Annual national accounts (1995 base)
The origins of the national accounts go back to the interwar period: at the time the objective was to build an indicator giving an evaluation of the wealth produced each year and of its growth. In France, the national accounts mainly developed in the 1950s, with the aim of meeting the needs of planning and budgeting.
What we now call GDP (gross domestic product) can be evaluated in three ways: by counting the goods produced and the value-added generated by this production (output approach), by counting their uses (demand approach), or by adding together the revenues (revenues approach). But the practical difficulty of reconciling these three approaches soon led to a search for finer-level consistency.
The national accounts describe the resources and uses at a fine level for each type of good or service. In order to be used, a good (or service) has to have been produced or imported. Output is the main source of revenue: it describes both the human activity that goes into manufacturing goods or providing services, and the result of this activity.
But the scope needs to be specified; a good or a service produced may be sold in order to be exported, consumed, invested, stored or destroyed, or to be incorporated into the production process of another good or service. Certain products are invested, stored or consumed by their producer; if products of the same type are traded, the national accounts take an interest in this production and these uses.
Lastly, national accounts deal with the production of public services (defence, justice) where the use cannot be broken down between agents. National accounts classify the agents of the economy into institutional sectors, the activities and interrelations of which they describe.
In concrete terms the resident units, that is, the agents whose main activity is exercised on the economic territory, are grouped together into institutional sectors: non financial enterprises, households, general government, etc.
By means of a set of successive accounts, integrated economic accounts (tableau économique d'ensemble, TEE) are built, describing the output of each sector, the value-added generated, the distribution of revenue, the redistributions through taxation and transfers, the disposable income trade-off between consumption and savings, the net lending and borrowing that results from the gap between savings and direct investment, and the change in assets resulting from savings and the growth in asset prices.
A Rest of the World account registers operations - from the rest of the world's point of view - between the resident units and those located outside the economic territory.
All the figures in national accounts are evaluated "in value", that is, in current euros. Trade is evaluated by means of the prices actually charged. However, the price charged by the producer is not the same as that paid by the purchaser; to get from one to the other, the good (or service) has to be transported and marketed by intermediaries who take their cut. The good or service is usually taxed (VAT or domestic duty on petroleum products, for example) and sometimes subsidised.
All these operations occur when the input-output balance of a good (or service) is described, that is, the balance in value between production and trade of this good. When goods or services are not traded, they are valued at the prices used for the trade of goods or services of the same type. When no trade exists for these goods, the production costs are often used by default.
Additionally, indirect methods are used to evaluate certain services which are genuinely produced and consumed but not invoiced as such (financial intermediation services indirectly measured: FISIM).
The GDP in value growth rate is not in itself sufficient as information; to really evaluate the growth of the economy, the only valid growth rate is the GDP "in volume" growth rate. It is implemented after the impacts of price variations are taken into account. When a single good of homogenous quality is considered (aluminium, for example), output or consumption can be measured directly in quantity (here, in tons) and it is relatively simple to split prices and volumes in the value growth rate between two successive years.
Once a complex good is considered (a car, for example), the principle consists in evaluating what the growth rate would have been if the prices had remained unchanged. But growth rates at base-year prices that remain fixed become less and less pertinent the further away you are from the base year; it gives excessive importance to goods whose relative prices diminish cyclically, such as computer hardware, to the detriment of those whose relative prices increase (certain services), and this bias worsens over time.
The five-yearly base changes largely offset the drawbacks of a fixed price base. Since the more often the base year is changed the more faithful are national accounts, why not change it every year? This is the solution that was selected for the countries of the European Union in the framework of the European System of Accounts (ESA 95), which France has applied since the 1995 base year.
The annual accounts are therefore published "chain-linked, in volume": the principle consists in chain-linking the calculated growth in volume from one year to the next at the prices of the previous year using the values of the base year. While they can be used to make comparisons of actual growth levels, accounts in volume cannot be used to directly compare GDP and standards of living between countries.
To do this, it is necessary to directly compare the prices between countries and calculate the aggregates in a joint pricing system; this is the so-called purchasing power parity (PPP) method. This work is coordinated by Eurostat for the European Union, and has led to new requirements in the harmonisation of methods.
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