Market potential is defined by market demand. Market demand measures the absolute potential of a market for sales – either from domestic sources or foreign ones. It is approximated by production, less exports plus imports, sometimes called “apparent consumption”. QuERI splits Market Demand using input-output models into its major components – inter-industry demand (sales between businesses), and the three components making up final demand – personal consumption demand, business investment demand, and government demand. Market Demand is available at the 6 digit NAICS level of detail and can be aggregated into ISIC 3, ISIC 2 and Broad Aggregates.
Inter-industry demand measures the sales of companies to other industries. Special analyses can be developed using these IO models splitting inter-industry demand into components driving that demand, i.e. demand coming from agriculture, mining, forty-seven different manufacturing sectors, and
fifteen service categories.
Personal consumption demand is based on detailed vectors of personal consumption demand (16 categories from basic food stuffs to personal services). Individual IO vectors split these broad categories of demand into purchases by 415 industry and service products.
Government demand is based on 4 major vectors of government demand with government spending drivers derived from UN SNA categories of government expenditures – from defense to health and safety.
Investment demand is based on production data adjusted by the US investment per unit of output factors from the Capital Flows Matrix developed initially for the 1997 US IO model and integrated into the baseline 2002 model. These factors are simple approximations of the required new capital to
replace depreciated capital. Total capital spending, excluding estimates of residential expenditures are used to adjust the estimated capital investments based on production and fixed US factors. Investment spending for each industry is adjusted by the size and growth of the production base for that industry combined with information from macroeconomic baseline data on total business investment thus making the individual investment estimates consistent with the investment cycles associated with each countries business cycle. By combining detailed country specific production with available data on total investment spending on capital equipment in each country, fixed factors (from the US 1997 tables) are adjusted to reflect differences in investment propensity across industries and countries.
Total investment by each industry is then used with the detailed investment flows matrix included in the country adjusted IO models to estimate the demand for investment goods from supplying industries (around 100 non-zero industry categories).