Definition: Industrial production index

Category: Short-term statistics

The production index is an important business cycle indicator which shows the monthly activity of the industrial sector, which is the one of the most volatile components of the economy. It also records the evolution of production over longer periods of time.
The legal basis for the production index is the Council Regulation No 1165/98 of 19 May 1998 concerning short-term statistics (STS-R).

Definition and coverage

As specified in the STS-R, and in line with traditional practice in business statistics, the production index  should show the evolution of value added at factor cost, at constant prices. Value added at factor cost can be calculated from turnover (excluding VAT), plus capitalised production, plus other operating income, plus or minus the changes in stocks, minus the purchases of goods and services, minus other taxes on products and taxes linked to production .

This index of production (net output at constant prices) should take account of

- variations in type and quality of the commodities and of the input materials,
- changes in stocks of finished goods and work in progress,
- changes in technical input-output relations (processing techniques) and
- services such as the assembling of production units, mounting, installations, repairs, planning, engineering, creation of software.

In practice, the ideal production index can only be approximated using either input data (consumption of typical raw materials, energy or labour) or output data (production quantities, deflated production values or deflated sales values).

For more information see Eurostat New Release No. 38/2000 http://ec.europa.eu/eurostat/ramon/statmanuals/files/news_release_38-2000_EN.pdf