Understand the Structure of NAICS Codes
The North American Industry Classification System (NAICS) uses a hierarchy structure to group and align establishments into industries based on the primary production processes used. Understanding the NAICS hierarchy can help you navigate the system and understand the placement of certain industries within the NAICS database.
IBISWorld primarily writes reports at the 6-digit code level, or the National Industry level. You can distill further information regarding the industry’s placement in the overall economy by understanding the meaning of the digits in the National Industry 6-digit code.
- Sector: 2-digit code
- Subsector: 3-digit code
- Industry Group: 4-digit code
- Industry: 5-digit code
- National Industry: 6-digit code
Note: While the codes are generally standardized up to the 5-digit level, some variation occurs in code alignment in the United States, Canada and Mexico. Additionally, three sectors are represented in the US by a range of 2-digit codes: Manufacturing Sector (31-33), Retail Sector (44-45), and Transportation and Warehousing Sector (48-49).
To illustrate the NAICS structure, consider the Dairy Product Production Industry (31151). From the industry’s 5-digit code, one can identify its placement within the larger hierarchy:
- Sector: 31 – Manufacturing
- Subsector: 311 – Food Manufacturing
- Industry Group: 3115 – Dairy Product Manufacturing
- Industry: 31151 – Dairy Product (except Frozen) Manufacturing
Then, adding the 6-digit code, you can drill down to the National Industry if applicable, for example:
- US – 311511 Fluid Milk Manufacturing
- Canada – 311515 Butter, cheese, and dry and condensed dairy product manufacturing
Once you’re familiar with the NAICS hierarchy, you can quickly distinguish a Manufacturing industry, which will always start with a 31, 32 or 33, from an Information industry, which will always start with a 51. NAICS classifies all economic activities into 20 broad Sectors. IBISWorld’s report collection covers all NAICS sectors, except 92 (Public Administration).
Overview of NAICS Sectors
You can read summaries of the sectors below or choose to explore the NAICS sectors by using IBISWorld's NAICS Lookup Tool.
11: Agriculture, Forestry, Fishing and Hunting – This sector covers a variety of industries involved in the growing and cultivation of crops, the raising of animals and other similar activities.
21: Mining, Quarrying, and Oil and Gas Extraction – This sector includes industries involved in the extraction of mineral solids, such as coal and ore, along with liquid minerals, such as petroleum, and gases, such as natural gas.
22: Utilities – This sector includes industries generating, transmitting or otherwise distributing utilities, such as electricity, gas, steam and water, along with sewage removal.
23: Construction – This sector covers industries involved in the erecting, altering, and reconstructing of structures, along with providing maintenance and repairs.
31-33: Manufacturing – The largest sector in the NAICS system, this sector includes industries that mechanically, physically, or chemically transform raw materials, substances or components into new products.
42: Wholesale Trade – This sector includes industries involved in wholesaling merchandise without transformation of the original product. The merchandise sold by this sector are outputs from various other sectors.
44-45: Retail Trade – This sector includes industries that retail merchandise to the general public and may also offer services relevant to merchandise sold.
48-49: Transportation and Warehousing – Industries included in this sector provide transportation of passengers and cargo, along with warehousing and storing services.
51: Information – Industries in this sector produce and distribute information, along with providing the means to transport this information as data or communications, and process data.
52: Finance and Insurance – This sector includes industries involved in financial transactions relating to the creation, liquidation, or change in ownership of financial assets.
53: Real Estate and Rental and Leasing – Industries included in this sector are involved in renting, leasing, or otherwise allowing the use of assets, along with providing related services.
54: Professional, Scientific, and Technical Services – This sector includes industries involved in professional, scientific, and technical services for other operators.
55: Management of Companies and Enterprises – This sector includes industries that hold securities of companies for the purpose of owning a controlling interest of influencing management decisions. Included industries may also administer, oversee, and manage establishments of the companies, along with undertaking in strategic planning and decision making.
56: Administrative and Support and Waste Management and Remediation Services – Industries included in this sector provide routine support services for the daily operations of other businesses.
61: Educational Services – Industries in this sector provide instruction and training on a variety of subjects through specialized establishments, such as universities, colleges and training centers.
62: Health Care and Social Assistance – This sector includes industries that provide health care and social assistance by trained professionals for individuals.
71: Arts, Entertainment, and Recreation – Industries in this sector operate facilities or provide services for the cultural, entertainment, and recreational interest of their patrons.
72: Accommodation and Food Services – This sector includes industries that provide lodging, meals, snacks, and beverages for immediate consumption.
81: Other Services (except Public Administration) – This sector covers products and services not specified elsewhere in the NAICS hierarchy. Industries included cover a wide array of products and services, including but not limited to repairs, laundry, personal care, advocacy and more.
92: Public Administration – This sector covers the administration, management and oversight of public programs provided by Federal, State and local governments.
About the NAICS Structure
NAICS differs from other classification systems in that it uses a supply-based, or production-oriented economic concept. In NAICS, industries are identified and grouped based on economic units that have similar production processes. In other words, industries are comprised of establishments that use the same or similar raw materials, capital equipment, and labor for their primary activities.
You can use this information and the relation between industries and their hierarchical counterparts in the production of data to measure various factors. Some examples include:
- Measuring per-unit labor costs and the capital intensity of production
- Estimating key operational costs for an industry
- Understanding an industry’s placement in and contribution to the overall economy
- Constructing input-output tables
The NAICS classification system was originally designed to replace the Standard Industrial Classification (SIC) system. While the two systems share similarities, the introduction of NAICS was largely aimed at providing the following:
- Identifying and classifying new and emerging industries
- Breaking down services industries in general (SIC excluded most)
- Developing production-oriented classification for industries engaged in the production of advanced technologies
IBISWorld Industry Research and NAICS
IBISWorld industry reports analyze industries at both the five- and six-digit NAICS level, while also offering corresponding sector reports at the two-digit NAICS level. We offer over 1,300 US Industry Reports, 400+ Canada Industry Reports and 100+ Mexico Industry Reports.
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