Section 3

Types and sources of data requirement for

economic analysis
• Contents
– Background and need
– Types of sector of analysis
– Types of data required
– Demand forecasting
– Data Sources
 Relevant publications
 Relevant departments
 Where no data is available
 Economic analysis at the global level

– Limitations of data sources

– Data checking
– Workout problem 1
 Background and Need of Data
• Economic data or economic statistics may refer to data
(quantitative measures) describing an actual past or present
economy.
• All kinds of people are interested in economic data.
• The economic data will be useful in a business decision, a
financial investment or a career move.
• The engineering economist depends on economic data in
much the same way that a doctor depends on a patient’s
vital signs- pulse, blood pressure, and temperature- to make
an accurate diagnosis.
• To understand economic developments and to be able to
give useful advice to policymakers, businesspeople, and
financial investors, an engineering economist simply must
have up-to-date, accurate data. 2
• Political leaders and policymakers also need economic data
to help them in their decision and planning.

• Proper preparation of an economic analysis requires a

major effort to gather data.

• The first step in financial and economic analysis of

engineering development project is to identify appropriate
data and to understand their potentials and limitations.

• Results from computer runs are only as good as the data

input, so valid data must be used.

• The most challenging aspect of economic analysis is

identifying the benefits and costs and their quantification.
3
 Types of sectors of analysis
Sources of data are as follows:
A: Industry
• Aerospace
• Chemicals & petroleum products
• Agricultural crop production
• Agricultural stock production
• Coal mining products
• Oil and natural gas exploration and production
• Textile mill products
• Wood products
• Printing & publishing and
• Stone, clay and glass products
4
B: Structural
• Highway
• Bridge
• Building/housing and real estate
• Dam
• Barrage

C: Power Generation
• Electricity
• Hydro-electric power plant
• Renewable energy farm (solar, wind, wave, etc.)
• Thermal power plant
• Nuclear power plant
5
D: Health care data sources

E: Energy and environmental resources

F: Education data sources

G: Demographic data sources

H: Labour market data sources

• Within a specific type of work, there may have different

options (technological/ material combination) to fulfill the
same objective.
• Economic analysis should be done for that case also.
6
 Types of data required
The following types of data may be required in
analyzing engineering project:

• Engineering data

• Management data

• Financial data

• Maintenance data

• Environmental data

• Support data / relevant data (Transportation, distance, etc)

• Other complementary data (locality, manpower etc),

7
 Demand forecasting
• Demand forecasting is the area of predictive analytics
dedicated to understanding consumer demand for goods or
services.
• That understanding is harnessed and used to forecast
consumer demand.
• A demand forecast is the prediction of what will happen to a
company's existing product sales.
• If demand is underestimated, sales can be lost due to the
lack of supply of goods.
• If demand is overestimated, the supplier is left with a surplus
that can also be a financial drain.
• Understanding demand makes a company more competitive
in the marketplace.
8
• Understanding demand and the ability to accurately
predict it is imperative for efficient manufacturers,
suppliers, and retailers.
• Using this technique, a business is better prepared to
meet the actual demand of its customers.
• As the projects are planned to solve a problem or to
satisfy the required demand, accurate forecasting/
projection of the required demand is essential.

The following points are required to consider the demand

forecasting
 Planning period (e.g. 50 yrs or 100 yrs projection)
 Population growth / urbanization rate
 Change in income
 Change in habit
9
• Demand should be forecasted with appropriate method/
technique/model considering the above points.
Population growth
• A population forecast provides estimates of the most likely
future trends in population size.
• Population can be forecasted using the formula
𝑔𝑟 𝑛
𝐹𝑝𝑛 = 𝑃𝑝 (1 + )
100

• Fpn = forecasted population at year n from now [nos]

n = future target year – present year (say, 2020 – 2011= 9)
• Pp = present population (nos)
• gr = expected average population growth during this period
(%)

10
Exercise 1
Total population in an area in 2010 is 1.7 million.
What would be the population in that area in 2030,
if the average population growth rate in the area
during this period is 1.5%?

11
 Forecasting resource availability
• For natural resource project, specially water resource
project, it is necessary to analyze ‘low flow’ or ‘minimum
availability’, and also need to consider change in
environment/climate over time, and consequently change in
natural flow pattern.
• For example, in case of designing water reservoir, it is
important to calculate reservoir capacity based on lowest
probable rainfall (normally considered as ‘rainfall at 80%
probability of exceedence’) to ensure fulfilling demand during
low-rainfall year (s).
• In contrast, height of embankment or retaining wall should
be based on probable highest rainfall/flood to ensure
protection during high-rainfall or flood year(s).

12
 Design capacity estimation
• Design capacity or service capacity is maximum rate of
output for a process, or facility.

• Design is an important factor which decides the cost of the

product for a specified level of performance of that product.

• Design capacity is what the engineers have designed

a plant to operate at.

• For design capacity estimation, the height of protective

structure (embankment or retaining wall) should be based
on probable highest rainfall/flood – to ensure protection
during high rainfall or flood year(s), and, with long-term data
series, also having a safe margin (safety factor) special
consideration for sensitive/valued/sophisticated project
13
Exercise 2
In a new resort city at Gambang, the present population is
1000 and daily per capita water demand (normal demand) is
150 liter (including household, gardening, car washing, etc.).
But there is a shortage of water by 10% of the demand. As an
executive engineer of the city corporation, you are going to
submit a water-supply project to the higher authority. You are
planning the project for 20 years projection. Expected average
population increase (growth rate) during this period is 2% per
annum, and increase in per capita water-demand due to
changes in income is expected to 10% (during 20 years
period, not annually). Determine the design capacity of water-
supply project.

14
 Data and sources of data
 The engineering economist uses the data to
develop economic model to assist the decision
maker in arriving at a logical and informed decision.
 Economic analyses are built from data as a house
is built of bricks, but an accumulation of data is no
more an analysis than a pile of bricks is a house.

 Both raw material and finished product information

(data) is important for an engineering economic
evaluation.

 Evaluation process is similar to familiar production

processes. 15
 Data are links to the data sites for all of Government and the
Board of Governors, as well as other key government agencies
and private institutions that specialize in providing data.
 The following major sources of information are listed below:
i. Accounting records: Accounting records are a prime
sources of information for economic analysis. It is a good
source of historical data. It rarely contains
 direct statements of incremental costs or
 opportunity costs,
both of which are essential in most engineering economic
analyses.
ii. Other sources within the farm: The typical firm has a
number of people and records that may be excellent
sources of estimating information. Such as:
 Sales
 Production
 quality
 purchasing and
 personnel. 16
iii. Sources outside the firm: There are numerous
sources outside the firm that can provide helpful
information. The following is a listing of some
commonly used sources:
 Technical directories,
 buyer indexes,
 reference books
 relevant publications
 statistical yearbook,
 trade journals etc. offers a wealth of
information.
iv. Research and development (R&D): If the information
is not published and cannot be obtained by consulting
someone, the only alternative may be to undertake R
& D to generate it.
v. Internet: The internet can also be a source of data.
17
vi. Censuses: Censuses (publication of the ‘Bureau of the
Census’) are an important source of data for planning
and monitoring of population issues and socioeconomic
and environmental trends, in both developed and
developing countries.
 National population and housing censuses also
provide valuable statistics and indicators for
assessing the situation of various special population
groups, such as
 those affected by gender issues
 Children
 Youth
 the elderly
 persons with a disability, and
 the migrant population.
vii. Relevant departments
18
 Relevant Departments
Sl Type of work Type of data Source Department
no.
1 Water Engg. Works Rainfall, flood - Department of Meteorology
(Dam, Barrage, etc.) - Water Development Board
2 Roads, Highway Land map, price of - Department of Land Resources
land
Traffic load/density - Department of Roads and Highway
- Metropolitan city / City Corporation
- Department of Transportation
3 Building Price of building - Public Works Department
materials - Relevant industry / industry trade
association
- Relevant govt.
Agencies/Departments
Price index - Statistical Yearbook
Price of land - Department of Land Resources
19
SL. Type of work Type of data Source of department
No
4 Manufacturing Recognized chemical, Chemical Chemical Industries
sector Product, Some large polymer
molecules etc.

Annual product, cost, emission of Cement Industries

CO2 , nitrogen oxides , Sulfur oxides
etc.

Steel information, steelmaking raw Steel industries

material costs, costs include iron ore,
coal, electricity and natural gas
prices. Steel industries

Type of farm and food, cost etc. Agro-based industries

Wind power, solar electricity , bio Renewable energy plant

fuels etc.
20
 When data not available
• The use of expert opinion (or discussion with
engineers) is appropriate in situations in which there
is little or no published material in a particular area,
• In which the results of a thorough literature review or
meta-analysis are considered unreliable, conflicting,
or insufficient to cover the requirements of a study.
• Investigation through internet search may also be
useful.

21
 Limitations of data sources
Limitations of different sources of data are given
below:
Type of data Advantage Disadvantage/
source limitation
Market survey - Data are representative for - Time consuming and
data a specific location and troublesome
current time/rate

Administrative - Data are readily available - Data may not be

data representative for all
cases

Census data - Data are readily available - Limited data may be

available

22
 Data checking
• Data checking is an activity through which the
correctness conditions of the data are verified.
• Data checking may be aimed at detecting error-
free data or at detecting erroneous data.
• The analyst should review the data for
 accuracy and adequacy
 report any major questions
 data gaps, or
 other deficiencies
to the work group to address possible shortcomings before analysis
• The economic analyst should then supplement
these collected data with available primary and
secondary sources to complete the data profile.
23
 Economic analysis at the global level
 Economic analysis is a process whereby the strength
and weakness of an economy are analyzed (different countries).
 Economic analysis is important in order to understand
the exact condition of an economy (compare with global basis).
 It is a good way to analyze an economy by comparing its
policies with those of other economies.
 The engineering farm may bid for international project,
and for that, international data may be required.
 Publications of ‘World Bank’, FAO, WTO, WMO, and
other international organizations may be useful.
 Data of a specific country may be collected from the
publication of that country.

24