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Industry trend analysis is a report on economic activity in a specific sector using the North American Industrial Classification System (NAICS). It helps leaders understand industry structure, vulnerabilities, and opportunities. NAICS codes are used to compare industries and group them for analysis.
An analysis of industry trends is a qualitative and quantitative report on a specific sector of economic activity defined by national or international industry classification systems. Industry is any activity in which raw materials are transformed into finished products. There are various methods used to collect, quantify and interpret economic activity in an analysis of industry trends. Typically, the analysis selects an industry based on the North American Industrial Classification System (NAICS) code.
Some industry trend analysis reports compare the performance of a particular business with the performance of that industry as a whole. Others are conducted to gain a better understanding of market dynamics and performance within the industry sector. Analyzing industry trends helps business leaders, economists and policy makers understand the structure of an industry. The vulnerabilities and opportunities that may exist within an industry can be revealed through analysis.
What data is collected in an analysis depends on the purpose of the analysis. Economists look at industry trends to provide feedback to government officials or industry leaders. Political systems are closely intertwined with economic systems, as a nation’s productivity is essential to sustain a population with essential and luxuries goods. The government could use the data it collects to incentivize one sector over another. Business leaders conduct an analysis of industry trends to measure their companies’ ability to remain competitive.
The NAICS is used in an analysis to compare one industry to another or to group industries as part of a larger analysis. The economic activity generated by the sale of finished products is also included in a NAICS category. This system replaced the Standard Industrial Classification System (SIC) used in the United States in 1997. This change was made to modernize the system to include categorization based on how manufacturing occurs, not just what is produced. The change also made it possible to consider industrial activity in Mexico, Canada and the United States as a whole.
NAICS organizes industry categories using numerical codes. Classification codes mark the boundaries of where one industry ends and another begins. Strict delimitation is useful when comparing one analysis to another industry category’s trend analysis.
An example of how the NAICS codes work can be understood by looking at the seafood industry. The seafood preparation and packaging industry has the number code 3117. fresh and frozen has the code 311712 .
Industry sector coding helps establish specific limits for the activities of each sector. These codes are structured in such a way that a part of an industry sector’s activity can be broken down as a separate economic statistic for the purpose of trend analysis. Such statistics are essential for conducting the quantitative portion of an industry trend analysis.
