Minister Lim Hng Kiang's written reply to Parliament Questions on EDB's January manufacturing data

Question No. 539 of Notice Paper No. 59 of 2008

Name and Constituency of Member of Parliament
Mr Seah Kian Peng, Member for Marine Parade GRC

Question
To ask the Minister for Trade and Industry in light of the correction by EDB in the January manufacturing data from 6.9% to 11.7% growth (a) whether he will explain how this error in its January manufacturing data occurred; (b) what does EDB mean by "computation error in the application of the price deflator data"; and (c) whether this was a human or computer error.

Answer
The EDB Monthly Manufacturing Index of Industrial Production tracks changes in production output in real terms. For the data that is collected from companies in dollar value or nominal terms, they have to be converted to real terms using appropriate price deflators, and finally compiled into the Manufacturing Index. The price deflators are calculated from manufacturing price data obtained from the Department of Statistics (DOS).

In May 2007, the base year of the DOS’ manufacturing price index was revised from 2000 to 2006.Since the base year for EDB’s Manufacturing Index remained unchanged, it was necessary to perform an additional step to normalize the DOS’ price index back to the 2000 base year, so as to ensure consistency in the Manufacturing Index series.

In computing the January Manufacturing Index, an error was made during this additional step of normalizing the DOS’ price index. Specifically, an error was made in entering the formula for doing this normalization of the price index. This meant that the wrong price deflator was used to derive the Manufacturing Index for January. The error was discovered by EDB during the subsequent analysis of the data.

To avoid such an incident from happening again, EDB will run independent calculations of the additional step so as to counter-check the results. This step will not be needed after April 2008 when EDB’s Manufacturing Index is rebased and the DOS’ manufacturing price index can be used directly.