Euro Area Growth Signals from Industrial Production: Warnings from a Comparison of Gross Value Added and Production

This study compares industrial production and gross value added in volume terms in the euro area and euro area countries, because real GDP growth signals from industrial production growth might be misleading and earlier released industrial production growth is not one-to-one translated into industrial value added growth. This is an important issue for analysts and policy makers, because industrial production is a standard element in tools for nowcasting real GDP in real time. It also raises the question about the factors explaining these differences. Differences in terms of (changes in) quarterly growth between production and gross value added include sign reversals and can last for consecutive quarters. Persistent level differences might also exist. The explanatory factors for these differences are the treatment of prices, seasonality and coverage. Data limitations prevent a detailed analysis of the price factor, but the other two factors are more closely evaluated. It turns out that the relative importance of these factors varies over time and thus is difficult to assess ex ante for a specific quarter. A remedy is that statisticians further harmonize national accounts and short-term statistics as well as national practices for seasonal adjustment.