Indices of industrial production in Russia

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Coral Garrett
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1 Idices of idustrial productio i Russia 1. The idex of idustrial productio 1 (IIP) is a short-term idicator of the ecoomic cycle, which eales to aswer the questios aout a curret developmet stage of the ecoomy ad whether it experieces a dowtur or a growth or a iflectio poit. The IIP eales to estimate chages i the GDP i geeral ad it esures a advatage of timeliess the last oe. The aim of the IIP is to reflect the value added chages resulted from the ecoomic activity. Regardig complexity of the value added calculatio o a mothly asis, Russia statisticias use data o productio output i terms of the atioal classificatio of products as a alterative idex to measure idustrial productio. Those are primary products divided y properties ad use wherever possile. They are mostly accouted i physical uits. I the trasitio ecoomy statistical data i physical uits are eeficial to cost evaluatio ecause of the complexity to exclude iflatioary compoet from the output volume uder a high iflatio ad rapid structural chages. Quatitative output idicators may e used to measure homogeeous products oly. They are difficult to calculate for high-tech miscellaeous products of rapidly chagig property characteristics. For the latter data o the value output are collected ad deflated y relevat price idices afterwards. 2. The IIP is compiled i stages accordig to the Russia methodology. I the first stage idices for elemetary activities are calculated o the asis of market askets y Laspeyres formula 2, wheever it is possile: i t / N q 1 N q 1 t p p, where: i t / : a idex of kid of activity for the referece moth t i relatio to the average for a moth productio of the ase year; q t, q : commodity productio i physical uits (or i value deflated) for period t ad the average for a moth of the ase year respectively; p : average aual price of a product uit i the ase year; N: umer of items y kid of activity chose for the asket. The idex shows a chage i gross output volume i.e. quatity of products y activities, which are estimated at the average price per uit of product i the ase year. Strictly speakig, weights are shares of products i value terms, which make up the asket y activities for the ase year. It is quite reasoale to assume, that a share of items i the asket is proportioate to the volume of productio ad the value added y the activity, the the idex umers of gross output will e close to the idex umers of value added. 1 Methodology of short-term usiess statistic: Iterpretatio ad guidelies. Eurostat, The IIP is oe of the idicators that coutries, which have suscried to SDDS (Special Data Dissemiatio Stadard), must calculate ad pulish i accordace with iteratioal stadards. 2 The Laspeyers idex is preferred due to feasiility of rapid provisio of iformatio, which is idispesale for calculatio, good practice of calculatio (weights chage is ot required for processig of a ew period data) ad ease of iterpretig the result. 1

2 I later stages elemetary activities idices are aggregated i accordace with their hierarchical structure i OKVED 3, with idices of higher classificatio groups ad the idustrial idex (C + D + E). The value-added 4 for the ase year is used as weights for aggregatio. The calculatio is performed y the formula: I vd t / m I t / 1 m 1 D D, where: I vd t / : productio idices for kid of activity m (y sugroup, group, etc.) i OKVED for t-period t are compared to the average for a moth productio of the ase year; I t / : productio idices y types of activities, otaied at previous stages of calculatio, withi a relevat OKVED group; D : value added y activities for the ase year withi a relevat OKVED group; m - umer of activities fallig withi a relevat OKVED group. At each aggregatio stage of a IIP, five ase idices, fixed i relatio to the average mothly output of the ase year, are calculated respectively for: A reportig moth; A period sice the egiig of the year; A moth prior to the reportig moth; A correspodig moth of the previous year; A correspodig period sice the egiig of the previous year. Three derivative idices 5 : A moth i relatio to the previous moth; A moth i relatio to the correspodig moth of the last year; A period sice the egiig of the reportig year to the correspodig period sice the egiig of the last year. Actually, this algorithm is implemeted to compile idices, which Russia users accustomed to employ. However, iformative capacity, which is iheret i the fixed ase idex, which provide maximum amout of iformatio aout movemets of the ecoomic cycle, it is desiged to reflect, is lost whe derivative idices are used. 3. The quality of the IIP is directly depedet o availaility of data o productio output to e received uder time of four days. This idex is to reflect productio y all ecoomic uits ad Rosstat has to comie methods of full-scale oservatios ad sample surveys to compile it. Large ad medium-sized eterprises report mothly, supplyig short-term iformatio o the productio of goods ad services. All these eterprises, regardless 3 The Russia Statistical Classificatio of Ecoomic Activities (OKVED) ad NACE Rev. 1 classificatios are directly compatile at the 4-digit level. 4 The advatage of the value added is that it cotais o doule coutig, does ot deped o the orgaizatioal structure of eterprises ad represets a real iput y activity to cumulative productio. 5 A compariso of productio for period t with productio for period t-1 (t-) of time is ot performed y direct compariso of their deviatios from the average value of the ase year. 2

3 Kids of products of their pricipal activity, supply data o actual productio, i accordace with the list prescried y the ONS. Small usiesses (legal etities ad idividual etrepreeurs) make a sigificat cotriutio to the productio of may goods ad services i the Russia ecoomy. I respect of these ecoomic etities iter-year sample surveys 6 are coducted uder the Russia legislatio. The iformatio acquired from these surveys eales to create a system of coefficiets, which are used for mothly upward adustmets for commodities ivolved i compilig the IIP, i accordace with estalished methods ad algorithms. Timeless pressure (o later tha the fourth day of a referece moth) o data reportig for large ad medium-sized eterprises reduces to a certai extet quality of iformatio ad causes further refiemets from the respodets to e doe i the previously sumitted mothly data. A scale of refiemets with respect to the earlier mothly data o the productio output i physical or i value terms are ofte statistically sigificat ad ualaced that ca e see i Chart 1 elow. Chart 1: Refiemets value of data o the productio output (Refiemets as % of productio output i physical or i value terms) Refiemets, % Expected ormal Refiemets alter the idex, calculated i relatio to the previous moth, which, i tur, will impact o dyamics of the idicator for a loger period. Some refiemets o the productio of goods ad services, reported y respodets withi a year, are take ito accout, whe curret idices are compiled. Most of refiemets are sumitted to the ONS i aual reports, whe respodets supply data o aual productio of goods ad services, specifyig their output y moths. I relatio to the aove, mothly compiled ad pulished idexes are ot usually reviewed quickly. 6 Cesuses of small usiesses are coducted periodically, to clarify the parameters of their activities, otaied o the asis of sample surveys. 3

4 Revisio ad re-pulicatio of mothly idexes are carried out y the ed of the aual IIP compilatio 7. A maor effort i adustmet of mothly ad aual IIPs is made to avoid discrepacies etwee mothly ad aual data calculatio results, without shortterm idustrial developmet treds umers eig deformed, ad to make a complete use of the iformatio cotaied i the aual data. The adustmet algorithm of mothly ad aual data calculatio deliveries should e the oe to result i mothly data determie short-term treds umers of a summarized idex ad aual data determie log-term treds umers of this idex. Data adustmet is mostly performed at the level of products. After aalyses of discrepacies, which may e caused y solely refiemets i some earlier provided mothly chages data or were also attriutale to iclusio of additioal products for calculatio or resulted from disaggregatio of product group y compositio 8, Rosstat applies the followig methods of idex adustmet: update of mothly data, produced uder aual developmet, are used to recalculate short-term idices of products selected for i-lie accoutig processig; adustmet coefficiets 9, which defie a impact of these products o chages y kid of activity, are used i relatio to selected products accouted for oce a year ad/or compositio of product group. 4. Beside aual updates of the IIP, Rosstat exercises revisio of the idices i coectio with chagig the ase year for calculatios. Techological ad orgaizatioal structures of productio are costatly upgraded i trasitio ecoomies, a ratio of prices for products ad, cosequetly, the value added structure of actual activities, a chage of the ase year ca sigificatly affect a IIP umers. The weightig ase is updated i depedece o the extet of structural chages i productio. The more rapid these chages, the more ofte the weightig ase has to e updated. Aual update of the weightig ase is laorious, ecause it icreases sigificatly calculatios caused y costat adustmet of log-term timeseries of mothly idices. Whe makig a decisio o a ase year, it is take ito accout, that it should e represetative i terms of productio structure, techology ad orgaizatio of productio. Actually, over the period from 1990 to 1995, whe structural chages were very rapid, Russia chaged a ase year aually. For the period from 1997 to 2000 the ase year was The ecoomic crisis i 1998 led to sigificat structural shifts i the idustry. I Jauary 2001 the year 1999 was take as a ase year ad weights were calculated for "homogeeous" idustries opposite to "mixed" idustries 7 The aual IIP is compiled with data o productio of 3.5 thousad product groups ad i mothly calculatio aout 750 product groups are used. 8 Whe refiemet is sustatial, as a exceptio, additios are made to the mothly idex calculatio "asket" ad retrospective re-calculatio of the idex is made. For example, Alumiium widows ad doors were ot icluded the "asket" of the 1999 referece year. Cosiderig, that these products have occupied a sustatial share of the productio, a decisio was made to iclude them ito accout util movig to a ew ase year. 9 The coefficiet is produced from a compariso of aual idices, calculated o the asis of the products, which are icluded i the aual idex "asket", ad o the asis of products ivolved i short-term calculatios, i which refiemets of previously provided mothly dyamics are used. 4

5 like it had ee efore. I 2005, whe atioal statistical classificatio of ecoomic activities (OKVED), comparale at the 4-digit level of NACE, was adopted, the year 2002 was chose as a ase year. 5. Time-series are of iterest for ecoomic aalysis, ad eale to defie ecoomic cycles ad their turig poits. Some aselie data reflect mai treds of productio developmet as well as impact of the caledar, seasoal ad irregular factors. Seasoal adustmet esures time comparaility withi a year, providig a more accurate short-term productio chages trackig ad forecast of its short-term developmet. Rosstat employs the "X-12-ARIMA" program for idetificatio ad estimatio of mai treds of productio developmet, seasoal adustmet ad cotrol of irregular compoets of time-series. Need for rapid compilatio of seasoally adusted idicators of productio chages, forces to carry out seasoal adustmet at a sufficietly high level of OKVED (sectio or susectio). Accoutig for a high ecoomic growth ad rapid structural chages i the Russia ecoomy, time-series for seasoal adustmet are uilt for a sufficietly log period of time, coverig at least five years, ad they are actually a rage of fixed ase idices. Seasoal adustmet of the IIP is carried out mothly. The series of seasoally adusted idices are preseted to users i graphic form. 5

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