The task of splitting GDP expenditures into basic headings implies that expenditures on goods and services will be disaggregated into as much detail as possible. Yet, all producers and users of national accounts data know that the very principle of national accounts is to combine detailed data into aggregates from bottom up. Ideally, detailed prices, production data and expenditures are the point of departure instead of them being derived from any composite or aggregate data. In most countries in the world, there are many reasons to the contrary: the paucity of basic data sources, discrepancies in GDP estimates between the three approaches of GDP compilation, the fact that many countries don’t implement the expenditure approach, the limited dimension of supply and use tables (SUT), limited human capacity, inadequacy of resources for national accounts activities, etc.
It’s essential to make the most of existing data to ensure utmost consistency in the national accounts activities for ICP: consistency between prices collected in the field and prices embedded in GDP expenditures, between production data and expenditure data, between import prices, producer prices and purchaser’s prices, between wholesale prices and retail prices, consistency and likelihood of per capita expenditures at basic heading level in nominal and real terms, as well as consistency of the above between countries belonging to the same economic clusters, etc.
The dual consistency approach of, on the one hand, using national accounts to review surveyed prices, and on the other hand, reviewing expenditures values in the light of these prices, is meant to increase the quality and reliability of both types of data. Relevant dual validation processes is described in the ICP Operational Guide chapter on validation of National Accounts data.