How BEA accounts for investment in private structures.

Lally, Paul R.

WHILE the term "investment" popularly means buying financial assets in hopes of a capital gain, the economic concept of investment refers to the creation of productive assets--a company building a new plant, for example, or a new home. Such spending on new assets adds to the nation's capital stock, which is used in turn to produce other goods and services. Investment is thus a key component of gross domestic product (GDP), which measures current production in the economy, and a perennial object of scholarly interest.

This BEA Briefing offers a guide to an important component of private business investment: structures. It also discusses recent improvements to the Bureau of Economic Analysis (BEA) statistics on investment in structures, which now better reflect productivity and quality changes.

Private investment in structures, as defined by the national income and product accounts (NIPAs), generally includes domestic spending on structures by private businesses, households, and nonprofit institutions regardless of whether the asset is owned by U.S. residents. Structures can be thought of as products that are usually constructed at the location where they will be used and that typically have long economic lives.

BEA generally relies on tax accounting conventions regarding assets that can be depreciated as a rough guide in determining what kind of spending is considered investment in the national economic accounts)

As defined by the NIPAs, most (but not all) structures are buildings. Accordingly, BEA classifies structures investment as either nonresidential or residential. Nonresidential investment consists of new construction and improvements to existing structures in commercial and health care buildings, manufacturing buildings, power and communication structures, and other structures. Residential investment includes new construction of single-family homes and multifamily homes and spending on other residential structures. (2)

The value of structures also includes equipment installed as part of the structure, such as elevators or heating and air-conditioning systems.

In the NIPAs, private investment in new construction is measured mainly as the sum of the costs of inputs of all construction "put in place" that is, all construction activity completed in a given period. For individual projects, BEA's measure of investment in structures includes the following:

* Cost of materials installed or erected

* Cost of labor and the cost of construction equipment rental for the period

* Cost of architectural and engineering work

* Miscellaneous overhead and office costs incurred by the project's owners

* Interest and taxes paid during construction

* Contractors' profits (3)

To these measures of construction activity, BEA adds the following:

* Brokers' commissions on the sale of new and used structures. These commissions are considered part of the total price paid by the purchasers for the structure and are thus counted as part of the value of investment.

(1.) Tax accounting conventions are not a perfect guide to capital spending in the NIPAs. There are cases where spending is considered as investment in the NIPAs but not according to the tax code. For example, exploration and drilling costs associated with "dry" oil and gas wells are treated as investment in the NIPAs but as expenses in tax accounting. The use of business tax accounting conventions as a guide could result in a somewhat arbitrary classification of individual items as investment because business accounting practices do not treat all items identically from one business to another or from one period to another, while the NIPAs treat investment consistently across businesses. For example, businesses expense the purchase of certain software; in the NIPAs, all software purchases are treated as investment.

(2.) In the NIPAs, spending on new residential housing is counted as investment. However, separate calculations account for the capital services that flow from residential housing. These services represent the ongoing economic value that is generated by these assets. The rentals actually paid for tenant-occupied housing are accounted for as personal consumption expenditures and income for the business sector, and an imputed rental for owner-occupied housing is also accounted for as personal consumption expenditures and income for the household sector. The NIPA calculation for owner-occupied housing essentially treats homeowners as if they charged themselves rent for their homes. This treatment keeps GDP invariant as to whether housing is owned or rented.

(3.) Contractors' profits do not apply to "own-account construction" which is included in the NIPA measure of private structures investment. Such construction refers to construction activity performed by companies for their own use.

* Net purchases of used structures from the government sector. In general, ownership changes do not reflect current construction activity. But when a transaction for a used building occurs between the private and government sectors, the NIPAs record the activity. By definition, these purchases net to zero. They are included to record the transfer of assets between the public and private sectors to accurately value the net stock of capital.

* Improvements to structures. These capital expenditures add to the value or useful life of a property and are thus treated as part of investment in structures. Nonresidential improvements are included with new construction but are not separately identified. Residential improvements are separately measured.

* Mining exploration, shafts, and wells. This category includes exploration and development expenditures related to the construction of mine shafts and the drilling of oil and gas wells. It also includes expenditures for dry (unsuccessful) wells.

* "Other" investment. This category includes investment in mobile structures and manufactured homes.

Historically, structures investment has accounted for about half of total private investment and about 10 percent of GDR However, since the first quarter of 2006, private investment in structures' share of current-dollar GDP has been steadily decreasing, from 9.1 percent in the first quarter of 2006 to 7.1 percent in the fourth quarter of 2008 (table 1).

Recently, structures investment has generally been a drag on real GDP growth, largely because of reduced investment in residential buildings. From the first quarter of 2006 to the fourth quarter of 2008, real investment in residential housing subtracted from growth in each quarter, while real investment in nonresidential structures added to growth in all quarters except the fourth quarter of 2008 (table 2). In the fourth quarter of 2008, residential housing investment subtracted 0.85 percentage point, while nonresidential investment subtracted 0.07 percentage points. What's more, from the first quarter of 2006 to the fourth quarter of 2008, residential investment's share of GDP has dropped from 6.2 percent to 3.0 percent (table 1).

BEA produces statistics on structures investment as part of its GDP estimates. Quarterly and annual summary statistics on private investment in structures are presented in NIPA tables 1.1.1-1.1.10 and classified by type in tables 5.3.1-5.3.6. More detailed annual statistics for private investment in structures are presented in NIPA tables 5.4.1B-5.4.6B. In addition, more statistics are included in underlying detail tables.

Source data

BEA relies on Census Bureau statistical reports on construction spending as the primary source data for estimating investment in structures. BEA and the Census Bureau estimates generally share similar construction activity classifications. However, BEA measures investment in some structures for which Census Bureau construction data are not available. In such cases, BEA uses data from other sources. For example, to measure investment in petroleum and natural gas mining, BEA relies on data about drilling footage and cost per foot from a trade group (the American Petroleum Institute).

Quarterly current-dollar estimates

In general, BEA relies on "value" or "expenditures" data, that is, information that encompasses both the quantity and price elements that are required to calculate current-dollar estimates.

In most cases, construction spending data are available from the Census Bureau. BEA uses these data to extrapolate quarterly estimates on a "best-change" basis, which means that BEA simply applies a percent change in the indicator for the type of investment being measured. For example, BEA's quarterly single-family residential structures investment is determined by applying the growth rate of the Census Bureau estimate of construction spending for single-family residential units to BEEs estimate from the previous quarter. (4) For a listing of the component categories that are individually measured, see table 3.

In cases where value data are not available from the Census Bureau, notably for petroleum and natural gas mining structures, BEA relies on data about prices and quantities from other information sources. For example, a "physical quantity times price" method is used to calculate a current-dollar estimate of petroleum and natural gas shafts and wells.

Quarterly price and quantity estimates

Deflation. After current-dollar estimates are calculated, BEA uses various price measures to convert the current-dollar measures to "real" or inflation-adjusted quantity measures. For most components, simple deflation is used for this; a quantity index for each detailed component is obtained by dividing the most detailed current-dollar index by an appropriate price index that has the base year--currently 2000--equal to 100 and then by multiplying the result by 100. In some cases, a direct valuation method is used. For petroleum and gas mining, for example, quantity indexes are obtained by multiplying the base-year price by actual quantity data for the period. The result is then expressed as an index with the base year equal to 100.

Price indexes. To deflate individual components, BEA uses a variety of price measures from the Census Bureau, the Bureau of Labor Statistics, and trade sources. In addition, BEA calculates some indexes. Table 3 lists the price indexes used to prepare the quarterly estimates of private investment in structures.

Because GDP measures output, BEA generally prefers to use indexes that capture price changes of output; using input costs indexes assumes that the output prices are changing at exactly the same rate as input costs. This does not capture the effect of changing productivity. In addition, a longstanding goal of BEA has been to use, when possible, price measures that have been adjusted for quality changes, which most economists recommend.

In some important cases, BEA has long used indexes that account for both quality changes and output prices. For example, BEA incorporated the Census Bureau's single-family price index in 1968 and the multifamily price index in 1993.

In recent years, BEA has benefited from more appropriate price measures, notably new producer price indexes (PPIs) from the Bureau of Labor Statistics (BLS) that measure output prices and are quality adjusted. BLS released a warehouse PPI in 2005, a new school building PPI in 2006, a new office building PPI in 2007, and a manufacturing and industrial building PPI in 2008. All were incorporated by BEA in the following annual revisions.

For some components, however, output price indexes are unavailable. In such cases, BEA combines an input cost measure with an output cost measure in an effort to reflect some of the productivity and quality changes in the construction industry and the costs for a particular building category. For hospitals, for example, BEA combines the Census Bureau's single-family houses under construction index with the Turner Construction Company building cost index. The former index reflects the productivity and quality change of the industry; the latter index reflects the costs associated with building construction.

For some categories, combining a nonresidential cost index with a residential output index is not appropriate. In such cases, BEA uses trade-based cost indexes. For utilities and communication, for example, cost indexes are used.

Aggregated estimates

For all aggregated quarterly and annual components, BEA uses its familiar Fisher chain-type formula to produce real estimates. The procedure uses prices and quantities from specific components to compute a so-called chained index. For more details about how the Fisher index is computed, see "Chained-Dollar Indexes: Issues, Tips on Their Use, and Upcoming Changes" SURVEY 83 (November 2003): 8-16.

Annual estimates

As part of the annual revision of the NIPAs released every July, BEA releases revised annual estimates--current dollar and real--of investment in structures for the previous 3 years. The 2008 annual revision, for example, included revised estimates for 2005-2007. Those estimates were based on the most recent data from the Census Bureau and other sources (table 4). Like the quarterly estimates, BEA's estimates for all components of structures are made on a "best-change" basis. So if a Census Bureau type of construction value increases 5 percent from 1 year to the next, BEA's corresponding measure will also increase 5 percent. In addition, the same deflation methods are generally used for quarterly and annual estimates.

As part of the annual revision, revised quarterly estimates for the previous 3 years are released as well.

Future directions

BEA plans to work closely with BLS on improving price measures. Recently, BEA and BLS staff have discussed ways that nonresidential building construction price indexes might be improved. BEA has suggested price indexes for highways, hospitals, retail, communication, power, and lodging structures. BEA is also working with the Census Bureau to fill gaps in data. Recently, the Census Bureau lost funding for the Survey of Residential Alterations and Repair, which provided data on improvements made to rental and vacant property.

For the 2009 benchmark revision, BEA plans to reclassify its historical estimates of nonresidential structures to a classification by function. This would create a consistent time series by removing a discontinuity that arose from the 2003 benchmark revision, for which BEA changed its estimates of structures beginning with 1997 to reflect changes in the Census Bureau classification of the value of construction from a classification by function instead of by type.

(4.) See the box "Incorporating Source Data on the Basis of 'Best Change'," in Eugene P. Seskin and David E Sullivan, "Annual Revision of the National Income and Product Accounts;' SURVEY OF CURRENT BUSINESS 80 (August 2000): 16.

Table 1. Private Fixed Investment in Structures as a
Share of Current-Dollar Gross Domestic Product

(Percent]

 All Non-
 structures residential Residential
 structures structures

2006: I 9.1 2.9 6.2
 II 9.0 3.1 5.9
 III 8.7 3.2 5.5
 IV 8.4 3.2 5.2
2007: I 8.3 3.3 4.9
 II 8.1 3.4 4.7
 III 7.9 3.5 4.4
 IV 7.6 3.6 4.0
2008: I 7.4 3.7 3.7
 II 7.3 3.8 3.5
 III 7.2 4.0 3.3
 IV 7.1 4.1 3.0

NOTE. Shares of nonresidential structures and of residential
investment (mainly structures, but including residential equipment)
are shown in NIPA table 1.1.10.

Table 2. Contributions to Percent Change in Real Gross
Domestic Product by Private Fixed Investment in Structures

[Percentage points]

 All Non- Residential
 structures residential investment
 structures

2006: I 0.19 0.42 -0.23
 II -0.57 0.54 -1.11
 III -0.98 0.42 -1.40
 IV -1.10 0.08 -1.18
2007: I -0.56 0.35 -0.91
 II -0.03 0.57 -0.60
 III -0.41 0.65 -1.06
 IV -1.04 0.29 -1.33
2008: I -0.82 0.30 -1.12
 II 0.12 0.64 -0.52
 III -0.24 0.36 -0.60
 IV -0.92 -0.07 -0.85

NOTE. Contributions of nonresidential structures and of residential
investment (mainly structures, but including residential equipment)
are shown in NIPA table 1.1.2.

Table 3. Source Data and Price Indexes for the Quarterly Estimates of
Private Fixed Investment in Structures by Type

 Component Major source data

 Private fixed
 investment in
 structures
Nonresidential
 Commercial and health care
 Office (1) Census Bureau monthly construction survey.

 Health care
 Hospitals and
 special care
 Hospitals Census Bureau monthly construction survey.
 Special care Census Bureau monthly construction survey.
 Medical buildings Census Bureau monthly construction survey.
 Multimerchandise
 shopping Census Bureau monthly construction survey.
 Food and beverage
 establishments Census Bureau monthly construction survey.
 Warehouses Census Bureau monthly construction survey.
 Other commercial (2) Census Bureau monthly construction survey.

 Manufacturing Census Bureau monthly construction survey.

 Power and communication
 Power
 Electric Census Bureau monthly construction survey.
 Other power (3) Census Bureau monthly construction survey.
 Communication Census Bureau monthly construction survey.

 Mining exploration,
 shafts, and wells
 Petroleum and
 natural gas Footage drilled and cost per foot from
 trade source extrapolated by BLS PPI for
 oil and gas wells.
 Mining Extrapolated from BEA data on private
 investment in mining equipment.

 Other structures
 Religious Census Bureau monthly construction survey.
 Educational and
 vocational Census Bureau monthly construction survey.

 Lodging Census Bureau monthly construction survey.
 Amusement and
 recreation Census Bureau monthly construction survey.
 Transportation
 Air Census Bureau monthly construction survey.
 Land (4) Census Bureau monthly construction survey.
 Farm Census Bureau monthly construction survey.
 Other (5) Census Bureau monthly construction survey.
 Brokers' commissions Trend-based BEA data.
 on sale of
 structures
 Net purchases of used Trend-based BEA data.
 structures (6)

Residential
 Permanent site
 Single-family Census Bureau monthly construction survey.
 structures
 Multifamily structures Census Bureau monthly construction survey.
 Other structures
 Manufactured homes Shipments from trade source and average
 retail prices from Census Bureau monthly
 survey.
 Dormitories Census Bureau monthly construction survey.
 Improvements Trend-based BEA estimate.
 Brokers' commissions
 on sale of
 structures Number of single-family houses sold and
 mean sales price from Census Bureau
 monthly survey and trade source.
 Net purchases of used
 structures (6) Trend-based BEA data.
 Price index used to deflate
 the estimates

 Component

 Private fixed
 investment in
 structures
Nonresidential
 Commercial and health
 care
 Office (1) BLS PPI for office building construction.

 Health care
 Hospitals and
 special care
 Hospitals An unweighted average of Census Bureau's
 single-family houses under construction
 index and the Turner Construction
 Company building cost index.
 Special care Same as those used for hospitals.
 Medical buildings Same as those used for hospitals.
 Multimerchandise
 shopping Same as those used for hospitals.
 Food and beverage
 establishments Same as those used for hospitals.
 Warehouses BLS PPI for warehouses.
 Other commercial (2) Weighted average of the BLS PPI for
 warehouses and the BLS PPI for mobile
 structures.

 Manufacturing BLS PPI for industrial buildings.

 Power and communication
 Power
 Electric A three-quarter moving average of the
 Bureau of Reclamation composite index.
 Other power (3) An unweighted average of the
 three-quarter moving average of the
 Bureau of Reclamation composite index and
 the BLS PPI for steel pipe and tubes.

 Communication Engineering News Record construction
 cost index.
 Mining exploration,
 shafts, and wells
 Petroleum and
 natural gas A weighted average of BLS PPI for
 drilling oil and gas wells and BLS PPI
 for oil and gas field services.
 Mining Same as those used for hospitals.

 Other structures
 Religious Same as those used for hospitals.
 Educational and
 vocational BLS PPI for new school construction.
 Lodging Same as those used for hospitals.
 Amusement and
 recreation Same as those used for hospitals.
 Transportation
 Air Same as those used for hospitals.
 Land (4) Weighted average of BLS employment cost
 index (ECI) for construction industry,
 Bureau of Reclamation construction cost
 trends for bridges and for power plants,
 the BLS PPls for material and supply
 inputs into construction industries, BLS
 PPI for other communication equipment,
 and the price indexes used for hospitals.
 Farm Same as those used for hospitals.
 Other (5) A weighted average of the prices used
 for electric and the Federal Highway
 Administration composite index for
 highway construction.
 Brokers' commissions BLS PPI for real estate brokerage,
 on sale of nonresidential property sales and rental
 structures including land sales and rental.
 Net purchases of used An unweighted average of the implicit
 structures (6) price deflators for nonresidential
 buildings, for utilities, for farm
 buildings, and for other private
 structures.
Residential
 Permanent site
 Single-family Census Bureau's price index for
 structures single-family houses under construction.

 Multifamily structures Same as that used for single-family
 structures.
 Other structures
 Manufactured homes BLS PPI for mobile structures.
 Dormitories Same as that used for single-family
 structures.
 Improvements An unweighted average of Census Bureau
 price index for single-family houses
 under construction index, BLS PPI for
 home maintenance and repair construction,
 and BLS ECI for construction industry.
 Brokers' commissions
 on sale of
 structures BLS PPI for real estate brokerage,
 residential property sales and rental.
 Net purchases of used
 structures (6) Same as that used for single-family
 structures.

 Component Description of the price index

 Private fixed
 investment in
 structures
Nonresidential
 Commercial and health care
 Office (1) This PPI measures the quality-adjusted
 cost for new office building
 Health care construction.
 Hospitals and
 special care
 Hospitals The Census Bureau index measures
 quality-adjusted changes in the prices
 of new single-family homes under
 construction. The building cost index
 is a price index for national building
 construction costs.
 Special care
 Medical buildings
 Multimerchandise
 shopping
 Food and beverage
 establishments
 Warehouses This PPI measures the quality-adjusted
 cost for new warehouse construction.
 Other commercial (2) The PPI for warehouses is described
 above.
 The PPI for mobile structures measures
 the changes in prices for mobile
 structures.

 Manufacturing This PPI measures the quality-adjusted
 cost for new industrial building

 Power and communication construction.
 Power
 Electric This index is a weighted average of
 costs of labor, materials, and
 equipment furnished by contractors for
 work on dams, pumping plants, steel
 penstocks, and discharge pipes, canals
 and conduits, laterals and drains,
 hydroelectric power plants, concrete
 pipelines, switch yards and
 substations, transmission lines,
 general property, and roads and bridges
 in 17 western states.

 Other power (3) The Bureau of Reclamation index is
 described above. The BLS PPI measures
 change in the price of steel pipe and
 tubes.

 Communication This index is based on prices for
 materials and the common labor rate.

 Mining exploration,
 shafts, and wells
 Petroleum and
 natural gas These indexes measure changes in prices
 of drilling oil and gas wells and of
 oil and gas field services.
 Mining

 Other structures
 Religious
 Educational and
 vocational This PPI measures the quality-adjusted
 costs of new school construction.
 Lodging
 Amusement and
 recreation
 Transportation
 Air
 Land (4) The BLS employment cost index measures
 labor costs. The Bureau of Reclamation
 construction cost trends index tracks
 costs such as contractor labor and
 equipment costs for the Bureau's
 construction projects. The PPI for
 material and supply inputs measure
 prices of input commodities, and the
 PPI for other communication equipment
 measures prices of signal equipment.
 Farm
 Other (5) The Federal Administration composite
 index is derived from average unit bid
 prices for fixed amounts of common
 excavation, surfacing, and structures.

 Brokers' commissions This PPI measures changes in real
 on sale of estate brokerage fees received from
 structures nonresidential property sales and
 rental.

 Net purchases of used These implicit deflators reflect the
 structures (6) types of building bought and sold by
 the private sector.

Residential
 Permanent site
 Single-family This index measures quality-adjusted
 structures changes in the price of new
 single-family homes under construction.
 Multifamily structures

 Other structures
 Manufactured homes This PPI measures changes in the
 prices of new mobile homes.

 Dormitories

 Improvements The Census Bureau index is described
 above, the PPI measures the cost of
 residential home maintenance and
 repair, and the ECI measures in labor
 costs.
 Brokers' commissions
 on sale of
 structures This PPI measures changes in real
 estate brokerage fees received from
 residential property sales and rental.
 Net purchases of used
 structures (6)

(1.) Consists of office buildings, except those constructed at
manufacturing sites and those constructed by power utilities for
their own use.

(2.) Consists of auto dealerships, garages except those for buses
and trucks, service stations, drug stores, restaurants, mobile
structures, and other structures used for commercial purposes by
the retail, wholesale, and selected service industries.

(3.) Consists of gas plants, pipelines, and solar power plants.

(4.) Consists primarily of railroads, but also includes garages for
buses and trucks.

(5.) Includes water supply, sewage and waste disposal, public
safety, highway and street, and conservation and development.

(6.) Net purchases of used structures include net purchases from
federal and state and local governments.

BLS Bureau of Labor Statistics
PPI Producers' price index
ECI Employment cost index

Table 4. Source Data and Price Indexes for Annual Estimates of Private
Fixed Investment in Structures by Type

 Component Major source data

 Private fixed
 investment in
 structures
Nonresidential
 Commercial and
 health care
 Office (1) Census Bureau monthly construction survey.
 Health care
 Hospitals and
 special care
 Hospitals Census Bureau monthly construction survey.
 Special care Census Bureau monthly construction survey.
 Medical buildings Census Bureau monthly construction survey.
 Multimerchandise
 shopping Census Bureau monthly construction survey.
 Food and beverage
 establishments Census Bureau monthly construction survey.
 Warehouses Census Bureau monthly construction survey.
 Other commercial (2) Census Bureau monthly construction survey
 Manufacturing Census Bureau monthly construction survey.

 Power and communication
 Power
 Electric Census Bureau monthly construction survey.
 Other power (3) Census Bureau monthly construction survey.
 Communication Census Bureau monthly construction survey.

 Mining exploration,
 shafts, and wells
 Petroleum and
 natural gas Footage drilled and cost per foot from
 trade sources extrapolated by BLS
 producer price index for oil and gas
 wells.
 Mining Census Bureau annual capital
 expenditures survey.
 Other structures
 Religious Census Bureau monthly construction survey.
 Educational and
 vocational Census Bureau monthly construction survey.
 Lodging Census Bureau monthly construction survey.
 Amusement and
 recreation Census Bureau monthly construction survey.
 Transportation
 Air Census Bureau monthly construction survey.
 Land (4) Census Bureau monthly construction survey.

 Farm Census Bureau monthly construction survey.
 Other (5) Census Bureau monthly construction survey.
 Brokers' commissions
 on sale of Trend-based estimates.
 structures
 Net purchases of
 used structures (6) BEA government fixed asset accounts.

Residential
 Permanent site
 Single-family
 structures Census Bureau monthly construction survey.
 Multifamily structures Census Bureau monthly construction survey.
 Other structures
 Manufactured homes Shipments from trade source and average
 retail price from Census Bureau monthly
 survey.
 Dormitories Census Bureau monthly construction survey.
 Improvements Census Bureau survey of residential
 alterations and repair and survey of
 consumer expenditures.
 Brokers' commissions
 on sale of Number of single-family houses sold and
 structures mean sales price from Census Bureau
 monthly construction survey and trade
 source.
 Net purchases of
 used structures (6) BEA government fixed asset accounts.

 Component Price index used to deflate the estimates

 Private fixed
 investment in
 structures
Nonresidential
 Commercial and
 health care
 Office (1) BEA price index for office buildings.

 Health care
 Hospitals and
 special care
 Hospitals An unweighted average of Census Bureau's
 single-family houses under construction
 index and a Turner Construction Company
 building cost index.

 Special care Same as those used for hospitals.
 Medical buildings Same as those used for hospitals.
 Multimerchandise
 shopping BLS PPI for warehouses.
 Food and beverage
 establishments Same as those used for multimerchandise
 shopping.
 Warehouses Same as those used for multimerchandise
 shopping.
 Other commercial (2) Same as that used for warehouses and BLS
 price index for mobile structures.
 Manufacturing BEA price index for factories.

 Power and communication
 Power
 Electric Weighted average of Handy-Whitman price
 indexes for electric light and power
 plants and utility buildings.
 Other power (3) Handy-Whitman price index for gas plants.
 Communication AUS Telephone Plant index.

 Mining exploration,
 shafts, and wells
 Petroleum and
 natural gas Weighted average of BLS PPIs for drilling
 oil and gas wells and for oil and gas
 field services.
 Mining Same as those used for hospitals.
 Other structures
 Religious Same as those used for hospitals.
 Educational and
 vocational BLS PPI for new school construction.
 Lodging Same as those used for hospitals.
 Amusement and
 recreation Same as those used for hospitals.
 Transportation
 Air Same as those used for hospitals.
 Land (4) Weighted average of BLS employment cost
 index (ECI) for construction industry,
 Bureau of Reclamation construction cost
 trends for bridges and for power plants,
 the BLS PPIs for material and supply
 inputs into construction industries, BLS
 PPI for other communication equipment,
 and the price indexes used for hospitals.

 Farm Same as those used for hospitals.
 Other (5) An unweighted average of the Handy-Whitman
 water utility plant index, Federal Highway
 Administration composite index for
 highways, and those used for hospitals.
 Brokers' commissions
 on sale of BLS PPI for real estate brokerage,
 structures nonresidential property sales and rental
 including land sales and rental.
 Net purchases of
 used structures (6) An unweighted average of the implicit
 price deflators for nonresidential
 buildings, for utilities, for farm
 buildings, and for other private
 structures.
Residential
 Permanent site
 Single-family
 structures Census Bureau price index for
 single-family houses under construction
 index.
 Multifamily structures Census Bureau price index for multifamily
 houses under construction.

 Other structures
 Manufactured homes BLS PPI for mobile structures.
 Dormitories Same as that used for single family
 structures
 Improvements Average of the Census Bureau index for
 single-family houses under construction,
 BLS PPI for home maintenance and repair,
 and BLS employment cost index for
 construction industry.

 Brokers' commissions
 on sale of BLS PPI for real estate brokerage,
 structures residential property sales and rental.
 Net purchases of
 used structures (6) Same as that used for single family
 structures.

 Component Description of the price index

 Private fixed
 investment in
 structures
Nonresidential
 Commercial and
 health care
 Office (1) This quality-adjusted index measures
 changes in costs and is derived using
 ordinary least squares hedonic
 regressions based on square foot costs
 Health care data from the R.S. Means Company.
 Hospitals and
 special care
 Hospitals The Census Bureau index measures quality-
 adjusted changes in the price of new
 single-family homes under construction.
 The building cost index is a price index
 for national building construction costs
 based on current cost.
 Special care
 Medical buildings
 Multimerchandise
 shopping This PPI measures the quality-adjusted
 cost for new warehouse construction.
 Food and beverage
 establishments
 Warehouses
 Other commercial (2) This PPI measures changes in the prices
 of new residential mobile homes.
 Manufacturing This quality-adjusted index measures
 changes in costs. It is derived using
 ordinary least squares hedonic
 regressions based on square foot costs

 Power and communication data from the R.S. Means Company.
 Power
 Electric These indexes are based on prices for
 materials, labor costs, and prices of
 mechanical and electrical equipment for
 steam operated electric plants in six
 regions and for reinforced concrete
 buildings and brick buildings in six
 regions.
 Other power (3) This index is based on prices for
 materials, labor costs, and prices of
 mechanical and electrical equipment for
 gas plants in six regions.
 Communication This index is derived from data from
 operating companies and suppliers on
 construction methods, plant investment,
 and component costs.
 Mining exploration,
 shafts, and wells
 Petroleum and
 natural gas These indexes measure changes in prices
 received by domestics producers.
 Mining

 Other structures
 Religious
 Educational and
 vocational This PPI measures the quality-adjusted
 cost for new school construction.
 Lodging
 Amusement and
 recreation
 Transportation
 Air
 Land (4) The BLS employment cost index measures
 labor costs. The Bureau of Reclamation
 construction cost trends index tracks
 costs such as contractor labor and
 equipment costs for the Bureau's
 construction projects. The PPI for
 material and supply inputs measures
 prices of input commodities, and the PPI
 for other communication equipment
 measures prices of signal equipment.

 Farm
 Other (5) The Handy-Whitman water utility plant
 index is based on prices for materials,
 labor costs, and prices of mechanical
 and electrical equipment for water
 utilities in six regions.
 Brokers' commissions
 on sale of This PPI measures changes in real estate
 structures brokerage fees received from
 nonresidential property sales and rental.
 Net purchases of
 used structures (6) These implicit price deflators reflect
 the types of buildings bought and sold
 by the private sector.

Residential
 Permanent site
 Single-family
 structures This index measures changes in the price
 of new single-family homes under
 construction.
 Multifamily structures This index measures changes in the price
 of new multi-family homes under
 construction.

 Other structures
 Manufactured homes This PPI measures changes in the prices
 of new mobile homes.
 Dormitories
 Improvements See single-family structures for a
 description of the Census Bureau index.
 The BLS employment cost index measures
 labor costs in the construction industry.
 The PPI measures the cost of residential
 home maintenance and repair.
 Brokers' commissions
 on sale of This PPI measures changes in real estate
 structures brokerage fees received from residential
 property sales and rental.
 Net purchases of
 used structures (6)

(1.) Consists of office buildings, except those constructed at
manufacturing sites and those constructed by power utilities for their
own use.

(2.) Consists of auto dealerships, garages except those for buses and
trucks, service stations, drug stores, restaurants, mobile structures,
and other structures used for commercial purposes by the retail,
wholesale, and selected service industries.

(3.) Consists of gas plants, pipelines, and solar power plants.

(4.) Consists primarily of railroads, but also includes garages for
buses and trucks.

(5.) Includes water supply, sewage and waste disposal, public safety,
highway and street, and conservation and development.

(6.) Net purchases of used structures include net purchases from
federal and state and local governments.

BLS Bureau of Labor Statistics
PPI Producers' price index
ECI Employment cost index