Background Notes

Introduction  

Industrial Production and Turnover (IPT) monitors the volume of production and value of turnover of industrial local units. Two indices are compiled from the survey – the monthly index of production and the monthly index of turnover.

The monthly index of production measures the change in the volume of production (i.e. value added at constant prices) each month. 

The monthly index of turnover measures the change in the level of sales each month of industrial products, whether manufactured in the month in question or in previous periods (excluding non-industrial activity where practicable). The turnover indices outlined in this release are exclusive of VAT. 

The principal difference between the production and turnover indices is that the production index traces the quantitative volume of production (i.e. with the effect of price changes excluded) each month whether sold or not, whereas the turnover index reflects both the volume of sales and the price level.  

Starting with January 2015 updated industrial production and turnover indices are being published to base year 2015=100. 

Sample covered

Industrial Production and Turnover covers all the larger local units which between them account for the bulk of industrial output – in general those which in the base year 2015 had twenty or more persons engaged in NACE divisions 5 to 35. For certain sectors the threshold of 20 persons engaged is lowered where this is considered necessary to ensure representativeness of the sample or where data for a sector would have to be kept confidential if a threshold at 20 persons engaged was applied. The business activity classifications are based on the Statistical Classification of Economic Activities in the European Community (NACE Rev. 2).

The provisional results are published about 40 days after the reference month. At that point, the response rates are typically 46% of local units surveyed covering 84% of the value of production and 82% of the value of turnover. The corresponding figures for the final results, one month later, are 66%, 95% and 94% respectively. These response rates are based on averages for the 12 months of 2017. 

Methodology

Index calculation

Individual turnover sub-indices are compiled for each detailed NACE class (i.e. NACE 4-digit level). These sub-indices are combined to provide the indices for broader sectoral groupings (NACE 2-digit and groupings of NACE) using the turnover as the weight.  The production indices are created in the same way but use the gross value added at factor cost (GVA) as the weight. The production indices are calculated at constant prices, using the Wholesale Price Index (Base 2015 = 100) as deflators. The GVA and turnover weights are from the 2015 Census of Industrial Production (CIP). The weights and base year are revised every five years. 

Globalisation and Measurement of Industrial Production

The level shift of 26% in GDP in 2015 was driven by relocations of entire balance sheets to Ireland, with the activity related to these relocations having consequential impacts on the corresponding annual and monthly industrial statistics. These relocated balance sheets were dominated by intellectual property. The practice of relocating intellectual property to Ireland has been growing in recent years, but the scale of the relocations in 2015 was substantial and added €300 billion to Ireland’s capital stocks.

Associated with the relocations were significant increases in contract manufacturing activity attributable to Ireland. While contract manufacturing and outsourcing arrangements – both by Irish and foreign-owned enterprises - were not new per se, the level of increase seen in 2015 was substantially greater than in previous years. The Index of Industrial Production increased by 33% between 2014 and 2015.

The CSO’s treatment of contract manufacturing in the IPT follows the definitions set out in the UN 2010 International Recommendations for the Index of Industrial Production. The relevant section of the UN recommendations, on the treatment of outsourcing activities is as follows:

"Outsourcing of parts of the production process

If only part of the production process is outsourced, the principal is classified to the ISIC class that corresponds to the activity representing the complete production process, i.e., it is classified as if it were carrying out the complete process, including the contracted work, itself.

This applies not only to the outsourcing of support functions in the production process, such as accounting or computing activities, but also to the outsourcing of parts of the core production process, such as parts of a manufacturing process.

Outsourcing of the complete production process

In general, if the principal outsources the complete production process of a good or service, it is classified as if it were carrying out the production process itself. This applies in particular to all service-producing activities, including construction.

In the case of manufacturing, however, the following special considerations apply. In manufacturing, the principal provides the contractor with the technical specifications of the manufacturing activity to be carried out on the input materials. The input materials (raw materials or intermediate goods) can either be provided (owned) by the principal or not.

A principal who completely outsources the transformation process should be classified into manufacturing if and only if it owns the input materials to the production process – and therefore owns the final output." 

On the basis of these recommendations outsourced production is included as part of an enterprise’s Irish production. The inverse (i.e. Irish companies being sub-contracted to produce for foreign companies) has been excluded to avoid double counting.

The PRODCOM annual survey provides statistics on domestic production sold in Ireland annually.  

Seasonal Adjustment 

Seasonal adjustment is conducted using the direct seasonal adjustment approach. Under this approach each individual series is independently adjusted, i.e. aggregate series are adjusted without reference to the component series. Seasonal adjustment models are developed for each series based on unadjusted data spanning the months from January 2000 to the current period. These models are then applied to the entire series. Seasonal factors are updated each month.

The adjustments are completed by applying the X-13-ARIMA model, developed by the U.S. Census Bureau to the unadjusted data. This methodology estimates seasonal factors while also taking into consideration factors that impact on the quality of the seasonal adjustment such as:

• Calendar effects, e.g. the timing of Easter

• Outliers, temporary changes and level shifts in the series 

For additional information on the use of X-13-ARIMA see https://www.census.gov/srd/www/winx13/ 

NACE classification

The business activity classifications used in this Statistical release are based on the Statistical Classification of Economic Activities in the European Community i.e. NACE Rev. 2. For further information on the NACE Rev. 2 classification of industrial activity, visit the CSO website  http://www.cso.ie/px/u/NACECoder/NACEItems/searchnace.asp 

Definitions

"All Industries"

All industries are comprised of all sectors classified NACE 05 to 35 inclusive. This includes Mining and quarrying NACE 05 to 09, Manufacturing Industries NACE 10 to 33, Electricity, gas, steam and air conditioning supply NACE 35.

"Manufacturing Industries"

Manufacturing Industries is comprised of all sectors classified NACE 10 to 33 inclusive.

"Transportable Goods Industries"

Transportable Goods Industries is comprised of all sectors classified NACE 05 to 33 inclusive. This includes Mining and quarrying NACE 05 to 09 and Manufacturing Industries NACE 10 to 33.

 “Modern” Sector

The Modern Sector includes the following industrial sectors:

NACE 20.00 - 21.20 Chemicals and pharmaceuticals

NACE 26.00 - 27.90 Computer, electronic, optical and electrical equipment

NACE 18.20 Reproduction of recorded media

NACE 32.50 Medical and dental instruments and supplies

"Traditional” Sector

The Traditional Sector includes All Industries (NACE 05 to 35) excluding the “Modern” sector as detailed above.  

Wholesale Price Index (Base Year = 2015)

The wholesale price indices were revised in March 2018 to include updated weights (base year = 2015). New base year weights were compiled for the Wholesale Price Index using the results of the 2015 Census of Industrial Production (CIP) and the Prodcom Inquiry surveys. New base weights were applied to each three digit NACE group on the basis of the Census of Industrial Production and the commodity group weights were assigned on the basis of the Prodcom Inquiry. For further information on the updated WPI indices see the CSO publication  

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