← Economics Explained · Learning path
What is the difference between a sector and an industry?
A sector usually groups broad areas of economic activity, while an industry identifies a more specific activity. The exact categories depend on the classification. Manufacturing, for example, includes industries with very different customers and costs. For sector or industry analysis using official statistics, choose a classification such as ISIC or NAICS and record its version. Classifications used for listed companies may differ from those used in national accounts.
Map the value chain
Identify inputs, production stages, distribution, end customers and substitutes. Distinguish upstream suppliers from downstream users. Avoid summing every stage’s revenue and calling it economic value added: the same intermediate product can be counted repeatedly. A sector’s stock market capitalization, company revenue and contribution to GDP are different measures.
Separate volume, price and mix
Sales can increase because more units are sold, prices rise or customers buy a different mix. Use volume indicators where available. Demand drivers may include household income, business investment, public budgets or exports. Supply drivers include capacity, utilization, inventories, energy, labor, technology and regulation. Backlogs can signal demand but can also reflect delivery constraints.
Choose industry specific indicators
- Manufacturing: orders, production volumes, utilization, inventories and input costs.
- Banking: credit growth, funding cost, capital, liquidity and loan quality.
- Retail: volumes, comparable store sales, traffic, basket size and inventory turnover.
- Energy: production, realized prices, costs, reserves and capital expenditure.
- Transport: capacity, load factors, yields, fuel cost and route mix.
A revenue decomposition
Suppose units sold rise 4% and the average price rises 6%, with no mix change. Revenue rises 1.04×1.06 minus 1 = 10.24%, not exactly 10%. If input costs rise faster or financing becomes more expensive, profit may still weaken. Compare the revenue change with margins, cash flow and investment needs.
Write an industry assessment
Explain the demand cycle, capacity outlook, pricing power, cost pressures and balance sheet resilience. Compare firms with similar business models and accounting scope. Distinguish a good industry outlook from an attractive security valuation. Finish with indicators that would contradict the thesis and the horizon over which they should become visible.
Sources and further reading
Examples use hypothetical figures unless stated otherwise. Updated 8 October 2026.
