Methodology

Supply and use tables are matrices by product and industry that describe production processes and product transactions in detail. Industries are classified according to the statistical classification of economic activities (NACE Rev. 2), and products are classified by the classification of products by activity (CPA version 2.1).

These classifications are fully aligned. At each level of aggregation, the CPA shows the main products for the related NACE division.

The supply and use tables (SUTs) tables show:

• structure of production costs and of the value added during production
• flows of goods and services produced within the national economy
• flows of goods and services between the economy in question and the rest of the world

The supply table shows the supply of goods and services by product and supplier type. A distinction is drawn between supply from domestic industries on the one hand and imports on the other.

The use table shows the use of goods and services by product and by type of use. The 4 types of use are:

• intermediate consumption (in the production process, broken down by industry)
• final consumption
• gross capital formation
• exports

The table also shows the components of gross value added:

• compensation of employees
• other taxes less subsidies on production
• net mixed income
• net operating surplus
• consumption of fixed capital

Supply and use tables are interlinked by 2 types of identities:

• identity by industry, (i.e., output by industry must equal input by industry: output = intermediate consumption + value added)
• identity by product, (i.e., total supply by product must equal total use by product: output + imports = intermediate consumption + final consumption + gross capital formation + exports)

Supply and use tables contain all the flows in: 

• the goods and services account
• the production account
• the generation of income account

Supply and use tables (SUT) are a good framework for analysing data discrepancies and balancing data because it combines 3 methods used to measure GDP (the production, expenditure, and income approaches) in a single dataset.

An input-output table is a product-by-product or industry-by-industry matrix that describes both domestic production processes and product transactions in detail. Such tables incorporate both supply and use into a single table. Products or industries are classified in the same way in rows and columns.

Supply is broken down into:

• market output
• output for own final use
• other non-market output only for the total output by industry.

In the supply table, goods and services are valued at basic prices. In the use table, they are valued at purchasers' prices. To match supply and use, the following must be added to the supply table:

• trade and transport margins
• taxes minus subsidies on products

The total of trade margins by product is equal to the total of trade margins by trade industries, plus the secondary trade margins by other industries. An analogous equation applies for transport margins. Transport margins include transport costs paid separately by the purchaser and included in the use of products at purchasers' prices, but not in the basic prices of a manufacturer's output or in the trade margins of wholesalers or retailers.

Taxes on production and imports comprise:

• taxes on products, i.e., value-added taxes (VAT) etc., and non-VAT taxes and duties on imports
• non-VAT taxes on products, and import taxes or other taxes on production.

Similar categories are distinguished for subsidies on production and imports. Subsidies are treated as if they were negative taxes on production and imports.

Value added is recorded at basic prices. It is the net result of output valued at basic prices minus intermediate consumption valued at purchasers' prices. Value added at factor costs is not a concept used in the ESA. Nevertheless, it could be derived from value added at basic prices by subtracting other taxes minus subsidies on production.

GDP is valued at market prices. Flows and stocks are measured according to their exchange value, i.e., the value at which flows and stocks are, or could be, exchanged for cash. Market prices are thus the ESA's reference for valuation.

This aggregate can be derived from the supply and use tables in 3 ways:

• as output at basic prices by industry minus the sum of intermediate consumption at purchasers' prices by industry plus net taxes on products (production approach)
• as the sum of the various components of value added at basic prices by industry plus net taxes on products (income approach)
• as the sum of final use categories minus imports: exports – imports + final consumption expenditure + gross capital formation (expenditure approach)

Please note that for the expenditure approach, re-exports should be added to match national exports and national imports.

The use table also includes some supplementary information, such as gross fixed capital formation, stocks of fixed assets, and labour inputs by industry. This information is crucial for productivity analysis and may also be useful for other types of analyses, such as employment.

In the supply and use tables, 2 adjustment items are introduced to reconcile the valuation of imports. The transfer of existing goods is recorded in the use table as a negative expenditure for the seller and a positive expenditure for the purchaser. For the product group involved, the transfer of an existing good amounts to a reclassification among uses.

Direct purchases abroad by residents and purchases within domestic territory by non-residents are introduced as adjustments to initial estimates of imports, exports, and final consumption expenditure.

In the ESA 2010, the product-by-product input-output table is the most important input-output table.

The product-by-product input-output table is compiled by converting supply and use tables, both at basic prices. This involves a change in format, meaning from 2 asymmetric tables to a single one. The conversion takes place in 3 steps:

1. allocation of secondary products in the supply table to the industries for which they are the principal products. This involves transfers of secondary products in the supply table to industries that are the primary producers and removals from the industries that are secondary producers.
2. rearrangement of the columns of the use table from inputs into industries to inputs into homogeneous branches (without aggregation of the rows). This step is more complicated, because the basic data on inputs relate to industries, not to individual products within each industry. The kind of conversion to be made here entails transferring inputs associated with secondary outputs from the industry in which that secondary output has been produced to the industry to which they mainly belong.
3. aggregation of the detailed products (rows) of the new use table to the homogeneous branches shown in the columns, if appropriate. This involves aggregating the products in the new use table to the industries that generate them in step 1, if the conversion was started from rectangular tables.

These amendments start with data based on Local Kind of Activity Units (LKAUs).

The input-output table should be accompanied by at least 2 tables:

• a matrix showing the use of imports
• a input-output table for domestic output

The latter table is used in calculating the cumulated coefficients using the Leontief-inverse. This matrix is the inverse of the difference between the identity matrix I and the matrix of technical coefficients. By multiplying the Leontief-inverse by the vector of final demand, it is possible to calculate the vector of total output by product.