International Workshop on Industrial Statistics Dalian, China June 2010

1. International Workshop on Industrial StatisticsDalian, ChinaJune 2010 Harmonization of statistical methods related to measurement of production capacity utilization Shyam Upadhyaya UNIDO

2. Outline • Different measures and levels of production capacity • Data sources for production capacity and its utilization • IIP and production capacity utilization • Harmonization issues

3. 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 capacity Full utilization of engineering capacity may not be economically feasible

4. 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

5. 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 quantity C – Working capacity product/product lines U – Rate of capacity utilization w – share of i-th product in total output

6. Production capacity in monthly/quarterly production report – UNIDO experience Report Type I Report Type II

7. 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

8. Derived rate of utilization from production and capacity indices US sample data

9. 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

10. 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

11. 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

12. 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)?

13. Thank you for your attention!