The Impact of the North American Industry Classification System on U.S. Economic Data: In May 2001, NAICS Hits the Economic Indicators

By Parker, Robert P. | Business Economics, April 2001 | Go to article overview

The Impact of the North American Industry Classification System on U.S. Economic Data: In May 2001, NAICS Hits the Economic Indicators


Parker, Robert P., Business Economics


Based on materials provided by Thomas Mesenbourg of the U.S. Census Bureau, this article describes the forthcoming incorporation of the North American Industry Classification System (NAICS) into several of the principal Federal economic indicators prepared by the Census Bureau. NAICS is replacing the Standard Industrial Classification (SIC) system, which was used widely by government and industry to classify establishments.

In the October 1997 Business Economics, Maurine Haver reported on the development and advantages of NAICS, which had been recently issued by the Office of Management and Budget as the official industry classification system for use by U.S. Government statistical agencies and offices. [1] Haver alerted business economists that the new system, which would be implemented by Federal statistical agencies over several years, would not only affect industry analysts, but also macro forecasters and others who use the government's principal economic indicators. [2] Since 1997, NAICS has replaced the SIC in the many annual and census programs. It has been incorporated into the following Census Bureau programs: 1997 Economic Censuses; Current Industrial Reports; County Business Patterns; the Annual Surveys of Manufactures; Wholesale Trade, and Retail Trade; and the Service Annual Survey. It also has been incorporated into the Internal Revenue Service Statistics of Income program and the Bureau of Economic Analysis (BEA) 1997 Benchmark and Annual Foreign Direct Investment Surveys. [3]

In May and June of this year, the Census Bureau will release the first monthly indicators for which NAICS will replace the SIC. The dates of the release of these indicators and the latest month covered are as follows: manufacturers' durable goods shipments, inventories, and orders (May 25 with advance data for April); manufacturers' shipments, inventories, and orders (June 5 with data for April nondurable goods and revised durable goods data); retail sales and inventories (June 13 with sales data for May and June 14 with inventory data for April); monthly wholesale trade sales and inventories (June 7 with sales and inventory data for April); and manufacturing and trade sales and inventories (June 14 with data for April). The corresponding historical time series for January 1992 through March 2001 will be released for manufacturing on May 25 and for retail and wholesale trade sales and inventories on June 1.

NAICS also will replace the SIC in the other industry-based principal economic indicators over the next several years. [4] For example, in 2001, BEA will incorporate NAICS into the industry distribution of the inventory change component of GDP, and the Federal Reserve Board will incorporate NAICS into industrial production and capacity utilization indexes. In 2002, the Census Bureau will incorporate NAICS into the Quarterly Financial Report. In 2003, the Bureau of Labor Statistics will replace the SIC with NAICS for the monthly employment situation.

How Will NAICS Change the Indicator Series?

The replacement of the SIC with NAICS for the Census Bureau's manufacturing and trade indicator series will affect both the three-industry totals as well as the composition of the industry categories shown in the release. [5] NAICS differs significantly from the SIC in that NAICS is a production-based industry classification system whereas the SIC reflected a mix of production-based and other classification principles, such as class of customer. For the indicators to be released by the Census Bureau in May and June 2001, this uniform adoption of a production-based system results in the following major changes:

* Many wholesale trade establishments are redefined as retail trade establishments.

* The retail trade sector is redefined by transferring eating and drinking places to a new accommodation and food services sector.

* The manufacturing sector is redefined by transferring logging industries to the agriculture, forestry, hunting, and fishing sector and publishing industries to the information sector. …

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