Bye, SICs! NAICS is the new industry nomenclature
By Staff -- Purchasing, 3/12/1998
The government's industry classifications are suddenly looking a lot more specific now that it has introduced naics (North American industrial classification system). That's good news for buyers who collect market intelligence, even if this major overhaul of the old SIC (standard industrial classification) means certain data comparability will be disrupted.The system replaces SIC codes as of 1997 in the U.S. The purpose is to update classifications to reflect U.S. industries and businesses more accurately and better equip U.S. agencies that compare U.S. data with economic activity of trading partners Canada and Mexico. In addition, Carole A. Ambler, economist, U.S. Census Bureau, points out that naics was designed to "improve comparability with the international standard industrial classification (isic)," which is the foundation of the EU's own industry identification system.
To ensure a smooth transition, the government already has started to process industry numbers by naics and will start issuing certain reports using naics in 1999. More reports will contain naics in the early part of the next century. (See box.)
The most visible changes are in the classifications themselves. Certain industries are built out of several sectors since the government chose to focus on the "type of production activity" rather than "a mixture of production-based and market-based" categories.
As a result, new sectors have been added. For example, the "Information" sector is built from several SIC categories. This new sector covers satellite, cellular, and pager communication as well as software and more. Industries have been split into smaller subsections to help data users pinpoint information more exactly. Among new businesses listed are semiconductor machinery manufacturing and fiber optic cable manufacturing.
The codes also are different. Instead of a four-digit code, the major naics listings are six digits. The first five digits are the same for all three countries. The sixth digit "identifies subdivisions of naics industries that accommodate user needs in individual countries," as described by the federal government.
However improved the system is, those who use the government's industry performance data are most concerned with one thing: comparability. The federal government acknowledges that there will be more disruptions in comparability than have occurred after any of the previous revisions to SIC (the most recent revision was in 1987). However, buyers can rebuild a limited portion of the information from industry subsectors and new businesses for data such as shipments, inventory, and orders.
An example of this subdivision is the new category "Iron and Steel Mills," naics 3312. This particular subsector has only four digits, though the numbers match the core naics code and can be compared with the two other participating countries' codes. To create that new category, part of SIC 3399, "Primary Metals Products," was combined with "Steel Works, Blast Furnaces, and Rolling Mills," SIC 3312. The government attributes this change to the need to identify that "Iron and Steel Mills" include "direct reduction and other furnace processes" that are used in manufacturing steel.
For information on naics development, see the U.S. Census Bureau website at: census.gov/epcd/www/ naics.html
NIACS implementation schedule
Here are the start dates for several reports:
Bureau of the Census
* 1998 Annual Survey of Manufacturers will be available in 2000
* The monthly Manufacturing and Trade Inventories and Sales report in 2001
* Annual Trade Survey also in 2001
Bureau of Economic Analysis
* The 2001 Real Inventories, Sales, and Inventory-Sales Ratios for Manufacturing and Trade will be available in 2002
Bureau of Labor Statistics
* The monthly Producer Price Index will be available in 2004
* The annual Employment and Wages Report for the year 2000 is available in 2001
* Monthly Current Employment Statistics for the year 2002 in 2003
SOURCE: U.S. CENSUS BUREAU
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