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International Workshop on Industrial StatisticsDalian, China

June 2010

Shyam UpadhyayaUNIDO

Harmonization of statistical methodsrelated to measurement of production capacity

utilization

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Outline

Different measures and levels of production capacity

Data sources for production capacity and its utilization

IIP and production capacity utilization

Harmonization issues

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Definition and measurement

Production capacity refers to the quantity of output that can be produced in a specified period of time with the given stock of capital

Different measures of production capacity: Licensed, installed and working capacity

Working capacity may usually be less than LC and IC

Engineering and economic capacityFull utilization of engineering capacity may not be economically feasible

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Survey approach of estimating capacity

Production capacity – in its sense of current working and economically viable capacity is a data item for monthly/quarterly survey.

Capacity can be measured at the level of product line

Measurement of capacity can be quantity of output, material input and labour input

Due to the product variation production capacity cannot be directly aggregated

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Rate of capacity utilization

Interest of data users is not much to know the total capacity but the rate (or coefficient ) of capacity utilization:

Rate of capacity utilization for an establishment is calculated as;

i. One or one type product

ii. More than one product lines

Q – Actual production quantityC – Working capacity product/product linesU – Rate of capacity utilizationw – share of i-th product in total output

j

ijij

ij

j w

wC

Q

U

j

jj C

QU

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Production capacity in monthly/quarterly production report – UNIDO experience

Product/product line

CPC code

Unit Production capacity

Actual production RCU in %(optional)

Quantity Quantity ValueOffice use

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Product/product line

CPC code

Production capacity Actual use RCU in %Description Unit

Quantity QuantityOffice use

Report Type I

Report Type II

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Estimation of capacity from rate of utilization – US experience

Capacity is estimated as the product of rate of utilization and actual production

Index series are constructed production , for capacity and utilization

Level of capacity utilization can be derived from production index and capacity index

jjj UQC

QI CI

UI

100C

Q

I

IU

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Derived rate of utilization from production and capacity indices

75.0

85.0

95.0

105.0

115.0

125.0

135.0

145.0

155.0

J an F eb Mar Apr May J un J ul Aug S ep Oct Nov Dec

P roduction C apac ityUtiliz ation

US sample data

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OECD business tendency survey

Question: What is your current level of capacity utilization (in per cent of normal capacity utilization)

Answer: Type I (…%)

Type II up to 50 ___51-60 ___ 61-70 ___….91-100

Eurostat quarterly Industry Survey follows the same type of questions

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UN recommendations

IRIS-83 recommended installed capacity of machinery and equipment

IRIS-2008 has no mention of production capacity

IIP 2010 has mentioned capacity utilization as a complementary indicator to IIP

Above points underline the need of developing a commonly accepted standard for production capacity

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International harmonization of capacity utilization statistics

What we have in common

Recognition of the production capacity utilization as an important short term indicator for monitoring the production performance and growth trend

Data required for computation of capacity utilization can be collected from monthly/quarterly survey, which is the main data source for IIP too

Data can be collected from the same set of samples and in same frequency at the same level of industry and product classification

Aggregation method for capacity utilization is identical to IIP

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Differences in practices (or questions for discussion)

Is the capacity utilization a part of monthly/quarterly industrial survey or a part of the business tendency survey?

Should the data be collected separately for capacity and actual production/use to derive capacity utilization(a list of measurement units will be needed by ISIC)?

Should estimation of capacity utilization be left to the respondent (US and OECD practice)?

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Thank you for your attention!