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NACE backgrounds

From Statistics Explained

NACE is the acronym used to designate the various statistical classifications of economic activities developed since 1970 in the European Union (EU). NACE provides the framework for collecting and presenting a large range of statistical data according to economic activity in the fields of economic statistics (e.g. production, employment, national accounts) and in other statistical domains.

Statistics produced on the basis of NACE are comparable at European and, in general, at world level. The use of NACE is mandatory within the European statistical system.

The international system of economic classifications

International system of classifications

The comparability at world level of statistics produced on the basis of NACE is due to the fact that NACE is part of an integrated system of statistical classifications, developed mainly under the auspices of the United Nations Statistical Division. From the European point of view, this system can be represented as follows:

Where:

  • ISIC is the United Nations’ International standard industrial classification of all economic activities.
  • CPC is the United Nations’ Central product classification.
  • HS is the Harmonized commodity description and coding system, managed by the World Customs Organisation.
  • CPA is the European Classification of products by activity.
  • PRODCOM is the classification of goods used for statistics on industrial production in the EU.
  • CN stands for the Combined nomenclature, a European classification of goods used for foreign trade statistics.

Such an integrated system allows the comparability of statistics produced in different statistical domains. As a consequence, for instance, statistics on the production of goods (reported in the EU according to PRODCOM surveys) could be compared with statistics on trade (in the EU produced according to CN).

NACE is derived from ISIC, in the sense that it is more detailed than ISIC. ISIC and NACE have exactly the same items at the highest levels, where NACE is more detailed at lower levels.

In order to ensure international comparability, the definitions and the guidelines established for use of NACE within the EU are consistent with those published in the introduction to ISIC.

Scope and characteristics

All observations that are to be described in terms of statistics require systematic classification. Classifications partition the universe of statistical observations according to sets that are as homogeneous as possible with respect to the characteristics of the object of the statistical survey.

Statistical classifications are characterised by:

  • exhaustive coverage of the observed universe;
  • mutually exclusive categories: each element should be classified in only one category of the classification;
  • methodological principles which allow the consistent allocation of the elements to the various categories of the classification.

NACE is the European standard classification of productive economic activities. NACE presents the universe of economic activities partitioned in such a way that a NACE code can be associated with a statistical unit carrying them out.

An economic activity takes place when resources such as capital goods, labour, manufacturing techniques or intermediary products are combined to produce specific goods or services. Thus, an economic activity is characterised by an input of resources, a production process and an output of products (goods or services).

An activity as defined here may consist of one simple process (for example weaving), but may also cover a whole range of sub-processes, each mentioned in different categories of the classification (for example, the manufacturing of a car consists of specific activities such as casting, forging, welding, assembling, painting, etc.). If the production process is organised as an integrated series of elementary activities within the same statistical unit, the whole combination is regarded as one activity.

Structure and coding of NACE

NACE consists of a hierarchical structure (as established in the NACE Regulation), the introductory guidelines and the explanatory notes. The structure of NACE is described in the NACE Regulation as follows:

  • a first level consisting of headings identified by an alphabetical code (sections),
  • a second level consisting of headings identified by a two-digit numerical code (divisions),
  • a third level consisting of headings identified by a three-digit numerical code (groups),
  • a fourth level consisting of headings identified by a four-digit numerical code (classes).

The divisions are coded consecutively. However, some “gaps” have been provided to allow the introduction of additional divisions without a complete change of the NACE coding. These gaps have been introduced in sections that are most likely to prompt the need for additional divisions. For this purpose, the following division code numbers have been left unused in NACE Rev. 2: 04, 34, 40, 44, 48, 54, 57, 67, 76, 83 and 89.

Historical background and legal context

  • Between 1961 and 1963, Nomenclature des industries établies dans les Communautés européennes” (NICE) (Classification of Industries Established in the European Communities)
  • 1965, Commerce dans la CEE” (NCE) (Classification of Trade and Commerce in the European Communities)
  • 1967, Classification for services, followed by one for agriculture, both in broad divisions.
  • 1970, Nomenclature générale des activités économiques dans les Communautés Européennes” (NACE - General Industrial Classification of Economic Activities within the European Communities)
  • 1990, NACE Rev. 1. Starting from the structure of ISIC Rev. 3, details were added to reflect European activities that were inadequately represented in ISIC.
  • 2002, minor update of NACE Rev. 1, called NACE Rev. 1.1
  • 2006 NACE Rev. 2. It is to be used,in general, for statistics referring to economic activities performed from 1 January 2008 onwards (Article 8 of the NACE Regulation provides details on implementation)

Further Eurostat information

  • NACE Rev. 2 - Statistical classification of economic activities is a detailed publication containing the structure of the classification, the introductory guidelines containing the main concepts, a historical background and the methodological guidelines for understanding and applying the classification as well as a detailed description of the different items of NACE Rev. 2.
  • Regulation establishing the statistical classification of economic activities NACE Rev. 2 (providing access to the NACE Rev. 2 Regulation in all EU languages)
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