Industrial production (volume) index overview

Data extracted in October 2019.

Planned article update: October 2020.

Highlights
Figure 1: EU-28, Industrial production for total industry and main industrial groupings, 2005-2019, monthly data, seasonally adjusted, 2005-2019, 2015 = 100 -Source: Eurostat (sts_inpr_m)

The industrial production index (abbreviated IPI and sometimes also called industrial output index or industrial volume index) is a business cycle indicator which measures monthly changes in the price-adjusted output of industry. This article takes a look at the industrial production index as it is calculated in the European Union (EU) as well as in some EFTA and candidate countries.
Please also see the monthly Eurostat News Release 14 September 2020.

Full article

General overview

Since mid-2003 total industrial output had been on a relatively steady growth path. The production level reached its highest value in April 2008 and afterwards fell continuously for one year until April 2009 when it was 21 percentage points below its former peak. Afterwards the indicator steadily increased again and regained over 90 % of its pre-crisis value by May 2011.In the second half of 2011 and in 2012, industrial production in the EU-28 was on a slow downward trend. Since early 2013 the index value slightly but steadily increased and almost regained its pre-crisis level by the end of 2017. In 2018 and 2019 industrial production in the EU-28 stagnated (Figure 1).

Figure 1: EU-28 Industrial production for total industry and main industrial groupings, monthly data, seasonally adjusted, 2005-2019, 2015 = 100, Source: Eurostat (sts_inpr_m)

Comparison by main industrial groupings

Capital and intermediate goods

When distinguishing between the main industrial groupings, data show that the production of capital and intermediate goods peaked just before or at the same time as total production and then fell rapidly for over one year until April 2009. Afterwards production in these areas recovered relatively quickly until the first half of 2011. A moderate decline followed this recovery which lasted until early 2013. Between 2013 and 2018 production in these areas increased again until early 2018 and since then has more or less stagnated.

Durable and non-durable consumer goods

The production of consumer durables reached its peak several months before total production and had already been on a slow decline before the onset of the crisis. The development of non-durable consumer goods was less dramatic than in the other main industrial groupings. The overall decline in this sector was slower and amounted to only around 7 percentage points (Figure 1). Ever since the volume of non-durable consumer goods has developed much in line with total production.

Energy products

For energy products the development of the output level was quite different from the evolution of the other areas. During the period from April 2008 to April 2009 production levels in this industry fell by 14 percentage points. But production levels in the energy sector tend to be rather volatile and the drop in production during the main years of the crisis was not so much different from e.g. the period between March 2006 and January 2007 when it had already dropped by 10 percentage points. Overall, the production volume in the European energy production has been on a relatively stable downward trend for several years and in Summer 2019 stood only at about 80 % of the level in Spring 2008.

Development of main industrial groupings

Table 1 shows a breakdown of the general development of the main industrial groupings in more detailed NACE divisions. The 2009 decline in production was particularly strong for the production of basic metals, machinery and equipment, and for motor vehicles which together account for more than one fifth of total industrial production. The magnitudes of the various rates of change for consumer goods reflect consumers' possibilities and inclinations to adjust their consumption to the new circumstances in the economic crisis. (Table 1). The only sector that did not register a decline in production levels during the crisis years was the pharmaceutical industry.

Table 1: Annual rates of change for total industry, main industrial groupings and NACE divisions, calendar adjusted data, EU-28, 2005-2018 - Source: Eurostat (sts_inpr_a)

The growth rates for the different industrial sectors for the year 2018 are displayed in Figure 2. Strong increases were recorded for the production levels of pharmaceuticals, and other transport equipment while the production of tobacco products fell by 8 %.

Figure 2: EU-28 Annual rate of change 2018, calendar adjusted data - Source: Eurostat (sts_inpr_a)

The economic crisis did not start in all Member States at exactly the same moment (Table 2). Several countries (Estonia, Greece, Spain, Luxembourg, Malta and Portugal) already recorded rates of change below -4 % in 2008 but a relatively large number of countries still displayed positive growth rates of industrial production. In 2009 all EU countries experienced a fall in industrial production and the European average rate of decline was almost -14 %. In 2010 all EU countries with the exception of Greece, Croatia, and Cyprus had returned to positive growth rates. After two years of recovery the EU-28 as a whole in 2012 again displayed a negative industrial development. This downwards trend for the EU-28 continued for the following year. However the negative growth rates were smaller in 2013 than in 2012. In 2014 the EU returned to a positive growth which continued in 2015, 2016, 2017, and 2018. During the last four years particularly strong increases in industrial production (20 % or more) were recorded in Ireland, Latvia, Lithuania, Austria, Poland, Slovenia, and Slovakia.

Table 2: Industrial production by country, annual rates of change, calendar adjusted, 2005-2018 - Source: Eurostat (sts_inpr_a)

Data sources

Despite its name the industrial production index is not intended to measure production but should – in theory – reflect the development of value added in the different branches of industry. This means that the inputs obtained by one branch from another must be deducted from its gross output. In this way double counting of production is prevented and the degree of vertical integration of branches should not influence the results for the indicator.

In practice, however, it is difficult to collect value-added data on a monthly basis. Most statistical institutes therefore derive monthly production data from other sources including deflated turnover, physical production data, labour input, intermediate consumption of raw materials and energy etc.

Eurostat publishes, on a monthly basis, the industrial production index for the EU, for the euro area and the Member States; data are also collected for several non-EU countries (Table 2). Data are presented in calendar adjusted/working-day adjusted and in seasonally adjusted form. Currently the indices for industrial production are calculated with 2015 as the base year (=100).

Context

The industrial production index is one of the most important short-term statistics indicators. It is used to identify turning points in the economic development at an early stage and to assess the future development of GDP. In order to serve this purpose it is available on a monthly basis in a detailed activity breakdown and with a rather short delay (1 month and 10 days). The industrial production index is one of the so-called 'Principal European economic indicators (PEEI)' which are used to monitor and steer economic and monetary policies in the EU and in the euro area.

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Industry (NACE Rev.2) (t_sts_ind)
Industry production index (NACE Rev.2) (t_sts_ind_prod)
Industry (NACE Rev.2) (sts_ind)
Industry production index (NACE Rev.2) (sts_ind_prod)