CHAPTER 5: PERSONAL CONSUMPTION EXPENDITURES
Financial services furnished without payment
Financial services furnished without payment includes depository institutions—
commercial banks, savings institutions, and credit unions—and regulated investment
companies (mutual funds), which provide services to persons without explicitly charging
for these services.
32
This component also includes pension plans—private pension plans
and publicly administered government employee retirement plans—which earn property
income (dividend and interest income) on plan reserves that have been contributed
directly by employers and employees and are held on behalf of beneficiaries to be paid
out to them as annuity or lump-sum distributions of income in the future.
33
In the
NIPAs, the value of these types of services is imputed to PCE as financial services
furnished without payment in order to make PCE invariant to whether the charges are
implicit or explicit.
In the NIPAs, imputations are made for the value of the services (such as check
clearing, recordkeeping, and investment services) that are provided by depository
institutions.
34
For commercial banks and other depository institutions, services to
borrowers are estimated as the difference between the rate of return on loans and a
riskless “reference rate”—measured as the average rate earned by banks on U.S.
government and agency securities
35
—times the value of loans that involve direct
customer contact.
36
Services to depositors are estimated as the difference between the
reference rate and the rate paid on deposits times the value of deposits that involve direct
customer contact. These estimates are based on the premise that rather than pay explicit
fees, borrowers accept a higher interest rate, and depositors a lower rate, than they would
otherwise. The differences in interest rates are used to infer the implicit value of the
services that the banks are providing to their customers. Interest flows are adjusted
because a portion of the money paid as interest by borrowers represents a payment for
these services and because the interest forgone by depositors reflects the value of the
services they receive.
32
The value of these services to government is imputed to government consumption expenditures and that
to foreigners is imputed to exports of services. For business, these services are considered intermediate
consumption and cancel out in the consolidation of the production account of the business sector.
33
Rental income is also earned by pension plans, but this amount is assumed to be small.
34
See Brent R. Moulton and Eugene P. Seskin, “Preview of the 2003 Comprehensive Revision of the
National Income and Product Accounts,” Survey 83 (June 2003): 23–27; see also Dennis J. Fixler, Marshall
B. Reinsdorf, and George M. Smith, “Measuring the Services of Commercial Banks: Changes in Concepts
and Methods,” Survey 83 (September 2003): 33–44.
35
The calculation of the reference rate excludes mortgage-backed securities.
36
As part of the 2013 comprehensive update of the NIPAs, the estimates of the output of commercial
banks were improved (1) by limiting the set of assets and liabilities included in the calculations to mainly
loans and deposits, (2) by removing from borrower services an estimate of expected losses in principal as a
result of borrower default, and (3) by refining the computation of the reference rate to reduce the volatility
in borrower and depositor services. For more information, see Kyle K. Hood, “
Measuring the Services of
Commercial Banks in the National Income and Product Accounts: Changes in Concepts and Methods in
the 2013 Comprehensive Revision,” Survey 93 (February 2013): 8–19. As part of the 2018 comprehensive
update, the same improvements were applied to the estimates for other depository institutions. See Jason
W. Chute, Stephanie H. McCulla, and Shelly Smith, “Preview of the 2018 Comprehensive Update of the
National Income and Product Accounts: Changes in Methods, Definitions, and Presentations,” Survey 98
(April 2018).