Definition: Classification of products

Category: Classifications

Different classifications are needed to cater for the different functions which statistics are required to perform, so at international and national levels classifications have been developed for a wide range of purposes, whereby each has its own specific area of application depending on the subject of classification. Economic classifications can be broadly divided into two categories:

- Classifications of economic activities cover all economic activities - from agriculture to services - and are used to classify economic entities (enterprises, local units and similar statistical units).
- The outputs of the economic entities are termed products and are generally divided into goods and services. They are classified in product classifications, wherein goods classifications have traditionally been far more important than classifications of services.  Product classifications are therefore used for statistics on very many aspects of the production and use of products and on their price dimension. Examples of this type of product-related data are foreign trade statistics, statistics on production and consumption, energy statistics etc.

There are two categories of product classifications: those in which the classification criterion is the industrial origin of the goods and those which are structured according to the material of which the goods are made. Product classifications of the first category, which are based on the criterion of industrial origin, can therefore be related to a classification of economic activities, so that the resulting classification is symmetrical to the classification of economic activities.  Each product is allocated to the economic activity which, by definition, produces it (e.g. milk powder -> milk processing, lawnmowers -> production of agricultural machinery, retail trade in fuels -> petrol stations), on condition that each product is entered under only one heading in the classification of activities. Product classifications which are mainly structured according to the material of which the goods are made have their historical origin in the requirements of customs and foreign trade statistics.  But this does not necessarily mean that they do not take some account of the industrial origin of the goods.

There are various product classifications, which, as has been said above, serve different purposes: foreign trade (Harmonized System [HS], Standard International Trade Classification [SITC], Combined Nomenclature [CN]), industrial production (List of products of the European Community [PRODCOM List]), compilation and presentation of statistics at aggregated level (Central Product Classification [CPC] at world level, Statistical Classification of Products by Activity in the European Economic Community [CPA] at European level), transport (Standard Goods Classification for Transport Statistics [NST]), etc.