Board of Governors of the Federal Reserve System

Industrial Production and Capacity Utilization - G.17

Performance Evaluation of the Federal Reserve G.17 (419) Statistical Release — June 2014

II. Changes in Indexes Since June 2011

Since mid-2011, when the Federal Reserve last reported to the Office of Management and Budget (OMB) on the G.17 statistical release, the methods for estimating a number of industrial production indexes and capacity series were changed in response to either the availability of new data or the discontinuance of previous data sources.[1]

The annual revisions issued in March 2012 and in March 2013 incorporated annual benchmark data for manufacturing production from the 2010 and 2011 Annual Surveys of Manufactures (ASM), respectively. In 2014, an annual revision that used detailed benchmark data from the 2012 Census of Manufactures (COM) could not have been issued until at least the fourth quarter of 2014 because of the timing of the release of the COM. Instead, an annual revision was issued in March 2014 that incorporated a few methodological changes and comprehensive annual data for mining and publishing.[2]

II.A. 2007 North American Industry Classification System

The most notable global transformation of the indexes was the change in classification system from the 2002 version of the North American Industry Classification System (NAICS) to the 2007 version, which occurred in the 2012 annual revision. The 2002 and 2007 versions of NAICS were fairly similar for the industries covered by industrial production, but the composition of some industries changed and one six-digit industry was eliminated, with its establishments being assigned into a number of other NAICS categories. Benchmark production indexes for industries classified by the 2007 NAICS were constructed back to 1972 based on bridge tables from the 2007 Economic Census.

II.B. Discontinuation of Current Industrial Reports by the U.S. Census Bureau

The IP indexes were also significantly affected by the discontinuation of the Census Bureau's Current Industrial Reports (CIR) in the middle of 2011. Data from these reports were used extensively as monthly and quarterly indicators for industrial production. At the time of the 2012 annual revision, data on production worker hours formally became the indicators for many of the indexes that had previously used CIR data. For a few indexes, however, product data replaced the CIR data as the high-frequency indicator. In particular, the new monthly indicator for fertilizer was calculated from data from the Fertilizer Institute; the new indicators for the six categories of communications equipment were derived from the utilization rate reported for that industry in the Quarterly Survey of Plant Capacity (QSPC); and the new indicators for the four indexes for computer storage and peripherals were estimated from data from IDC on U.S. domestic absorption of computers.

II.C. High-Technology Industries

The high-frequency indicators for computers and peripherals have evolved greatly over the past three years. Data from IDC on business and consumer purchases of computers were reintroduced as a determinant of market splits for the indexes for computers in the 2012 annual revision. In the 2014 annual revision, the high frequency indicators from 2012 forward for all of the indexes for computers and peripherals except servers were changed to production worker hours, though the splits between business and consumer use still reflected IDC data. Also in the 2014 annual revision, the production indicators for servers were changed to be calculated from QSPC data.

The estimation of the semiconductor indexes has also evolved during the past three years. In the 2013 annual revision, the producer price index for microprocessors (MPUs) was replaced by a hedonic price index in the calculation of its annual benchmark price index. The hedonic price index was further refined for the 2014 annual revision, which also featured a refinement in determining the U.S. domestic share of the worldwide shipments of semiconductor chips based on an extensive database of global semiconductor factories maintained by iSuppli. In addition, the estimation procedures for prices of DRAM, flash, and other types of memory incorporated the price index for MOS memory chips published by the Bank of Japan (BOJ). Most of the historical time series for the price indexes used in the output indexes for memory continue to reflect a matched-model chain-weighted aggregation of detailed memory prices, but the BOJ price index is used to interpolate the historical quarterly price indexes to a monthly frequency and to extend the quarterly indexes beyond their last available date.

II.D. Other Changes to the Indexes

In addition to the changes to the indicators forced by the discontinuation of the CIRs and the changes to the high-technology indexes, the methods for estimating several other indexes were revised in the past three years.

The following changes were instituted with the 2012 annual revision:

  1. Data from WardsAuto and the National Truck Equipment Association were introduced that indicate the consumer/business split of light truck production.
  2. Daily data from Bentek were introduced as the initial indicator for natural gas production prior to the availability of data from the Department of Energy.
  3. The capacity estimates for veneer, plywood, and engineered wood incorporated data on plywood and oriented strand board capacity from APA — The Engineered Wood Association.

The following changes were instituted with the 2013 revision:

  1. Data from the National Oilseed Processors Association and the National Cottonseed Products Association supplanted production worker hours as the production indicator for soybean and other oilseed processing for recent years. The index was based on data from a CIR for the period until the middle of 2011.
  2. Data from the Brick industry Association were introduced as the monthly indicator for brick production. As with oilseed production, the indicator previously had been production worker hour data for recent years because the discontinuation of the CIRs eliminated a data source that had been used for years.
  3. Data on shipments from the American Gear Manufacturers Association were introduced as the production indicator for speed changers, drives, gears, and power transmissions. Previously, output had been estimated based on production worker hours.
  4. Quarterly data on operating revenue from the U.S. Census Bureau's Quarterly Services Survey were instituted as the output indicator for periodical publishing. Previously, output had been inferred from production worker hours.

The 2014 annual revision included the following changes:

  1. Data on shipments from the Business and Institutional Furniture Manufacturers Association replaced production worker hours as the indicator for the output of business furniture.
  2. The quarterly Lighting Systems Index from the National Electrical Manufacturers Association was instituted as the production indicator for electric lighting equipment, replacing production worker hours.
  3. The design matrix for the estimation of seasonal factors for motor vehicle assemblies was changed to no longer allow the summer plant shutdown period to be in either July or August; the shutdowns have been reliably slotted for July since the mid-1990s.

[1] A description of the current methodology for estimating industrial production indexes is described here.
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[2] More detail on the changes introduced in the past three annual revisions to the G.17 can be found in the releases for the revisions: (2012, 2013, and 2014) and in the articles on the 2012 and 2013 revisions.
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Last update: June 27, 2014