Division 1) Variable 140101: Production (volume)

Production in short term business statistics is required as an index. The production volume index is the reference indicator for economic development and it is used in particular to identify turning points in economic development at an early stage. It should be presented in the form of a Laspeyres type index, comparing the current volume of production to the corresponding volume of production in the base period.

Theoretical target of the production volume index:

• In the view of business cycle statistics, own output should be measured. The terms ‘production’ or ‘output’ in the sense of business cycle statistics do not include inputs from other units.

• The objective of the production volume index is therefore to measure changes in the volume of value added at close and regular intervals.

• The changes in volume of value added measured should in general approximate the value added measured by the National Accounts concepts of value added.

Principles for the calculation of the production volume index:

• Data necessary for compilation of index as defined by theoretical target are usually not available on a monthly basis.

• Therefore, value added at basic prices is calculated only for the base period especially for updating the weights. If value added at basic prices is not available, gross value added at factor cost may be used as a proxy.

• The monthly continuation of value added in base period is done by suitable proxy values.

Calculation of the proxy values for continuation. Suitable proxy values for the continuation of the indices are:

• continuation with gross production values (deflated),

• continuation with volumes,

• continuation with turnover (deflated),

• continuation with work input,

• continuation with raw material input,

• continuation with energy input.

The correlation of these proxy measures with the development of value added may differ depending on the market activity. For each market activity a proxy with a high correlation should be chosen.

Relations to National Accounts:

• The common understanding of the term ‘production index’ as an ‘evolution of value added’ contradicts the definition of ‘production’ in the framework of national accounts or structural business statistics.

• In the terms of national accounts, the production index refers to the development of ‘value added’ in constant prices, whereas value added is in principle output minus intermediate consumption at basic prices.