The National Statistics Office published for the first time an index of industrial production, considered by many statistical institutes as a fundamental indicator of short-term business statistics.
Production determines the use of resources and labour, and hence influences growth, income generation, and eventually, prosperity. Regarded as one of the most important measures of economic activity, the production index monitors developments in the production cycle, and this can be used to assess the development of the GDP as a whole. In Short-term Statistics, the Index is considered as the reference indicator for economic development. As such, it is used mainly to identify turning-points in economic development at an early stage. The main advantage of a production index compared with other major indicators is its combination of timely availability and, simultaneously, its relatively detailed activity breakdown. The index of industrial production is disseminated monthly while the GDP is compiled and disseminated quarterly. As a result, the Index is a valuable tool for observing specific trends in the economic cycle in a relatively short period.
The local index of industrial production, published on 15 December, incorporated a time series of data from January 2005 onwards. The number of manufacturing enterprises submitting data for the compilation of this indicator amounted to 230. These were selected from approximately 650 manufacturing enterprises which, in total, account for 95 per cent of manufacturing output.
Three methods were used in order to compile the Index:
i. Physical quantities were collected from 130 manufacturing enterprises
ii. Producer prices were used to deflate the turnover collected from 70 enterprises
iii. Hours worked were used as a proxy to estimate production for an additional 30 enterprises. The hours-worked estimation is used for those enterprises that do not have standardised production (e.g. servicing of aircraft)
By means of specific statistical techniques, these three methods are grouped together to form the index of industrial production. The base year for this index is 2005.
The news release indicated that the total index for October 2009 stood at 107.4 points, up by 3.9 per cent when compared to the previous month, but down by 6.2 per cent when compared to October 2008. Overall since 2005, the total industrial production index peaked in June 2007, standing at 131.5 points. Compared to this point in time, the October 2009 level is down by 18.4 per cent. The most significant declines were attributable to the closure of a number of major clothing manufacturers. Furthermore, the production of cigarettes by the major producer ceased since the inception of the index base year. On the other hand, notable gains were registered in the production of pharmaceutical products and the servicing and repair of aircraft, mitigating the negative effects of the other sectors when compared to 2005. The index of the manufacture of electronic components rose by 8.8 per cent over the previous month, although it is still down by 21.9 per cent when compared to its highest point in September 2007.
Owing to its importance, this index is considered to be one of the core variables of the Special Data Dissemination Standard (SDDS) of the IMF. In line with Malta’s obligations in respect of SDDS compliance, the Index will be published monthly with a maximum delay of 45 days from the reference month.
