ECONOMIC COMMENTARY - A Revised Picture: Has Our View of the Economy Changed?

Sep 21, 2026

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ECONOMIC COMMENTARY by Theodore G. Bernard explains how the U.S. Bureau of Economic Analysis (BEA) revises the National Income and Product Accounts (NIPA) statistics and why those revisions matter. It describes current-dollar versus constant-dollar measures, then focuses on the December 1985 benchmark revision, especially the shift of the price index base period from 1972 to 1982. The analysis shows how rebasing changes measurement units, updates purchasing patterns, and can lower measured real GNP growth rates despite higher real GNP levels.

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Economic Commentary

Rebasing Constant-dollar Series

A Revised Picture: Has Our View of the Economy Changed?

# ECONOMICCOMMENTARY The Bureau of Economic Analysis(BEA),a part of the U.S.CommerceDepartment,produces the NationalIncome and Product Accounts(NIPA)statistics.These statistics summarizethe nation's total economic activity,and provide statistical views of ourgross national product(GNP). NIPA statistics are important eco-nomic tools.They provide informationthat helps government policymakersand business leaders to understandpast and present economic activity,andto make decisions that have far-reaching effects in the economy.Asidefrom regularly scheduled revisions,theBEA also releases benchmark revisionsapproximately every five years,as newcensus data become available.Themost recent benchmark revision tookplace in December 1985,the eighthsuch revision of its kind. The NIPA statistics measure eco-nomic activity in terms of current(nominal)dollars and in constant(real)dollars.Current-dollar series reflectdata before a correction for pricechanges,while constant-dollar seriesare adjusted to remove the effect ofprice changes over time. In the BEA's 1985 revision,allcurrent-dollar series in the NIPA statis-tics were revised back to 1972,whilemany were revised for earlier periodsas well.All constant-dollar series andprice indexes were revised back to 1929to reflect a base-period shift from 1972to 1982. Two types of major changes are evi-dent in the recent revision:definitionaland classificational changes,and statis-tical changes.Although changes indefinition and classification are impor-tant,the statistical changes have amuch greater impact on the NIPA sta- Theodore G.Bernard is a research assistant at theFederal Reserve Bank of Cleveland.The authorwould like to thank KJ.Kowaleweski for his helpfulcomments. The views stated herein are those of the authorand not necessarily those of the Federal ReserueBank of Cleveland or of the Board of Governors ofthe Federal Reserve System. tistics,both in terms of percentchanges and conceptual revisions.ThisEconomic Commentary analyzes themajor statistical changes in theDecember 1985 benchmark revisions ofthe NIPA.2 Rebasing Constant-dollar SeriesThe statistical changes are the BEA'sself-described "outstanding feature"ofthe revisions.Shifting the base periodfor the price indexes to 1982 from 1972in the calculation of constant-dollar ser-ies is the most important statisticalchange.The year 1982 was chosen forthe new base period because it is thelatest year for which data will not berevised until the next comprehensiverevision. The base-period shift restatesconstant-dollar output into differentunits of measurement.As a result,there is an approximate doubling of realGNP levels that reflects the differencein measurement units.For example, 1.The NIPA statistics are revised on a regularbasis as new and more comprehensive databecome available.Quarterly data are routinelyrevised twice after the preliminary figures areissued,then further revisions occur annually inthe following three years. # A Revised Picture:Has Our View of theEconomy Changed? by Theodore G.Bernard with 1972 as the base period,constant-dollar output in 1984 had been esti-mated at $1.6 trillion,but with 1982 asthe base period,constant-dollar outputin 1984 is now estimated at about $3.4trillion.This does not imply a doublingof actual output—only a doubling of theunits used to measure output. The rebasing,or restating,ofconstant-dollar series does more thanjust change the units of measurement.Since the economy does not remainstatic,patterns of consumption andinvestment change over time;rebasingupdates the NIPA statistics to reflectthese changes. For example,price inflation in theeconomy since 1972,the previous baseperiod,has caused changes in purchas-ing patterns.Generally,purchasershave tended to shift away from goodswith large price increases and towardgoods with smaller price increases,oreven with price decreases.Shifting thebase period,thus incorporating newpurchasing patterns and relative priceschemes,systema

FAQs

What are NIPA statistics used for?

NIPA statistics summarize the nation’s total economic activity and provide statistical views of gross national product (GNP). They help policymakers and business leaders understand past and present activity and make decisions with broad economic effects.

What is the key statistical change in the December 1985 benchmark revision?

A major change is rebasing constant-dollar measures by shifting the price index base period to 1982 from 1972. This restates real output in different measurement units and updates the series to reflect changes in consumption and investment patterns.

Does rebasing mean actual output doubled?

No. The commentary notes that the apparent doubling reflects the change in the units used to measure output, not a doubling of actual economic production.

Sep 21, 2026

Uploaded by Skyler