VOLUME INDEX

 French Equivalent: Indice de volume

 Definition: A volume index is most commonly presented as a weighted average of the proportionate changes in the quantities of a specified set of goods or services between two periods of time; volume indices may also compare the relative levels of activity in different countries (e.g. those calculated using PPPs).

 Context: A major aim of economic analysis is to develop an understanding of changes taking place in an economy over time. This includes the measurement of short-term growth or decline. To achieve this for key economic value aggregates, such as the value of industrial production or the value of retail turnover, it is necessary to distinguish between changes arising solely from price changes and those arising from other influences such as quantity and quality, which are referred to as changes in “volume”. Volume movements are determined by holding the price constant. By keeping fixed the prices on each item included in the volume index, period to period changes in the constant price estimates for aggregates of items reflect changes in the quantities and/or the quality of the different products. For example, if there is a fall in the total quantity of goods produced or goods consumed, volume data will decrease. Volume data will also decrease where the production or consumption pattern is changing towards cheaper goods (even if total quantity is not decreasing). It should be noted that although a change in volume terms reflects changes in quantity and or quality, it cannot in itself tell which of the factors is responsible. Further investigation is required before it can be ascertained how much of the change is due to quantity and how much to quality influences.The expression “constant prices” is often used interchangeably with “volume”. However, there is a slight distinction between the terms even though both have had the effects of price changes removed from the underlying value series. More specifically, the term “constant prices” describes aggregate data for several periods compiled using a fixed-base Laspeyres formula so that all the items are expressed in their respective prices of the base period and for which the components and totals are additive. However, for an annually chained volume series the resulting data is non-additive and it is no longer strictly correct to describe then as being at constant prices although for convenience they may be described as such.(Main Economic Indicators - Comparative Methodological Analysis: Industry, Retail and Construction Indicators. Available at: http://www.oecd.org/oecd/pages/home/displaygeneral/0,3380,EN-document-notheme-15-no-no-18317-0,00.html).

 Source Publication: SNA 16.11.