Netherlands - Industrial Production

The development in industrial production, published each month by Statistics Netherlands, is one of the most significant economic indicators. This development is commonly presented as a value added quantity index (production index) which refers to a particular base year. The value added of goods and services is the value of produced goods and services minus the value of raw and auxiliary materials, semi manufactured products and services necessary to produce them. Every month Statistics Netherlands also publishes sales indices, subdivided into domestic and exports, of industrial companies. The sales indices of industrial companies are calculated comparing the sales from all industrial companies with at least twenty employees in the month under inquiry with the sales in the average month in the base year 2000. Additionally Statistics Netherlands publishes monthly indices on the value of received orders, subdivided into domestic and foreign orders. All the above indices aim to provide information on the economic process in industry, shortly after the end of the month under review.

Production

Industrial production, within the scope of the production index, must be viewed as the volume development of the gross value added at basic prices. The value added is defined as the total production value minus the total consumption value. In the total consumption value is included the value of goods and services which entered the production process as input to create the total output (production value) of a particular group of industry. Gross value implies that depreciation of fixed capital is included. Indirect taxes which increase the cost price and subsidies which reduce the price also play an important part in the calculation of value added. For example: excise duties on domestic purchases of tobacco and alcoholic beverages. Value added at basic prices does not include indirect taxes and subsidies (with the exception of non-product related taxes and subsidies). In value added at market prices does are indirect taxes and subsidies included.

Sales

Sales refer to the invoice value (excl.VAT) of sales to third parties of goods and services processed in the company. Sales includes excise duties, taxes on passenger cars and motorcycles and deposits. Discounts and bonuses are excluded. Total turnover covers domestic and international sales. Foreign sales refers to direct exports by the manufacturing industry. Exports through exporters or other non-manufacturing companies are included in domestic sales. The data are collected from manufacturing companies with at least twenty employees. The most recent indices for turnover are provisional. Due to more response of companies the indices can change.

Received orders

Received orders refer to the value (excl.VAT) of orders accepted by manufacturing companies in the period under review. The total order receipt covers domestic as well as foreign orders. The data are collected among manufacturing companies which employ at least twenty persons, however, not all industry classes are included. The most recent indices for received orders are provisional. Due to more response of companies the indices can change. It occurred that the changes sometimes can be substantial.

Average daily production

The average daily production is calculated using a regression method.

An adjustment is being made for changes in production because of:

• national holidays
• bridge days
• working day effects
• leap year effects
• shifting holiday patterns

This results in the so-called "average daily index" which is significant for the determination of development of production volume of a certain month in a particular year compared with the same month in the previous year.

Production seasonally adjusted

The average daily production is seasonally adjusted. Data on industry classes are published every quarter, data on industry, manufacturing, mining and quarrying and public utilities every month. A correction factor is calculated for each class. The subsequent compilation of the aggregates takes the share of each class into account. This results in the so-called "average daily index, seasonally adjusted" which is significant for the determination of development of production volume of a certain period in a particular year compared with the previous period in the same year.

Classification

At company level, the volume developments of production and sales are divided into the sections mining and quarrying, manufacturing industry and public utilities. These three sections together make up industry. Usually, industry also includes construction. This branch of industry, however, is not included in the production index, nor in the sales index of industry. The manufacturing industry is divided into divisions, groups and classes based on the Standard Industrial Classification of all Economic Activities (SIC) 1993 of Statistics Netherlands; in this classification, companies are classified according to main production activity.

Basic data for the production index

Ideally, the determination of production volume developments would require monthly data on the production of goods and services and the use of raw and auxiliary materials of all companies. In practice, the number of interviewed companies as well as the number of respondents are limited. For each group of industry, an indicator is selected which most truthfully reflects the development of the gross value added at basic prices. Turnover is the most significant indicator of the production index, if possible in combination with stock data. Producer price index figures are essential for the calculation of volume developments. Other indicators are real production and/or consumption data and hours worked. If monthly data on a particular group of industry are not available, whereas, for instance, quarterly data are, the latter will be converted to monthly data. Statistics Netherlands calculates the production index as a chain index. The monthly volume development of a particular year is calculated on the basis of the average of the previous year. Next, the index is calculated by linking these developments to the base year 2000. The most recent indices for production are provisional. Due to more response of companies the indices can change.

Weighting

The volume index figures of production in the various categories, industry groups and classes are weighted by the gross value added at basic prices from the National Accounts. In the National Accounts macro economic data are consistently integrated. The weighting coefficients used in a specific year, are based on the previous year of the most recent National Accounts.

Confrontation with National Accounts

The aim of the production index is to measure the volume change of the gross value added at basic prices. This can often not be measured directly because short-term information on value added is lacking. Verification of the production index is therefore necessary. In the compilation of the National Accounts annual input-output tables are drawn up in real prices and in basic prices. The latter tables can be compared with the results of the production index.

Differences between the production index and the gross value added at basic prices may occur for the following reasons:

1. Changes in the structure of costs
2. Incomplete observation of enterprises
3. Inadequate specification of the available information

It will be clear from the above that differences may arise between the development of production within the scope of the production index and annual calculations of National Accounts. Therefore, the production index is adjusted annually to the three most recent years of National Accounts available. Figures referring to the year t-3 are considered permanent because all the available information has been incorporated. Figures referring to the years t-2 and t-1 are provisional, since not all information is available in detail.

After the publication of final results CBS only updates the results if there are major revisions / corrections are necessary.