Sectoral Output Revisions

Methodology Change for Estimating Output

Beginning with the July 12, 2017 Multifactor Productivity Trends in Manufacturing news release, BLS will incorporate improved methodology for calculating intra-industry transfers used in estimating sectoral output measures. The new method revises data for the 1987-2014 period and results from the following changes and improvements in methodology:

1. Benchmarking. BLS uses information on the proportion of an industry’s production that is consumed within that same industry to derive intra-industry transfers. The detailed data required for these calculations are available only every five years from the Economic Census, which is published by the Census Bureau. In years following an Economic Census, BLS estimates intra-industry transfers by extrapolating these ratios using data from the Census Bureau’s Annual Survey of Manufactures (ASM). Previously, these estimates were not revised when new Economic Census data became available. The new technique benchmarks these ratios to the Economic Census by interpolating the ratios between Census years. For example, the 2013-2016 ratios were extrapolated from the 2012 Economic Census using data from the ASM. When the 2017 Economic Census data become available, the ratios will be revised by interpolating between the 2012 and 2017 Economic Censuses. Benchmarking improves the accuracy of these ratios, and makes the intercensal year data more consistent with the Economic Census data.
2. Improved method for estimating production of manufacturing industries consumed by non-manufacturing industries. To develop estimates of intra-industry production for years between the Economic Censuses, BLS must make assumptions about the relationship between production in manufacturing and non-manufacturing industries and the consumption of intermediate goods. Previous estimates were based on the assumption that the output of manufacturing industries consumed within the sector was proportional to the total consumption of manufacturing industries. New research indicates that it is more appropriate to assume that the output of manufacturing industries consumed within the sector is proportional to the total output produced by manufacturing industries. This new method more accurately reflects changes in intra-industry transfers for the purpose of estimating sectoral output.
3. Improvements in the conversion of data from previous industry classifications to NAICS 2012.The BLS productivity program uses data from a variety of sources. The source data use different industry classifications and must be converted to a common basis. BLS has made improvements to the conversion process to enhance the consistency of the data.

The new methodology will also be incorporated into the Multifactor Productivity Trends for Detailed Industries news release (July 20, 2017) and the Productivity and Costs news release at a later date.