Alternative Price and Volume Measures for Commercial Bank and Fund Management Services

In the U.S. National Income and Product Accounts, commercial bank and fund management services grew modestly or declined in volume terms after 2008, despite substantial increases in the levels of assets and liabilities managed by these businesses. These estimates of limited growth result partly from the chosen estimation methods of the Bureau of Economic Analysis (BEA), which differ from those of several other countries. For the volume estimates of implicit services of commercial banks, BEA relies mainly on the banking output index from the Bureau of Labor Statistics, which counts numbers of loans, deposit accounts, and transactions. For personal consumption expenditures for the management of mutual funds and other regulated investment companies, BEA uses an input cost index that mainly reflects hourly wages, and that may not reflect some recent innovation. For personal consumption expenditures for the management of pension funds and other portfolio management, BEA relies partly on the producer price index for portfolio management, which counts upward asset revaluation as a price increase. While BEA can cite strong reasons for its methods, other countries measure trends in financial services volumes based on trends in inflation-adjusted balances of assets and liabilities. For the years after 2008, BEA’s methods result in lower estimates of growth in service volumes and higher estimates of price increases than methods based on deflated balances. These contrasting results reflect unresolved measurement differences that should be kept in mind when making international comparisons of trends in financial services.