Industrial production is a macroeconomic indicator that reflects the dynamics of industrial production in a country’s economy over a certain period.
In accordance with international UN recommendations, the calculation of the industrial production index takes into account mining and manufacturing industries, the supply of electricity, steam, and gas, as well as water supply and waste disposal.
The industrial production index can be calculated in annual and monthly terms. When calculated in annual terms (YoY), the indicator is determined as the percentage of industrial production in the current period to the volume of production in the same period of the previous or base year, and it can be calculated monthly (for example, in the USA, Russia, Turkey, Poland, Germany, Japan, and Mexico), quarterly (in Georgia, Hong Kong, Switzerland, Australia, Uzbekistan, New Zealand, and Morocco), and annually (for example, in Cuba and the Democratic Republic of Congo).
The monthly industrial production index (MoM) is calculated as a percentage of the current month’s production to the previous month’s industrial production. The indices for Brazil, France, Croatia, Greece, Sweden, Italy, and Ireland can be cited as examples.
In most countries, industrial production indices are calculated and published by national statistical offices (e.g., in Denmark, Austria, and Lithuania) and central banks (in Jordan, Venezuela, and Nigeria).
Today, in many countries of the world, industrial production in the structure of GDP is in second place after the service sector and is closely related to other sectors of the economy. Therefore, there is a need for the existence of an indicator, with the help of which it is possible to analyze the level of development of industrial production in the economy of a particular country.
The economic meaning of this indicator lies in the fact that it allows one to assess the stage of industrial production in the country (the stage of growth, peak, decline, or crisis), as well as to predict its further development in the long- and medium-term. This indicator is of greatest importance in industrialized countries, for example, in the USA, the United Kingdom, Canada, Norway, and Finland. The graph below shows the dynamics of industrial production indices (in annual terms) in these countries for 2016-2021.
The share of industry in the GDP of these countries is much smaller than in developing countries. Therefore, it is more likely to have the least importance, or simply “less importance,” than the dynamics in services. Due to lockdowns and other restrictions in 2020, the industry of most countries reduced production and was in crisis.