Revised estimates of new plant and equipment expenditures in the United States, 1947-83 Essay

THIS article presents revised estimates of new plant and equipment
(P&E) expenditures by business in the Unites States for 1947-83.
Revised estimates for the first three quarters of 1984 will be
published, together with estimates for the fourth quarter of 1984, in
the April 1985 SURVEY OF CURRENT BUSINESS. The estimates are of both
actual and planned expenditures compiled from the quarterly P&E
expenditures survey conducted by BEA.



This comprehensive revision is the fourth in the history of the
P&E survey. Comprehensive revisions have two primary purposes: The
introduction of “benchmarks,” to which the P&E
survey-based estimates are tied, and the retabulation of the P&E
survey reports. Benchmarks are universe estimates for each industry
based on data from the quinquennial economic censuses and, especially
for industries not covered by these censuses, from a variety of other
sources that provide comprehensive, detailed information. Retabulations
incorporate information not available when the previously published
estimates were prepared; industry and size classifications are updated,
and company reports received too late to be included in the previous
tabulations are included. In addition, the quarterly survey samples are
reedited.

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In this revision, benchmarks for 1977 are introduced, and estimates
back to 1973 and forward to 1983 are revised to reflect them. The
retabulation is carried out for 1977 and later years. The revised series
also reflect definitional revisions, which affect the estimates for
1947-83, and recalculation of seasonal factors, bias-adjustment factors,
and price deflators.


This revision was done in the context of a number of changes
resulting from an in-depth review of the P&E survey over the last
several years. These changes were made to reduce respondent burden and
to improve the quality of the estimates. Quarterly estimates no longer
include selected nonmanufacturing industries: Real estate; professional
services; membership organizations and social services; and forestry,
fisheries, and agricultural services. Data are now collected only
annually for these industries, which account for about 11 percent of
P&E expenditures. Also, separate quarterly estimates of plant and
of equipment expenditures are no longer published. Instead, annual
estimates now appear once each year.



The revision raised the expenditures estimates for all years for
“all industries,” which is the total for the industries
survey. Although the revision extends back to 1947, the largest
revisions are for the benchmark year 1977 and for later years. For
1977, the estimate was raised 5.8 percent, to $184.8 billion, and for
1983, 13.2 percent, to $304.8 billion (table 7 and chart 5). In
manufacturing, the 1977 estimate was lowered 2.5 percent, but the 1983
estimate was raised 4.2 percent. In nonmanufacturing, the 1977 estimate
was raised 11.3 percent and the 1983 estimate was raised 19.6 percent.



In constant (1972) dollars, the revision raised the expenditures
estimate for “all industries” 6.6 percent, to $126.0 billion,
for 1977, and 14.6 percent, to $146.4 billion, for 1983 (table 7 and
chart 5). In manufacturing, the estiamte was lowered 2.6 percent for
1977, but raised 2.5 percent for 1983. In nonmanufacturing, the
estimate was raised 12.5 percent for 1977 and 23.0 percent for 1983.



The first section of this article discusses the sources of the
revisions. The second compares the previously published and revised
estimates and describe the revised estimates for total P&E
expenditures, for plant and for equipment expenditures separately, and
for planned expenditures. Primary emphasis is on the period 1977-83.
Three technical notes follow. The first describes the P&E survey
and the procedures used to prepare the P&E expenditures estimates.
The second summarizes the methodology used to prepare the revised
P&E series. The third compares the P&E series with the
nonresidential fixed investment component of GNP. The revised series
follow the text: Annual P&E expenditures, in current and constant
dollars, in table 7; quarterly P&E expenditures, in current and
constant dollars, in table 8; annual plant expenditures and equipment
expenditures, separately, in current and constant dollars, in tables 9
and 10; and planned P&E expenditures as a percentage of actual
expenditures, quarterly and annually, in tables 11 and 12.


Sources of the Revisions



The revisions in the current-dollar annual estimates had two
sources: Statistical revisions and definitional revisions. These are
shown for selected years, including 1977-83, in table 1. The
recalculation of seasonal factors affected the quarterly, but not the
annual, estimates; the recalculation of bias-adjustment factors affected
the estimates of planned, but not actual, expenditures; and the
recalculation of price deflators affected the constant-dollar, but not
the current-dollar, estimates.



Statistical revisions



The statistical revisions stem from the two primary purposes of the
revision: The introduction of the 1977 benchmarks and the retabulation
of the sample reports for 1977-83. The statistical revision for 1977
due to the 1977 benchmarks was $8.7 billion; manufacturing was lowered
$1.7 billion and nonmanufacturing was raised $10.4 billion. The
statistical revisions for 1973-76 and for 1978-83 also reflect the 1977
benchmarks. For 1973-76, the estimates were revised using the
previously published series and the 1977 benchmarks. For 1978-83, the
estimates were prepared by extrapolating the 1977 benchmarks; therefore,
the size of the statistical revisions for these years varies in
proportion to P&E spending. For 1983, the statistical revision due
to the 1977 benchmarks was $12.0 billion, 34 percent of the total
revision.



the retabulation of the sample reports affected the estimates for
1977 and later years, although for 1977 it affected only the pattern of
the quarterly estimates. For 1983, the statistical revision due to
retabulation was $21.9 billion, 62 percent of the total revision.



Definitional revisions



Three nonmanufacturing industries were affected by two definitional
revisions. Unlike the statistical revisions, which affected only the
period 1973-83, the definitional revisions affected all years back to
1947. First, certain railroad track maintenance expenditures that were
previously defined as current expenses are now defined as capital
expenditures. Railroads were required by the Interstate Commerce
Commission to make this change beginning in 1983; the P&E
expenditure series for 1947-83 was revised to obtain a consistent time
series. Second, expenditures for leased railroad equipment and
aircraft, previously assigned to the railroad and air transportation
industries, are now assigned to the finance industry (in most cases, the
industry of the original purchaser). This revision, which affected the
estimates for 1959 and later years, makes the treatment of leased assets
consistent across all industries–that is, the P&E expenditure
series is now entirely on an owner basis. For 1947, the revision due to
the definitional revisions was $0.5 billion. For 1973, it was $0.7
billion, 49 percent of the total revision; for 1977, $1.4 billion, 14
percent of the total revision; and for 1983, $1.7 billion, 5 percent of
the total revision.



The Revised P&E Expenditures Series



On the revised basis, P&E expenditures for “all
industries” increased at an average annual rate of 7.8 percent from
1947 to 1983 (table 2). The previously published series increased at a
rate of 7.5 percent. During this period, manufacturing expenditures
increased at a rate of 7.5 percent, and nonmanufacturing increased at a
rate of 8.1 percent. In the previously published series, the comparable
rates were 7.3 percent and 7.7 percent, respectively.



During 1977-83, P&E expenditures for “all industries”
increased at an average annual rate of 8.7 percent, compared with 7.5
percent for the previously published series. Manufacturing expenditures
increased at a faster rate, 9.5 percent, than nonmanufacturing, 8.2
percent. In the previously published series, the comparable rates were
8.3 percent and 6.9 percent, respectively. In manufacturing, nondurable goods industries increased at a faster rate, 10.5 percent, than durable
goods, 8.4 percent. The largest growth rates in manufacturing were in
“other nondurables” (18.3 percent), aircraft, and electrical
machinery. The smallest growth rates were in blast furnaces-steel works
(2.1 percent) and fabricated metals. In nonmanufacturing, the largest
growth rates were in finance and insurance (18.7 percent), air
transportation, and wholesale and retail trade. Railroads and personal
and business services had smaller growth rates, and “other
transportation” declined.



On the revised basis, real (constant-dollar) P&E expenditures
for “all industries” increased at an average annual rate of
3.5 percent from 1947 to 1983, compared with 3.2 percent for the
previously published series (table 2). For 1977-83, the revised series
in creased at an annual rate of 2.5 percent, compared with 1.3 percent
for the previously published series. During this period, real
expenditures in manufacturing increased at a faster rate, 3.0 percent,
than in nonmanufacturing, 2.3 percent. Durable and nondurable goods
industries increased at about the same rate. In nonmanufacturing,
“commercial and other” and public utilities increased, while
transportation and mining declined.



The revised series of real P&E expenditures follows a cyclical pattern similar to that of the previously published series; both show
two contractions during 1977-83 corresponding to the two business-cycle
contractions in the U.S. economy (chart 6). Real P&E expenditures
for “all industries” peaked in the first quarter of 1980 at
$154.1 billion; they declined 3.0 percent over the next three quarters.
Real expenditures then rose from the first through the third quarters of
1981, when they reached $157.7 billion. They then declined 11.9 percent
over the next six quarters, to $138.9 billion. The 1980 contraction in
real P&E expenditures was mild compared to the average for the eight
postwar business-cycle contractions (the postwar average was a
five-quarters decline of 11.7 percent); the 1981-83 contraction
corresponded more closely to the average.



The peaks and troughs for various industries differed in timing and
severity from those for “all industries”. During the most
recent contraction in real P&E spending, manufacturing declined 15.6
percent, and nonmanufacturing, 10.2 percent, from their peaks in the
third quarter of 1981 to their respective troughs in the fourth quarter
of 1982 and the second quarter of 1983 (table 3). In manufacturing, the
contraction was more severe in durables, which declined 17.9 percent
from peak to trough, than in nondurables, which declined 14.u percent.
In durables, the largest declines were in nonferrous metals (45.1
percent), motor vehicles, blast furnaces-steel works, and fabricated
metals. Stone-clay-glass, which had never recovered from the previous
contraction, declined an additional 27.2 percent. In nondurables, the
largest declines were in paper (26.9 percent), food-beverage, and
textiles. The smallest declines in manufacturing were in rubber (10.7
percent), “other nondurables,” and machinery (except
electrical).



During the most recent contraction, the largest declines in
nonmanufacturing were in mining (37.5 percent) and communication.
Spending in transportation, which had never recovered from the previous
contraction, declined an additional 24.4 percent. The smallest
declines–5.1 percent to 6.1 percent–were in public utilities,
wholesale and retail trade, and finance and insurance.



Expenditures for plant and for equipment



Once each year, companies are asked to separate their annual
P&E expenditures into plant and equipment. However, not all
companies that report total P&E expenditures provide such a
breakdown. As a result, the two components are less reliable than the
total, and separate estimates for plant and for equipment are presented
only for the major industry groups shown in table 4.



On the revised basis, for the bench-mark year 1977, plant
expenditures were $62.5 billion, 0.3 percent lower than previously
published; equipment expenditures were $122.3 billion, 9.2 percent
higher than previously published. For 1983, plant expenditures were
$107.4 billion, 0.4 percent lower than previously published; equipment
expenditures were $197.4 billion, 22.3 percent higher than previously
published.



From 1947 to 1983, plant expenditures and equipment expenditures
for “all inudstries” increased at about the same average
annual rate–7.8 percent and 7.9 percent, respectively. For 1977-83,
plant expenditures increased faster, at an average annual rate of 9.4
percent, compared with 8.3 percent for equipment expenditures.



From 1977 to 1983, manufacturing expenditures for equipment
increased at a slightly faster average annual rate, 9.6 percent, than
those for plant, 9.1 percent. Equipment expenditures increased faster
for both durable and nondurable goods industries. In nonmanufacturing,
in contrast, in contrast, expenditures for plant grew at a faster rate,
9.6 percent, than those for equipment, 7.4 percent. Plant expenditures
increased faster for each major industry group in nonmanufacturing.



Plant expenditures as a proportion of total P&E expenditures
for “all industries” varied little over time; they were 36.3
percent of the total in 1947, 33.8 percent in 1977, and 35.2 percent in
1983. In manufacturing, the proportion declined from 35.6 percent in
1947, to 28.4 percent in 1977, to 27.9 percent in 1983. The larger
decline was in durable goods; nondurable goods showed relatively little
change. In nonmanufacturing, the proportion changed little from 1947 to
1977, then increased slightly. The largest increase was in mining, from
26.1 percent in 1947, to 45.8 percent in 1977, to 55.8 percent in 1983.



Planned expenditures



The estimates for planned P&E expenditures were revised to be
consistent with the revised estimates for actual P&E expenditures.
The planned expenditures estimates incorporate adjustments for
systematic reporting biases due to factors other than cyclical changes
in economic and operating conditions.



The mean absolute percentage deviation between planned and actual
spending levels for 1955-83 was 1.8 percent for one-quarter-ahead plans
and 2.6 percent for two-quarters-ahead plans. For manufacturing, the
deviations were 2.8 percent and 3.9 percent, respectively; for
nonmanufacturing, they were 1.7 percent and 2.7 percent, respectively.



The mean absolute percentage deviations for major industry groups
were larger than the deviations for “all industries” and vary
from industry to industry. The deviations were smallest for
“commercial and other” (2.5 percent for one-quarter-ahead and
3.5 percent for two-quarters-ahead plans), nondurable goods
manufacturing, public utilities, and durable goods manufacturing. They
were largest for mining (5.6 percent and 7.3 percent) and transportation
(3.9 percent and 7.9 percent).



For plans reported 1 year ahead in the fourth-quarter survey, the
mean absolute percentage deviation between planned and actual spending
for 1955-83 was 3.0 percent for “all industries.” For
manufacturing, the deviation was 4.5 percent, and for nonmanfacturing,
2.6 percent. Among major industry groups, the deviations were smallest
for public utilities (3.4 percent), nondurable goods manufacturing, and
“commercial and other.” They were largest for transportation
(7.7 percent), mining, and durable goods manufacturing.



TECHNICAL NOTES



1. The P&E Survey



This note describes the P&E survey–the data reported, the
collection schedule, and the sample–and the procedures used to prepare
the P&E expenditures estimates.



Description of the P&E survey



BEA’s quarterly P;E survey collects data on expenditures
by business for new plant and equipment for installation or use in the
United States. The survey covers expenditures both for new facilities
and for expansion or replacement of existing facilities that are
chargeable to fixed asset accounts and for which depreciation or
amortization accountsa re ordinarily maintained. The distinction between
structures–that is, plant–and equipment is not always clear-cut.
However, a useful guideline is that the former are not movable, but the
latter are. Detailed definitions of plant and equipment expenditures,
showing specifically what is included and what is excluded, as well as
other instructions to respondents are given on the buck of the report
forms. A sample form is provided at the end of this article.



Companies generally report expenditures for the quarter in which
payment is made to the supplier; construction work performed by a
company’s own employees–force-account construction work–is
generally reported for the quarter in which costs are incurred.



Companies are instructed to report expenditures for structures and
equipment acquired for lease to others. Thus, the reporting is on an
owner, rather than on a user, basis. Expenditures are included in the
industry of the company retaining title, even if the capital good is for
use by, or even capitalized by, a company in another industry.



Companies are instructed to report, whenever possible, on a fully
consolidated basis–that is, for all their domestic operations,
including those of their majority-owned subsidiaries. BEA classifies
each company in a two-digit Standard Industrial Classification industry
on the basis of its primary activity, which is the activity with the
largest volume of sales or business receipts. All of its capital
expenditures–for its primary activity as well as for its other
activities–are assigned to that industry. Company classifications are
reviewed during comprehensive revisions using responses to survey
questions and outside information; changes are reflected in the
retabulated samples. In addition, classifications of companies involved
in major mergers are reexamined between revisions.



P&E expenditures–both actual and planned–have been collected
quarterly since the survey began in 1947. Each quarterly survey
collects the following date: Actual expenditures for the previous
quarter and planned expenditures one quarter ahead, two quarters ahead,
and three quarters ahead. The third- and fourth-quarter surveys collect
planned expenditures for the coming calendar year (year-ahead plans).
(Plans for the second half of the year are derived in the fourth-quarter
survey by subtracting the sum of the first-quarter and second-quarter
plans from the year-ahead plans.) At various times during each year,
annual data are collected on the following: P&E expenditures,
separate plant and equipment expenditures, sales, assets, price changes,
type of business activity, and P&E expenditures for assets for lease
to others.



BEA currently requests quarterly data from a nonprobability sample
of about 12,000 companies; about 9,000 additional companies are sampled
in the industries survey only annually. In 1977, for “all
industries,” the proportion of P&E expenditures represented by
companies responding to the survey–that is, the sample
“coverage”–was 54 percent; the corresponding proportion for
manufacturing was 68 percent and for nonmanufacturing, 45 percent.
Survey coverage is highest in the most concentrated industries,
characterized by a relatively small number of large firms making a large
share of the industry’s capital expenditures. Table 5 shows that
sample coverage in 1977 was above 80 percent in blast furnaces-steel
works, nonferrous metals, motor vehicles, aircraft, petroleum, electric
utilities, and communication, but below 25 percent in mining, wholesale
and retail trade, finance and insurance, personal and business services
(including construction), and in the nonmanufacturing industries
surveyed only annually.



Estimating procedures



For each quarter, universe estimates for actual and planned P;E
expenditures are made for each industry by extrapolating the P;E
universe estimates forward from the previous quarter on the basis of
movements in the quarterly sample. (The starting points for the series
of quarterly universe estimates are the benchmarks. The methodology for
determining the benchmarks is described in technical note 2.) The four
steps in the procedure for making the quarterly estimates are as
follows.



First, after each, quarter’s report forms have been reviewed
for accuracy and consistency, the sample data are summarized by
“tab group.” For most industries, the tab groups are
asset-size classes; for the other industries, the tab group is the
entire industry. For each tab group, expenditures for companies
reporting in both the current and the preceding quarter are totaled and
used to calculate a ratio indicating the relative change from the
preceding quarter.



Second, each tab group’s sample is edited. Companies
reporting relative changes in investment spending that are noticeably different from other companies in that group are identified, and some
are classified as “outliers.”



Third, a tab-group universe estimate is derived in which the
outliers are treated separately using their reported values; the
remainder of the universe estimate is based on the relative change in
investment spending by the other companies. (The universe estimates for
planned expenditures are made as just described except that the
tab-group summaries are based on sample data for the current quarter and
the three successive quarters.)



Fourth, several adjustments are made to the universe estimates. The
planned expenditures estimates are adjusted for systematic reporting
biases, and the actual and bias-adjusted planned expenditures estimates
are adjusted for seasonal variation. Then, the resulting set of actual
and planned current-dollar estimates is adjusted to remove the effects
of inflation; the result is a set of actual and planned constant-dollar
estimates. Descriptions of these adjustments follow.



Bias adjustments.–Comparison of planned expenditures with actual
expenditures for the same quarter reveals systematic reporting biases in
the planned expenditures. Because there are well-established patterns
in these biases, for most purposes it is desirable to adjust the plans
data for them. Bias-adjusted plans estimates are prepared by dividing
universe estimates for planned expenditures by bias-adjustment factors.
These factors are calculated by industry for each planning horizon. For
a given quarter, the bias-adjustment factor is the median of the ratios
of planned to actual expenditures for that quarter in the preceding 8
years.



Seasonal factors.–Seasonal factors for adjusting the P&E
expenditures by industry are computed using the Census Bureau’s
X-11 program. The seasonal factors for actual P&E expenditures are
also used to seasonally adjust the bias-adjusted planned expenditures.



Price deflators.–The actual and planned quarterly expenditures
estimates are adjusted by BEA to remove the effects of inflation using
implicit price deflators derived from unpublished detailed estimates in
the national income and product accounts (NIPA’s) of current- and
constant-dollar nonresidential fixed investment (NRFI). Because NRFI
differs from the P;E series (see technical note 3), the NIPA
estimates must be adjusted before price deflators for P;E
expenditures can be calculated. First, capital-flow matrixes are used
to transform the NIPA current- and constant-dollar estimates of
structures and producers’ durable equipment by type into current-
and constant-dollar purchases by establishment-based industry;
adjustments are made to conform the NIPA estimates to P&E survey
industry definitions. Second, the adjusted establishment-based
estimates are transformed to a company basis. Implicit price deflators
are then derived by dividing the current-dollar estimates by the
constant-dollar estimates.



Constant-dollar P&E estimates are calculated by applying the
implicit price deflators to the quarterly current-dollar estimates.
Final constant-dollar estimates are derived by constraining the industry
deflators so that the growth rate for the total P&E deflator for
“all industries” equals that of the nonresidential fixed
investment deflator (on a P&E survey basis).



To adjust planned P&E expenditures, the price deflator for each
industry is projected using its growth rate over the latest four
quarters. Once the deflators are projected, they are applied to each
industry’s seasonally adjusted, planned current-dollar
expenditures.



2. Revision Methodology



The methodology used to prepare the revised P;E series is
summarized in five sections: 1977 benchmarks, definitional revisions,
quarterly expenditures series, planned expenditures, and expenditures
for plant and for equipment.



1977 benchmarks



Previous benchmarks were compiled for 1948, 1958, 1963, 1967, and
1972; the current revision introduces benchmarks for 1977. The current
benchmark year was selected primarily because of the availability of
1977 Enterprise Statistics data prepared by the Bureau of the Census.
(Benchmarks for 1982 will be prepared after 1982 Enterprise Statistics
data become available.)



The sources and methods used to prepare the 1977 benchmarks varied
among industries. The 1977 edition of Enterprise Statistics was the
principal source of the benchmarks for the manufacturing industries, and
for the mining, trade, personal and business services, and construction
industries. Specifically, the benchmarks for the manufacturing
industries, for mining, and for construction were based on published and
unpublished tabulations of data from Enterprise Statistics, the Census
of Manufactures, the Census of Mineral Industries, and the Census of
Construction Industries. For wholesale trade, retail trade, and
personal and business services, benchmarks were constructed from a
combination of enterprise and establishment statistics prepared by the
Bureau of the Census. Specifically, the benchmarks were derived from
capital expenditures and employment data for establishments from the
Census of Wholesale Trade, the Census of Retail Trade, and the Census of
service Industries, using employment matrixes from Etnerprise Statistics
to transform the establishment data to a company basis.



For transportation, a combination of data from the Interstate
Commerce Commission (ICC), the Securities and Exchange Commission (SEC),
other regulatory agencies, and the P;E sample was used in
conjunction with data from the Statistics of Income compiled by the
Internal Revenue Service (IRS). (The ICC data were supplemented with
data from other agencies to include companies engaged in intrastate transportation, which are not regulated by the ICC.) The ratio of
universe gross depreciable assets reported by the IRS to the gross
depreciable assets reported in the combined data was multiplied by the
expenditures reported in these data to obtain benchmarks.



For public utilities, communication, real estate, and the
for-profit portions of professional services, benchmarks were based on a
combination of data from the P;E sample and data from the IRS
Statistics of Income. The ratio of universe gross depreciable assets
reported by the IRS to the gross depreciable assets reported by
companies in the P;E sample was multiplied by the expenditures
reported in the P;E sample to obtain benchmarks.



For finance, the basic procedure just described was followed,
supplemented with balance sheet and income data compiled by the Board of
Governors of the Federal Deposit Insurance Corporation, and the Federal
Home Loan Bank Board. This basic procedure was also used for insurance,
except that total assets were used instead of gross depreciable assets.



For membership organizations and social services and for the
not-for-profit portions of professional services, IRS data were not
available. Benchmarks for those industries were based on data from the
Census Bureau’s County Business Patterns on employment and number
of establishments (instead of IRS gross depreciable assets) in
conjunction with P&E sample data. The benchmarks for most of these
industries also incorporated data from other government agencies and
various professional associations.



For those industries stratified by tab group, benchmarks were
allocated by tab group based on the size distribution of total assets.
Asset data were obtained from the IRS Statistics of Income, from
tabulations published and unpublished Enterprise Statistics data, and
from responses by the P&E sample.



Definitional revisions



In addition to the benchmarks, the revised estimates incorporate
the two definitional revisions. For railroads, the estimates of newly
capitalized track maintenance for 1979-82–years for which railroads
were required to restate their financial reports on the new basis–were
constructed by multiplying previously expensed track maintenance by the
proportion of that expense that was capitalized in the restated reports
to the ICC. For earlier periods, the 1979 proportion was applied to
track maintenance expenditures. For the definitional revision involving
aircraft and railroad equipment for lease, the expenditures were
reassigned, for 1959 and later years, from air and railroad
transportation to the finance industry.



Quarterly expenditures series



The preparation of the revised quarterly expenditures series was
carried out by tab group in three steps: estimating 1977 quarterly
expenditures, interpolating the quarterly series between the 1972 and
1977 benchmarks, and extrapolating the quarterly series forward from the
1977 benchmarks.



Estimates of expenditures for each quarter of 1977 were based on
the 1977 benchmarks and the quarterly pattern of the retabulated P&E
sample. The quarterly samples of company reponses were retabulated to
incorporate the following improvements: (1) Reports received too late to
be included in the previously published estimates were included; (2)
each company in the sample was reclassified by industry and size on the
basis of data reported in 1980; and (3) the quarterly samples were
reedited. A preliminary revised estimate for the fourth quarter of 1976
was constructed by multiplying the previously tabulated estimate for
that quarter by the ratio of the 1977 benchmark to the previously
tabulated 1977 estimate. Preliminary revised estimates for the quarters
of 1977 were obtained by linking them to the preliminary estimate for
the fourth quarter of 1976 using a chain of link relatives derived from
the retabulated samples. These revised quarterly estimates for 1977
were then forced to the 1977 benchmark using the ratio of the 1977
benchmark to the sum of the preliminary revised estimates for the four
quarters.



The expenditures estimates for the quarters between the previous
benchmark year (1972) and the current benchmark year (1977) were revised
using an interpolation procedure. The percentage difference between the
previously published estimate for the first quarter of 1977 and the
final revised estimate for that quarter was distributed geometrically to
the quarters from the first quarter of 1973 through the fourth quarter
of 1976.



The expenditures estimates for most industries were not revised
prior to 1973. However, as noted earlier, the estimates for air
transportation and finance were revised back to 1959, and the estimates
for railroad transportation were revised back to 1947. In these cases,
the revised quarterly estimates for each tab group for years prior to
1973 were obtained by distributing revised annual estimates using the
previously tabulated quarterly series.



Expenditures estimates for successive quarters starting in the
first quarter of 1978 were revised by extrapolating forward from the
final revised estimates for the fourth quarter of 1977 using a chain of
link relatives derived from the retabulated samples. Expenditures data
from sources other than the P&E survey were used as checks,
especially when the sample was weak.



Planned expenditures



The revised estimates for planned expenditures were prepared in two
steps. For plans reported in 1972-76, ratios of previously reported
planned to actual expenditures for each tab group for each planning
horizon were multiplied by the revised actual expenditures to obtain
revised planned expenditures.



For plans reported in 1977 and later years, the universe estimates
for plans by tab group were revised in the same way as those for actual
expenditures for that period. The revised planned expenditures for each
period were then adjusted for systematic reporting biases using the
procedure described in technical note 1.



Expenditures for plant and for equipment



The methodology for preparing separate benchmarks for plant and for
equipment expenditures was similar to that used in preparing benchmarks
for total P&E expenditures. In most cases, the same sources that
provided benchmark information on total P&E expenditures provided
information on the breakdown between plant and equipment. There were a
few exceptions–for example, for public utilities, the breakdowns were
based primarily on reports from the Federal Power Commission and the
American Gas Association, and for petroleum pipelines, they were based
on the Census Bureau’s Value of New Construction Put in Place.



The interpolation back to 1972 and extrapolation forward from 1977
were prepared using the separate data for plant and for equipment from
the P;E sample in the same way as described earlier for total
P;E expenditures. Because the response rate for reporting plant and
equipment expenditures separately is lower than that for reporting total
P;E expenditures, the estimates for plant and for equipment were
forced to equal the total P;E estimates for each tab group.



3. Comparison of the P;E Series with the Nonresidential
Fixed Investment Component of GNP



The nonresidential fixed investment (NRFI) series, which is a
component of GNP, differs from the P;E expenditures series in type
of detail, data sources, coverage, and timing. First, the NRFI series
provides estimates of investment by type of structure and by type of
producers’ durable equipment. The P&E series provides
estimates of investment by industry.



Second, the NRFI series is estimated primarily from Census Bureau surveys of the value of new construction put in place and
manufacturers’ shipments of equipment, with adjustments for
merchandise exports and imports and for government purchases. The
P;E series is estimated primarily from BEA’s surveys of plant
and equipment expenditures.



Third, the coverage of expenditures in the two series differs.
Investment in the farm sector is included in NRFI, but not in the
P&E series. Certain industries–real estate; professional services;
membership organizations and social services; and forestry, fisheries,
and agricultural services–are surveyed only annually in the P&E
series, and, therefore, are not included in the quarterly “all
industries” total; they are included in NRFI each quarter. In
addition, certain outlays not capitalized by business (and thus not
included in the P&E series) are included in the NRFI estimates–for
example, outlays for new motor vehicles held for less than 1 year, for
some oil and gas well drilling costs, and for some other outlays
associated with mining. NRFI also includes, but the P&E series
excludes, reimbursable expenditures for new motor vehicles by employees
for business use, and net purchases of, and broker/dealer margins on,
used plant and equipment. The P&E expenditures series includes, but
NRFI excludes, expenditures for certain types of residential structures,
such as dormitories (which are included as residential investment in the
NIPA’s).



Fourth, the timing of the two series differs. The NRFI series
reflects the value of new construction put in place and shipments of
equipment; the P;E series reflects expenditures. On balance,
expenditures tend to lag.



Table 6 shows NRFI and P;E expenditures (adjusted to the
definitions and coverage of NRFI) for P;E benchmark years and for
years since the current benchmark year. (Chart 7 shows the two series
for 1960-83.) For 1977-83, adjusted P;E expenditures increased 60.4
percent, compared with 72.0 percent for NRIF. As a percentage of
adjusted P;E expenditures, the absolute difference averaged 2.1
percent for 1977-83, down from 6.6 percent for the interbenchmark period
1972-77.

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