Consumption of fixed capital

10.53 The calculation of volume measures of the consumption of fixed capital poses few problems when good data on the composition of the stock of fixed capital goods are available. The perpetual inventory method, used by most countries, already implies, for the estimation of the consumption of fixed capital at current prices, the need to pass via a calculation of the stock of fixed capital goods at constant prices. To go from a valuation at historic cost to one at replacement cost, it is first necessary to value capital goods acquired over a number of different periods on a homogeneous basis, i.e. base-year prices. The price and volume indices derived in the process can therefore be used to calculate the value of the consumption of fixed capital at constant prices and the associated price index.

Where there is no perpetual inventory of the stock of fixed capital goods, the change in the consumption of fixed capital at constant prices can be obtained by deflating the current price data by price indices derived from data on gross fixed capital formation by product. Account has then to be taken of the age structure of the capital goods acquired.