INTRODUCTION
1.GENERAL
This publication presents the supply and use table for 2006, which was prepared in accordance with the recommendations of the System of National Accounts, SNA93[1]. The supply and use table is important, because it provides a basis for detailed analyses of the flow of goods and services, as well as for ongoing examination of the reliability of data obtained from various sources.
On the one hand, the supply and use table presents a breakdown of domestically produced and imported goods and services in the economy, by groups of characteristic products. On the other hand, the table presents the allocation of these commodities for different uses: private and general government consumption, investments, exports, and inputs of production industries.
The supply and use table was constructed after a complex process of adjusting and reconciling the estimates of the sources of products with estimates of uses of resources, which are compiled according to different methods and based on different statistical systems. In the process of constructing the table, there was a need to update existing estimates of many sections of national accounting. In addition, estimates of outputs in several production industries were revised, trade and transport margin rates were changed, and revisions were introduced in estimates of production industry inputs.
The supply and use table has been prepared based on estimates for various items, but in the near future the preparation of the input-output table for 2006 will be completed, which will provide a better adjustment between supply and use.
In addition to the supply and use table for 2006, the publication also includes a separate supply table for the years 2007-2008.
2.DEFINITIONS AND EXPLANATIONS[2]
a.Supply and Use Table – General Background
The supply and use table is a basic balanced framework which combines supply estimates of domestically produced and imported goods and services in the economy, by type of product. Concomitantly, the table shows the allocation of these products for final uses (private and general government consumption, capital formation, and exports) as well as for intermediate uses of production industries.
Supply Table
The supply table presents the total supply in the economy by groups of characteristic products. The term “characteristic product” refers to types of commodities as well as to types of services, and denotes a product whose production is characteristic of a given industry, in accordance with the definition of the standard classification of all economic activities[3]. The groups of characteristic products appear in the rows of the table, and their names are identical to those appearing in the corresponding economic industries.
The table distinguishes between two sources of products – domestic production and imports. The supply table can be presented at the highest level of aggregation as follows:
Groups of characteristic products / Total supply, at purchaser’s prices / Trade and transport margins / Taxes less subsidies for products / Total supply at basic prices / Output at basic prices / Imports of goods and services c.i.f. / Adjustment of imports c.i.f. / f.o.b.(1)=(4)+(3)+(2) / (2) / (3) / (4)=(5)+(6)+(7) / (5) / (6) / (7)
Domestic output is calculated in the first stage at basic prices. The value of output at basic prices is the value of products at the time they leave the premises of the establishment, and does not include taxes on products and subsidies.
According to the international recommendations of the SNA93, a comparison is made between supply and use at purchaser’s prices, i.e., the prices actually paid by the purchasers for the product.
Total supply at purchaser’s prices is obtained as the sum of:
-Domestic output at basic prices
-Imports of goods and services at f.o.b. prices
-Trade and transport margins
-Taxes less subsidies on products.
Use Table
The use table presents the combination of final and intermediate uses, as well as the structure of inputs for goods and services by their sourceof supply – domestic production or imports. The table contains a matrix of intermediate uses, where the rows of the matrix represent sale of products, and the columns show the purchases of these products by different production industries. Production industry is determined by classifying establishments in industries according to their main activity. Thus, production industries include production of secondary products in addition to production of characteristic products.
The following are the main components of the use table:
Groups of charac-teristic products / Total use at purchaser’s price / Final uses / Intermediate Uses (Matrix)Total / General government consumption / Private consump-tion / Gross capital formation / Exports / Total / Produc-tion industries
(1)=(7)+(2) / (2) / (3) / (4) / (5) / (6) / (7)
All of the components of the use table are presented at purchaser’s prices, i.e., they include taxes less subsidies, as well as trade and transport margins.
A balance between the supply and use table is achieved when the total supply of products at all levels is equivalent to the total of their uses.
b.Supply and Use Table in the Current Publication
The supply and use tables are presented separately and include 60 industries that have undergone a balancing process between the sources and uses, that are calculated in basic and purchaser's prices. These industries were aggregated from a total of 65 groups of characteristic products appearing in the last input-output table of 1995. That input-output table is an important source of information for preparing the supply and use table. A list of the industries in these groups is presented in Appendix 1[4].
In the supply and use table in this publication, some of the definitions differ from those in the Standard Classification of All Economic Activities:
Construction is divided into two categories, by purpose of construction: residential buildings, and other construction (roads, installation of pipes, railroads, cables and other infrastructure work). In the Standard Classification of All Economic Activities, however (see Footnote 3), the construction industry is classified according to stages of construction, such as: site preparation, structural phase, installation of water and electricity systems, building completion, etc.
Ownership of residential dwellings (known as “imputed housing services”) does not appear separately in the Standard Classification of All Economic Activities. This item comprises income deriving from housing services in residential dwellings owned by their tenants.
The electricity and water industries, which each include a small number of establishments, were combined into one group for the purpose of maintaining confidentiality of data.
b1.Supply Table
As mentioned, the supply table presents the total supply of goods in the economy by their origin (domestic production or imports). Total imports are divided into competitive imports and complementary imports. In addition, the table displays the two components in the transition from basic prices to purchaser’s prices, i.e., trade and transport margins, and taxes less subsidies on imported and domestically produced commodities. The following are definitions and sources of the data for the supply table components.
- Output of Industries
The output of industries that manufacture specific commodities is defined as the value of all commodities produced for sale, including commodities that have not yet been sold. In service industries, the output equals the total payment received for services provided. In addition, output includes goods and services produced for own use, such as: production of investment products for own use, housing services in dwellings owned by their tenants, production of agriculture commodities for own use, etc. As mentioned, the output of industries was estimated at basic prices.
In several industries, the definition of output is different:
Output of trade industries is defined as the difference between the value of product sales and the cost of purchasing them by dealers for the purpose of trade. This difference is also defined as trade margins in wholesale and retail trade. In national accounts, the sales margins are considered to be the value of the trade services provided to consumers, even though the fees for services in these industries are not paid directly, in contrast to other industries.
Output of banks includes two components: one component derives from payment of commissions for services that banks provide to their customers, and another component is calculated as the difference between the interest that banks charge their clients for credit and the interest that the banks pay clients for deposits.
Output of insurance companies includes net premiums (premiums less claims paid), and profit on investment of the insurance money reserves, less the net change in the actuary insurance reserves.
Output of startup companies (included in software and R&D services). Startup companies are companies established for the purpose of developing innovative products or technologies, usually in the areas of software, Internet, communications, and biotechnology. These companies are characterized by relatively lengthy production processes and a high rate of stocks for work in progress or finished products that have not yet been sold. Because it is usually not possible to evaluate the market price of stocks of new products in startup companies, an estimate of output that has not yet been sold was prepared on the basis of production costs, plus operational surplus estimates. This calculation is based on the assumption that production costs become equal to the value of capital raised to finance the development of the product from venture capital funds. The operational surplus assessment was based on average rates of return received by high-tech companies in capital markets.
Public services output (combined with the group of industries which includes educational, cultural, and health services, as well as research and development, welfare, religious services, and personal services).
Public services comprise services provided by the government (including the Ministry of Defense), as well as services provided by local authorities, national institutions, and non-profit institutions (e.g., universities, secondary schools, sick funds, museums, old age homes. etc.). Public services are usually provided free of charge or for a minimal fee that is lower than cost price, and it is difficult to estimate their output at market prices. Therefore, the output of public service industries is usually calculated as the sum of inputs, including labour compensation plus imputed contributions for budgetary pension schemes, purchase of goods and services, and consumption of fixed capital.
2.Imports of Goods and Services
Imports are presented by the product or by the characteristic industry that produced the product. This classification is based on registration of goods in customs, which is performed according to the international Harmonized Commodity Description and Coding System guidelines[5].
In the supply table, a distinction is made between competitive imports and complementary imports. Imports of a certain commodity will be defined as competitive if the imported product is an alternative to a commodity produced in Israel. According to the criterion used in the input-output table for 1995, if the percentage of domestic production out of all sources exceeds 20%, the imported commodities are classified as competitive. If the imported product is not an alternative to a commodity produced in Israel or is not produced in Israel at all, then it is defined as complementary.
The imports are registered at c.i.f. prices, which include transport and insurance services. In the supply table, imports are listed in f.o.b. (free on board) prices, i.e., including transport and insurance services provided by foreign companies, but not including the same services provided by Israeli companies. The adjusted f.o.b. prices are presented in a separate column.
3.Trade and Transport Margins
As mentioned, the products in the supply table are presented at basic prices and at purchaser’s prices. The transition from the basic prices to purchaser’s prices includes expenses for marketing the product and transporting it to the purchaser. These expenses are defined in the table as Trade and transport margins as well as the taxes and subsidies on the products.
In accordance with the definition of trade services and transport services in national accounts, the total trade and transport margins are equal to the output of trade industries, and the total output of transport industries is the same as the transport margins (including expenses for transport of goods which were paid for separately and not included in the price of the goods).
4.Subsidies and Taxes on Products
Taxes on products are defined as taxes levied per unit of goods or services, e.g., VAT on domestically produced and imported goods and services, customs, purchase tax, fuel tax, and tobacco tax.
Subsidies on products are subsidies payable per unit of goods, and can be given as a fixed amount per unit, as percentages of the price, or as the difference between the market price and a specific target price. For example, subsidies on agricultural products, subsidies on water prices, subsidies on public transportation, etc.
b2.Use Table
The total uses in the table are divided into two main parts: final uses, and intermediate uses of production industries. The final uses consist of final consumption (or total consumption), gross capital formation, and exports of goods and services. Final consumption is obtained in two ways: as the sum of private and public consumption, or as the sum of individual and collective consumption. The following are definitions and sources of data for the components of the use table.
- Private consumption expenditure includes consumption expenditure of households and consumption of non-profit institutions serving households, where the major part of their expenditure is not financed by the government.
Household consumption expenditure is supposed to include only the consumption expenditure of Israeli residents. However, the breakdown of household consumption expenditure by industry of origin in the table refers to the expenditures of all households (Israeli and foreign residents) in the domestic market. Notably, there are no detailed current data relating exclusively to consumption in Israel by Israelis. The transition to consumption expenditures by Israelis only appears under the row that indicates the total domestic uses. These expenditures are calculated by deducting the total consumption of foreign residents from the total consumption of domestic households, and adding consumption of Israelis abroad.
- General government consumption expenditure includes consumption expenditure of the general government sector – the government, the National Insurance Institute, local authorities, national institutions, and non-profit institutions, where the above-mentioned bodies finance the major part of their expenditure.
General government consumption equals the value of its intermediate consumption of inputs, compensation of employees, taxes on production (including taxes on wages and employers’ tax) and consumption of fixed capital. Compensation of employees includes imputed expenditure which reflects the government’s obligation to pay its staff pensions after they retire.
General government consumption expenditure consists of two components:
(a) The value of individual consumption financed by the general government, including expenditures for education, health, culture, housing, welfare, and religion; (b) the value of collective general government consumption expenditure, including expenditures on defense, public order, and civil administration.
- Total individual consumption expenditure includes private consumption expenditure and the value of individual consumption financed by the general government sector.
- Gross domestic capital formation is the sum of gross fixed capital formation and the change in stocks, as defined below:
Gross fixed capital formation: the expenditures (purchases and own account production) by industries, the general government, or non-profit institutions to increase their capital stocks of fixed assets. These expenditures include: acquisition of durable assets (except land and mineral deposits) for civilian use; work-in-progress on construction projects; major improvements; and outlays for land preparation and fruit plantations. Also included are intangible assets (mainly expenditures for production of software for own use and expenditures for oil and gas exploration). Excluded are government expenditures for buildings and equipment for military use.
Change in stocks. The market value of the physical change in stocks, including: (a) stocks of raw materials, work-in-progress, and finished products held by resident industries; (b) the value of work-in progress (buildings, roads, and other construction projects) is considered gross fixed capital formation and not increase in stocks. (c) change in stocks of start-up companies – see explanation in chapter "Sources and Methods".
- Exports of goods and services: The value of goods and services that residents of Israel sold to the rest of the world. These goods and services include merchandise, transportation, insurance, and other services, but do not include income of Israeli production units from activities abroad or payments to foreign economic units operating in Israel. In addition, exports do not include revenue of Israeli companies from transportation of imports to Israel. The value of exports is recorded in f.o.b. prices.
- Intermediate uses by production industries: The value of goods consumed by the purchasing industry as inputs in the production process. These products can change in form or become depleted in the production process. Intermediate use does not include acquisition of investment products that are listed in final uses.
3.SOURCES AND METHODS
a.Supply Table
In the current publication, the supply table was prepared for the period 2006-2008. The following are the sources of the data and the estimation methods of the components in the supply table – output of industries, imports of goods and services, trade and transport margins, and taxes and subsidies.
- Estimates of Output
Agriculture (1-5) – agricultural output by type of crops, in physical terms, is obtained from reports of the production councils and manufacturing establishments on agricultural produce collected from farms for the domestic market, export, or on industrial processing. The value of the output is calculated as the amount of product multiplied by the corresponding average price.
Manufacturing (6-37) – the output of manufacturing industries (excluding diamonds) is estimated according to annual manufacturing surveys conducted until 2007. Estimates for 2008 were calculated by extrapolating the survey data based on manufacturing production indices.