustment .Capital consumption

allowances without capitalconsumption adjustment

Less: Capital consumptionadjustment

Equals: Net national productLess: Indirect business tax and nontax

liabilityBusiness transfer paymentsStatistical discrepancy

Plus: Subsidies less current surplus ofgovernment enterprises

Equals: National incomeLess: Corporate profits with inventory

valuation and capital consumptionadjustments

Net interestContributions for social

insuranceWage accruals less

disbursements .. ..Plus: Government transfer payments to

personsPersonal interest incomePersonal dividend incomeBusiness transfer payments

Equals: Personal income

1989

5,200.8

554.4

541.9

-12.64,646.4

414.032.4

-17.0

6.34,2233

311.6445.1

476.8

0

604.5643.2114.432.4

4,384.3

1990

5,465.1

575.6

540.5

-35.14,889.5

440.335.0-1.7

2.54,418.4

298.3466.7

506.9

0

659.7680.4123.835.0

4,645.5


IV

5,289.3

572.5

544.3

-28.24,716.8

421.533.4-3.0

2.24,267.1

290.9461.7

484.2

0

622.5664.9118.233.4

4,469.2

1990

I

5,375.4

567.0

538.6

-28.44,808.4

431.734.1

.7

8.443503

296.8463.6

498.9

0

646.8670.5120.534.1

4,562.8

II

5,443.3

571.1

539.3

-31.84,872.2

433.034.7-3.2

3.64,411.3

306.6466.2

503.9

0

652.0678.0122.934,7

4,622.2

III

5,514.6

579.3

540.7

-38.64,935.3

444.935.4-4.9

-7.54,452.4

300.7468.3

511.3

0

661.0685.3124.935.4

4,678.5

IV

5,5273

585.1

543.3

-41.84,942.2

451.436.0

.4

5.34,459.7

288.9468.4

513.7

0

679.0687.9126.736.0

4,718.5

1991

lr

5,561.7

590.9

548.0

-43.04,970.8

461.436.78.1

-3.54,461.1

288.0463.9

527.5

0

708.6683.4126.736.7

4,737.0

Table 1.10.Relation of Gross National Product, Net National Product,and National Income in Constant Dollars


Gross national productLess: Capital consumption allowances

with capital consumption adjustment .Equals: Net national productLess: Indirect business tax and nontax

liability plus business transferpayments less subsidies plus currentsurplus of government enterprises

Statistical discrepancyEquals* National income

4,117.7

506.03,611.7

333.4-13.8

3,292.1

4,157.3

519.73,637.6

333.4-1.3

3,305.6

4,133.2

519.83,613.4

335.9-2.4

3,280.0

4,150.6

512.53,638.0

334.3.6

3,303.2

4,155.1

516.53,638.6

332.5-2.5

3,308.6

4,170.0

522.53,647.5

335.5-3.7

3,315.7

4,153.4

527.13,626.2

331.2.3

3,294.7

4,126.5

531.73,594.8

327.36.2

3,261.3

Table 1.14.National Income by Type of Income[Billions of dollars]

National incomeCompensation of employees

Wages and salariesGovernment and government

enterprisesOther

Supplements to wages and salaries ....Employer contributions for social

insuranceOther labor income

Proprietors' income with inventoryvaluation and capital consumptionadjustmentsFarm

Proprietors' income with inventoryvaluation adjustment

Capital consumption adjustmentNonfarm

Proprietors' incomeInventory valuation adjustmentCapital consumption adjustment

Rental income of persons with capitalconsumption adjustmentRental income of personsCapital consumption adjustment

Corporate profits with inventoryvaluation and capital consumptionadjustmentsCorporate profits with inventory

valuation adjustmentProfits before tax

Profits tax liability ....Profits after tax

DividendsUndistributed profits

Inventory valuation adjustmentCapital consumption adjustment

Net interestAddenda:

Corporate profits after tax withinventory valuation and capitalconsumption adjustmentsNet cash flow with inventory

valuation and capitalconsumption adjustmentsUndistributed profits with

inventory valuation and capitalconsumption adjustments

Capital consumption allowanceswith capital consumptionadjustment

Less: Inventory valuationadjustment

Equals: Net cash flow

1989

4,223.33,079.02,573.2

476.62,096.6

505.8

263.9241.9

379.348.6

56.3-7.7

330.7298.9-1.032.8

8.264.1

-55.8

311.6

286.1307.7135.1172.6123.549.1

-21.725.5

445.1

176.5

399.4

53.0

346.4

-21.7421.1

1990

4,418.43,244.22,705.3

508.02,197.2

538.9

280.8258.1

402.549.9

57.5-7.6

352.6324.3-1.730.0

6.961.6

-54.7

298.3

293.3304.7132.1172.5133.938.7

-11.44.9

466.7

166.1

395.3

32.2

363.0

-11.4406.6


IV

4,267.13,128.62,612.7

486.72,126.0

515.9

268.4247.5

381.745.7

53.4-7.7

336.0306.7-1.130.4

4.163.0

-58.9

290.9

275.3289.8123.5166.3127.738.6

-14.515.6

461.7

167.5

396.3

39.8

356.5

-14.5410.8

1990

I

4,35033,180.42,651.6

497.12,154.5

528.8

276.0252.8

404.057.4

65.1-7.7

346.6317.1

-.930.3

5.560.2

-54.6

296.8

285.5296.9129.9167.1130.336.8

-11.411.3

463.6

167.0

393.4

36.7

356.7

-11.4404.9

II

4,411.33,232.52,696.3

505.72,190.6

536.1

279.7256.4

401.751.0

58.5-7.6

350.8320.7

-.230.2

4.358.8

-54.5

306.6

298.8299.3133.1166.1133.033.2-.57.7

466.2

173.4

400.2

40.5

359.7

-.5400.6

III

4,452.43,276.92,734.2

511.32,222.9

542.7

282.7260.0

397.942.4

49.9-7.6

355.6329.3-3.529.8

8.463.5

-55.1

300.7

298.7318.5139.1179.4135.144.3

-19.82.0

468.3

161.6

392.0

26.5

365.5

-19.8411.8

IV

4,459.73,286.92,738.9

518.12,220.8

548.0

284.8263.2

406.248.8

56.3-7.5

357.4330.1-2.229.5

9.364.0

-54.7

288.9

290.3304.1126.5177.6137.240.4

-13.8-1.4

468.4

162.4

395.5

25.2

370.3

-13.8409.2

1991

I"

4,461.13,297.72,741.3

529.82,211.5

556.5

290.3266.2

404.248.5

55.9-7.4

355.7324.7

1.629.4

7.261.4

-54.2

288.0

291.1282.7115.1167.6137.530.28.3

-3.0463.9

172.9

410.6

35.5

375.1

8.3402.3

Table 1.11.Command-Basis Gross National Product in Constant Dollars[Billions of 1982 dollars]

Gross national productLess: Net exports of goods and services

ExportsImports

Equals: Gross domestic purchasesPlus: Command-basis net exports of

goods and servicesCommand-basis exports lImports

Equals: Command-basis grossnational product

Addendum:Terms of trade2 ..

4,117.7-54.1593.3647.4

4,171.8

-44.4603.1647.4

4,127.4

101.6

4,157.3-33.8631.5665.3

4,191.1

-29.5635.8665.3

4,161.6

100.7

4,133.2-47.9611.6659.4

4,181.1

-34.3625.1659.4

4,146.8

102.2

4,150.6-35.4628.1663.5

4,185.9

-28.8634.7663.5

4,157.2

101.1

4,155.1-44.6620.1664.7

4,199.7

-24.2640.5664.7

4,175.5

103.3

4,170.0-46.5630.5677.0

4,216.5

-39.2637.8677.0

4,1773

101.1

4,153.4-8.8

647.2656.0

4,162.2

-26.0630.0656.0

4,136.2

97.4

4,126.56.4

643.0636.6

4,120.1

11.4648.0636.6

4,131.5

100.8

1. Exports of goods and services deflated by the implicit price deflator for imports of goods and services.2. Ratio of the implicit price deflator for exports of goods and services to the implicit price deflator for

imports of goods and services with the decimal point shifted two places to the right.NOTE.Percent changes from preceding period for selected items in this table are shown in table 8.1.


May 1991 SURVEY OF CURRENT BUSINESS 11

Table 1.16.Gross Domestic Product of Corporate Business in CurrentDollars and' Gross Domestic Product of Nonfinancial Corporate Businessin Current and Constant Dollars

Table 1.17.Auto Output[Billions of dollars]

Gross domestic product ofcorporate business

Capital consumption allowances withcapital consumption adjustment

Net domestic productIndirect business tax and nontax

liability plus business transferpayments less subsidies

Domestic incomeCompensation of employees

Wages and salaries .Supplements to wages and

salariesCorporate profits with inventory

valuation and capitalconsumption adjustmentsProfits before tax



Inventory valuation adjustment ...Capital consumption adjustment .

Net interestGross domestic product of

financial corporate business .Gross domestic product of

nonfinancial corporatebusiness


Net domestic product ,Indirect business tax and nontax


Domestic incomeCompensation of employees

Wages and salariesSupplements to wages and

salariesCorporate profits with inventory

valuation and capitalconsumption adjustmentsProfits before tax



Inventory valuation adjustment ...Capital consumption adjustment .

Net interest

Gross domestic product ofnonfinancial corporatebusiness


Net domestic productIndirect business tax and nontax


Domestic income

1989 1990


IV

1990

I n III IV

1991

V

Billions of dollars

3,086.4

346.42,739.9

295.12,444.92,058.11,731.5

326.7

260.7256.9135.1121.8104.317.5

-21.725.5

126.0

231.9

2,854.5

317.82,536.7

272.92,263.81,902.31,599.4

302.9

241.0241.5101.4140.1104.835.2

-21.721.2

120.5

3,198.6

363.02,835.5

313.52,522.12,140.51,800.3

340.2

241.4247.8132.1115.7114.8

.8-11.4

4.9140.2

245.9

2,952.7

331.62,621.0

289.72,331.31,983.41,667.2

316.3

219.5229.196.3

132.8117.715.2

-11.41.8

128.4

3,109.5

356.52,753.0

299.92,453.12,080.61,750.3

330.3

234.0232.9123.5109.4100.4

9.0-14.5

15.6138.5

231.0

2,878.5

326.42,552.2

277.12,275.11,924.41,618.1

306.3

223.8226.096.6

129.3104.125.2

-14.512.3

126.9

3,1363

356.72,779.5

307.32,472.32,090.11,758.1

332.0

243.9244.0129.9114.1115.6-1.4

-11.411.3

138.3

228.8

2,907.5

326.12,581.3

283.92,297.41,946.21,636.3

310.0

224.5227.995.3

132.6118.5

14.1-11.4

8.1126.6

3,206.0

359.72,846.3

307.62,538.72,140.31,800.4

339.8

257.6250.3133.1117.2109.4

7.8_ .(D)2,062

291,327

706

10,717900285178759(D)(D)(D)109(D)

1,002(D)(D)(D)

2,589

1,95813742(D)8501(D)8

843

5,2784,696

4,008

4,89527,4567,591

O

813,336(D)61(D)

623

3,13093(D)(D)

1,283327(D)(D)

Sales1

51^68

631(D)(D)

31,5111,339

1011,237

3,73779

1,112645

1,901

9,7756,075

83,7004,9822,744

8171,9272,239

(D)1,499

(D)11,678

991433237338(D)(D)(D)(D)

1,4411,216

(D)(D)

1,2493,149

3,927(D)59

8224382141(D)

654

1^ 33

985219816

1,5461,200

7,9691,714

872569303

3,835945(D)(D)

470

2,21766

278(D)(D)(D)(D)

478

Net in-come

1,407

14-115

890

15-116

2222

7736

107

337218201

17119

-183-38-56

18-145

-4-100-41

5003383

10

895

17275

8-31217

346

(*)(D)(D)

8423

36

-92

-11

-10

60

(D)94

(D)1132339152498(D)(*)(D)

-22

64-530

128-41034

Numberof em-ployees

393,007

2,839(D)(D)

235,4318,638

6238,015

15,358415

7,0631,8526,028

57,42728,663

828,76447,08722,3464,738

17,60824,741

89417,8416,006

106,92113,3592,7391,2143,399

(D)(D)

18,8851,767

12,03412,617

(D)(D)

13,43127,476

8,106864292(D)(D)745927450(D)

2,349

34,275

' 830,4561,5893,941

9,124

2,85380,05237,2538,421

19,6386,211

8561,6755,998

14,7971,2011,808

82,9426,3932,453

Number ofacres of

landowned

309,205

1,552

8162,207

682

8(D)15

446101

142103101

3380

380

254(D)270

(D)0

(D)(D)(D)68680

8-509(D)

843

8-(D)(D)

001(D)

(D)179

(*)467

32099(D)137(D)

0(*)(*)(D)38

16019(*)

0'(*)131

37

Net in-come

83

(*)0

(*)-2

-1(*)-1

-9-200

-7

6743

-1

41213-1-80

-80

-2-2-10

(*)0

(*)(*)

12

-1-10

-32

14(*)(*)

6(*)

6(*)(*)no0

(*)'(*)(D)(D)(*)'80

-37

()a

0(*)(*)

4(*)(*)

0(*)(*)

Numberof em-ployees

11,285

(D)0

(D)5,331

743(D)

00

(D)

()185

1,003589

84140

4140

1,965(D)(D)

0(D)

0(D)(D)(D)(D)

440440

0

8'415(D)

06

(D)148(D)

6(D)(D)156

000

156143

275

(D)591

3,7511,3961,407

800(D)(D)

710

61845(D)

0(D)

4880

(D)

Numberof acresof landowned

166,053

000

1,263

6

89

00(D)$818

223

0(D)

0

452(D)0

(D)0(D)000

80(D)(D)135(D)

00070

(D)8(D0^

0(D)(D)130

116,25716,638

T000(D)0(D)(D)

31,21429,456

(D)0

(D)(D)

0(D)15

Suppressed to avoid disclosure of data of individual companies.* Less than $500,000 ().1. Sales, or gross operating revenue, excluding sales taxes.

NOTE.Data for 1990 are preliminary. For acquired businesses, data are for, or as of the end of, the fiscalyear preceding the year of acquisition; for newly established businesses, data are projections for, or as of theend of, the first full year of operation.


By J. STEVEN LANDEFELD and ANN M. LAWSON

Valuation of the U.S. Net International Investment Position

THIS article reviews the issues sur-rounding the valuation of the U.S. netinternational investment position andpresents revalued estimates for directinvestment, for U.S. gold reserves, andfor the international investment po-sition. The article describes two al-ternative methods for valuing directinvestment in prices of the currentperiod, presents estimates of the di-rect investment totals for 1982-89 thatare prepared using these methods, andcompares these estimates with BEA'sexisting historical-cost estimates andwith current-value estimates from sev-eral earlier studies. (Estimates for1990 and revised estimates for 1987-89 will be presented in the regulararticle on the international investmentposition next monthsee the box onthis page.)

In the mid-to-late 1980's, concernsbegan to arise about the mix of valua-tion methods used by BEA in derivingthe net international investment posi-tion. Although many of the assets inthe U.S. international investment posi-tion (such as portfolio investment andmost reserve assets) were being valuedat current-period prices, other assets(such as direct investment and U.S.gold reserves) were being valued atthe historical costs at which they werepurchased. In 1990, BEA suspendedpublication of the net international in-vestment position of the United Statesand announced that it was undertak-ing a review of alternative methodsof valuing international investment toreflect current-period prices.1

The BEA review focused on directinvestment because the largest differ-ences between historical and currentcosts in the international investmentposition were thought to have resulted

1. See "International Investment Position: Compo-nent Detail for 1989," SURVEY OF CURRENT BUSINESS 70(June 1990): 54-65. Before its suspension in 1990,an annual estimate of the net international investmentposition of the United States was published each year.40

Current-cost, market-value, and historical-cost estimates of direct investment for 1990and revised estimates for 1987-89 will ap-pear in the annual article on the U.S.international investment position in theJune 1991 SURVEY OF CURRENT BUSINESS.The revised estimates will reflect the in-corporation of information from the 1987benchmark survey of U.S. affiliates of for-eign parents and the most recent annualsurvey of U.S. parents of foreign affiliates.Detailed estimates by country and industryare available only in historical costs.

from a significant misstatement of therelative positions for U.S. direct in-vestment abroad (USDIA) and foreigndirect investment in the United States(FDIUS). Because most USDIA in the1989 stock occurred in the 1960's and1970's, it seemed likely that theseassets would require a significantlylarger adjustment for the cumulativeeffects of inflation than would those forFDIUS, most of which occurred in thelate 1970's and 1980's.2

2. Inflation drives a wedge between values expressedin historical prices and those in current prices. During

Revaluation of direct investment.As a result of its review, BEA hasdeveloped two measurescurrent-costand market-valueto revalue its es-timates of the USDIA and FDIUSpositions in prices of the current pe-riod. The current-cost method revaluesthe U.S. and foreign parents' shareof their affiliates' investment in plantand equipment using a perpetual in-ventory model to estimate the net stockof direct investment capital at currentcosts, revalues direct investment inland using general price indexes, andrevalues direct investment in invento-ries using estimates of their current

the last 30 years, the International Monetary Fund'sworld price index has risen more than 4 percent a year,amounting to more than a threefold increase over theperiod. Such an inflation rate may hinder meaning-ful comparisons of dollar values at different points intime. As a result, measures of flows, which are in cur-rent prices, are often restated to constant prices, andmeasures of stocks, which are valued in acquisition (orhistorical) prices, are often restated to current (or toconstant) prices. Consistent comparisons of businessincome and assets over time and of rates of return, cap-ital productivity, and capital/labor ratios require suchvaluations.

Table 1.U.S. Direct Investment Positions Using Alternative BEA Methods of Valuation, AmountsOutstanding at Yearend, 1982-89

[Millions of dollars]

Valuation method

Historical-costCurrent-cost1Market-value2



1982 1983 1984 1985 1986 1987 1988 1989

U.S. direct investment abroad

207,752374,003228,304

207,203357,900273,313

211,480350,007267,636

230,250379,556380,478

259,800414,091519,413

314,307485,178577,603

333,501499,500675,984

373,436535,870804,525

Foreign direct investment in the United States

124,677173,223133,044

137,061181,289157,548

164,583207,159177,726

184,615227,223227,949

220,414266,541283,153

271,788322,725322,579

328,851384,009397,535

400,817457,566543,703

Direct investment, net

83,075200,78095,260

70,142176,611115,765

46,897142,84889,910

45,635152,333152,529

39,386147,550236,260

42,519162,453255,024

4,650115,491278,449

-27,38178,304

260,822

1. Only tangible assets on the asset side of the balance sheet are revalued at their current cost. See "Technical Notes" for methodological details.2. Only owners' equity on the liabilities and owners' equity side of the balance sheet is revalued to market value. See "Technical Notes" for

methodological details.


May 1991 SURVEY OF CURRENT BUSINESS 41

replacement cost. The market-valuemethod revalues the owners' equityportion of the direct investment posi-tion for USDIA and FDIUS using in-dexes of stock market prices. Thus, thetwo methods can be viewed as revalu-ing, respectively, the asset side of abalance sheet and the liabilities andowners' equity side of a balance sheet(see the box "Revaluation of Direct In-

vestment in a Hypothetical BalanceSheet"). The market value differs fromthe current-cost value in that it is anestimate of firms' aggregate net worth,including not only the current valueof tangible assets, but also the mar-ket value of intangible assetssuchas patents, trademarks, management,and name recognition. The marketvalue may also reflect changes in the

Alternative Valuation of Direct Investment, 1982-89CHART 4

Billion $900

800

700

600

500

400

300

200

100600

500

400

300

200

100300

250

200

150

100

50

-50

U.S. DIRECT INVESTMENT ABROAD

Market-Value

FOREIGN DIRECT INVESTMENT IN THE UNITED STATES

NET DIRECT INVESTMENT POSITION

1982 1983 1984 1985 1986 1987 1988 1989 1990

general economic outlook or in the out-look for a particular industrychangesthat may not be related to the prices oftangible assets.

BEA's revaluation of direct invest-ment assets from historical cost to cur-rent cost raises the value of the USDIAposition at yearend 1989 by $162.4 bil-lion, to $535.9 billion, and raises theFDIUS position by $56.7 billion, to$457.6 billion (chart 4 and table 1).Revaluation of owners' equity from his-torical cost to market value raises thevalue of the USDIA position at yearend1989 by $431.1 billion, to $804.5 bil-lion, and raises the FDIUS position by$142.9 billion, to $543.7 billion. Ona historical-cost basis, the U.S. netdirect investment position at yearend1989 was -$27.4 billion. Revaluationto current cost raises the net positionto $78.3 billion; revaluation to mar-ket value raises the net position to$260.8 billion. The difference betweenthe current-cost and market-value es-timates reflects significantly differentrates of change in recent years instock prices and in replacement costsof tangible assets.

Revaluation of U.S. gold reserves.BEA has revalued U.S. gold reservesfrom the 1973 par value of $42.22per fine troy ounce previously used inthe international investment positionto the yearend market price, as re-ported for gold on the London fixing.The revaluation puts gold reserves onthe same current-cost valuation basisas other reserve assets and values goldreserves on the same basis as gold heldin private portfolios.

The following tabulation providesthe historical values for U.S. gold re-serves based on the 1973 par value andthe current values based on marketprices.

[Millions of dollars]

Year

19821983198419851986198719881989

Historical

11,14811,12111,09611,09011,06411,07811,05711,059

Current

120,653100,48481,20285,834

102,428127,648107,434105,164

U.S. Department of Commerce, Bureau of Economic Analysis

Revaluing U.S. gold reserves to theyearend 1989 market price of $401.50per fine troy ounce raises the 1989value of these reserves in the invest-ment position by $94.1 billion, from$11.1 billion to $105.2 billion.


42 SURVEY OF CURRENT BUSINESS May 1991U.S. international investment posi-

tion.After the revaluations of directinvestment and U.S. gold reserves, themajor components of the internationalinvestment position may be viewed asvalued at or near current-period prices(table 2). The following list summa-rizes the valuations used for the majorinvestment position components:

Direct investment has been reval-ued to current-period prices usingboth stock market prices for eq-uity investment and current-costvalues for tangible assets.

Portfolio investments in foreignand U.S. securities are valued atcurrent-period prices; for thesefrequently traded assets held inprivate and public portfolios, theposition estimates are based onchanges in stock market pricesand, in the case of bonds, onchanges in bond prices.

Short-term loans and other short-term liabilities to banks and non-banks are recorded at historicalcost because the face, or claim,value recorded on a firm's books

is normally roughly equal to thecurrent-period value.

Official reserve assets are valuedat current-period private marketpric

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