This bulletin presents the Index of Production (IoP) for the United Kingdom production industries, August 2013. Users are reminded that all figures contained within this release are seasonally adjusted estimates, unless otherwise stated. The reference year for these estimates is 2010=100 and they are based on a monthly business survey (MBS) of approximately 6000 businesses, covering all the territory of the UK without geographical breakdown. The IoP is one of the earliest indicators of growth and it measures the gross value added in the manufacturing, mining & quarrying, energy supply and water supply & waste management sectors. The total IoP estimate and various breakdowns are widely used in private and public sector institutions. Care should be taken when using the month on month growth rates due to their volatility. For an explanation of the terms used in this bulletin and other information, please see the background notes section. Table 1 and Figure 1 present key figures and trends for production and manufacturing.
|Index number||Month on the same month a year ago||3 months on the same 3 months a year ago||Month on previous month||3 months on previous 3 months|
As Figure 2 shows, between 2003 and 2007, manufacturing output increased at a faster rate than total production. While manufacturing fell by a greater amount than production following the economic downturn in 2008, the growth of manufacturing was greater between mid-2009 and 2011. Since then they have both continued to contract. Comparing Q2 2013 with a year earlier, production output fell by 0.7% and manufacturing output fell by 0.4%.
The decline of oil & gas extraction over the last 13 years provided a notable downward pressure on production. This has been due to North Sea oil and gas reserves becoming more difficult to extract and ageing extraction equipment, which required extensive repairs and maintenance.
More recently, quarter-on-quarter growth in production of 0.8% was in line with the second estimate of gross domestic product, which indicated the UK economy grew by 0.7% in Q2 2013. Broader economic conditions remain difficult as UK consumer price inflation continues to exceed growth in total average weekly earnings, therefore squeezing the real income of households. The prices of goods produced by UK manufacturers – or ‘factory gate prices’ – were slightly more favourable, rising by 1% in the year to August. Input prices for all manufactured goods increased by 2.8% over the same period.
Economic conditions in the euro area improved in the second quarter. The latest estimate of euro area GDP confirmed that output rose by 0.3% in Q2 2013 compared with Q1 2013. Euro area inflation (as measured by the Harmonised Indices of Consumer Prices) fell to 1.3% in August from 1.6% in July, though it varies by country. The UK is at the upper end of this scale, somewhat eroding the international competitiveness of the economy.
Since 2011 the production industries of the G7 economies have grown slowly. However, comparing Q2 2013 with Q1 2013, G7 production grew by 0.6%. Some growth is evident when looking at the country level performance. Production in most G7 nations including the USA, UK and Japan increased, while Canada and Italy declined.
In this release, revisions from January 2012 to June 2013 are consistent with data published in the Quarterly National Accounts Q2 2013 released 26 September 2013. Therefore, there is no impact on the previously published GDP estimates.
The estimates for the production industries are the first of the main components for the output approach to the measurement of GDP (agriculture, construction and services are the other components) to be published for August 2013, the second month of Q3 2013. All the components are already available for Q2 2013. Details of the data already published can be found in table 2. Output in the construction industry will be published on 11 October 2013 and services output on 25 October 2013 for August 2013.
|Publication||% of GDP||Release date||Month / Quarter of GDP||Most recent quarter on a year earlier||Most recent quarter on quarter earlier||Most recent month on the same month a year ago||Most recent month on the previous month|
|Index of Production 1||15.2||9 Oct||Aug||..||..||-1.5||-1.1|
|Construction output||6.3||13 Sep||Jul||..||..||2.0||2.2|
|Index of Services||77.8||27 Sep||Jul||..||..||1.8||0.2|
|Retail Sales||19 Sep||Aug||..||..||2.1||-0.9|
The data for the index of production reflect the latest revisions published as part of this release.
|Description||% of production||Month on same month a year ago growth (%)||Contribution to production (% points)||Month on previous month growth (%)||Contribution to production (% points)|
Headline figures for the Index of Production are:
Total Index of Production; Sector B Mining & quarrying; and within this Division 06 Oil & gas extraction; Sector C Manufacturing; Sector D Electricity, gas, steam & air conditioning; and Sector E Water supply, sewerage & waste management.
Total production output in August 2013 decreased by 1.5% compared with August 2012. This decrease reflected falls of 0.2% in manufacturing, 10.1% in mining & quarrying and 3.5% in the electricity, gas, steam & air conditioning sector. The highest contributor to the decrease in total production was mining & quarrying, contributing 1.3 percentage points to the fall. These falls were partially offset by an increase of 2.6% in the water supply, sewerage & waste management sector, which contributed 0.2 percentage points to the growth in total production.
Between July 2013 and August 2013 (Figure 2), total production decreased by 1.1% following growth of 0.1% between June and July. The decrease in total production reflects falls in all of its main sectors. Manufacturing decreased by 1.2%; electricity, gas, steam & air conditioning by 1.9%; mining & quarrying by 0.6%; and water supply, sewerage & waste management decreased by 0.6%. The largest contributor to the fall in total production amongst these main sectors was manufacturing, which contributed 0.8 percentage points to the fall.
Manufacturing output decreased by 0.2% between August 2012 and August 2013, with output falling in eight of the 13 manufacturing subsectors. The largest downward contributions in manufacturing output were: the manufacture of machinery & equipment not elsewhere classified, which fell by 10.4% and contributed 0.8 percentage points to the decrease; the manufacture of basic pharmaceutical products & pharmaceutical preparations, which fell by 10.2% and contributed 0.8 percentage points; and the manufacture of basic metals & metal products, which fell by 3.0% and contributed 0.4 percentage points.
In contrast, the largest upward contribution came from the manufacture of transport equipment, which rose by 12.5% and contributed 1.6 percentage points to the growth in manufacturing. The majority of this strength, 1.0 percentage points, came from the manufacture of motor vehicles, trailers & semi trailers continuing the upward trend shown in this industry during 2013. Other sectors showing large upward monthly contributions compared to a year ago were: other manufacturing & repair, which increased by 5.4% and contributed 0.4 percentage points; and the manufacture of wood, paper products & printing, which rose by 4.6% and contributed 0.3 percentage points.
Manufacturing output decreased by 1.2% between July 2013 and August 2013 following 0.2% growth in July. There were decreases in six of the 13 manufacturing subsectors. The largest contributors to the fall in manufacturing were: the manufacture of basic pharmaceutical products & pharmaceutical preparations, which fell by 7.0% and contributed 0.5 percentage points; the manufacture of computer, electronic & optical products, which fell by 7.4% and contributed 0.5 percentage points; and the manufacture of food, beverages & tobacco, which fell by 2.5% and contributed 0.4 percentage points. The largest contribution to the fall in the food, beverages & tobacco sector was from the processing and preserving of fish, fruit & vegetables, which fell by 10.7%. This contributed 1.3 percentage points to the fall.
In contrast to the above falls, the largest upward contribution to this month’s manufacturing growth came from the manufacture of basic metals & metal products, which increased by 4.2% and contributed 0.5 percentage points. The main contributor to this sector’s growth came from the manufacture of basic iron & steel.
Mining & quarrying output decreased by 10.1% between August 2012 and August 2013. The largest contribution to the decrease in this sector came from oil & gas extraction, which fell by 17.0% and contributed 13.1 percentage points to the fall. This decline reflects the continued long term volatility in this industry and the impact of planned maintenance and shutdowns of some of the North Sea oil and gas fields. The decline was slightly offset by an upward contribution from the other mining & quarrying industry, which increased by 15.7% and contributed 3.4 percentage points to the growth in this sector.
Mining & quarrying output decreased by 0.6% between July 2013 and August 2013. The largest contribution to this fall came from other mining and quarrying, which fell by 1.5% and contributed 0.4 percentage points. There was also a decrease in the mining of coal & lignite, which fell by 17.0% and contributed 0.2 percentage points. The latter reflects the downward trend in this industry over recent months as a result of the postponement of, or lower production in, some deep mined coal collieries.
Electricity, gas, steam & air conditioning output decreased by 3.5% between August 2012 and August 2013; a result of falls in both of its sectors. Electrical power generation, transmission & distribution fell by 2.3% and contributed 1.8 percentage points to the fall in this sector. The supply of gas, steam & air conditioning fell by 7.4% and contributed 1.7 percentage points to the fall.
Electricity, gas, steam & air conditioning output decreased by 1.9% between July 2013 and August 2013; a result of falls in both of its sectors. The supply of gas, steam & air conditioning fell by 5.8% and contributed 1.3 percentage points to the fall in this sector and electrical power generation, transmission & distribution fell by 0.8% and contributed 0.6 percentage points to the fall.
The warmer than average temperature in August and reduced demand for space-heating resulted in electricity and gas demand falling and hence contributed to the decline.
Water supply, sewerage & waste management output increased by 2.6% between August 2012 and August 2013. The highest contributors to the growth in this sector were; waste collection, treatment & disposal activities, which increased by 4.9% and contributed 2.2 percentage points; and water collection, treatment & supply increased by 7.9% and contributed 2.0 percentage points. Offsetting these rises was a negative contribution of 1.6 percentage points due to a fall in sewerage output, which decreased by 5.1%.
Water supply, sewerage & waste management output decreased by 0.6% between July 2013 and August 2013. This follows four consecutive months of positive growth to which the warmer than average temperatures in the last couple of months were a contributing factor. This month’s decrease reflects falls in water collection, treatment & supply, which fell by 1.4% and contributed 0.4 percentage points; and a decrease in waste collection, treatment & disposal, which fell by 0.5% and contributed 0.2 percentage points to the sector decline.
In this release, revisions from January 2012 to June 2013 are consistent with data published in the Quarterly National Accounts Q2 2013 released 26 September 2013. In addition there are revisions to July 2013 data in accordance with standard revisions policy for National Accounts (67.8 Kb Pdf) .
Following consultation with users, ONS are no longer producing the Index of Production summary statistics table. Records of any significance will be highlighted in the main text of the statistical bulletin.
A report titled GDP Output Improvement Report June 2013 (226.7 Kb Pdf) was published on 27 June 2013. This report provides a detailed update of the work on industry reviews and wider improvements to IoP, IoS, GDPO and outlines the greater scope of the project as part of the GDP Continuous Improvement Programme.
Special Events in 2012
The Diamond Jubilee and the London 2012 Olympic and Paralympic Games made 2012 an unusual and difficult year for policymakers and anybody interested in understanding the behaviour of the UK economy. ONS designated both events as 'special events' under the ONS Special Events policy as they had a potentially significant effect on many key economic statistics. An article published by ONS on 17 May 2013 took a retrospective look at each event and considered the impact on a range of published economic indicators, including GDP.
The index of production release for September 2013, to be published on 6 November 2013, will have a revisions period back to July 2013.
Code of Practice for Official Statistics
National Statistics are produced to high professional standards set out in the Code of Practice for Official Statistics. They undergo regular quality assurance reviews to ensure that they meet customer needs. They are produced free from any political interference. © Crown copyright 2013.
Understanding the data
Short guide to the Index of Production
This statistical bulletin gives details of the index of output of the production industries in the United Kingdom. Index numbers of output in this statistical bulletin are on the base 2010=100 and are classified to the 2007 Standard Industrial Classification (SIC). The production industries, which accounted for 15.2% of gross domestic product in 2010, cover mining & quarrying (Sector B), manufacturing (Sector C), gas & electric (Sector D), and water supply & sewerage (Sector E).
Interpreting the data
The non-seasonally adjusted series contain elements relating to the impact of the standard reporting period, moving holidays and trading day activity. When making comparisons it is recommended that users focus on seasonally adjusted estimates as these have the seasonal effects and systematic calendar related components removed.
Figures for the most recent months are provisional and subject to revision in light of (a) late responses to surveys and administrative sources and (b) revisions to seasonal adjustment factors which are re-estimated every month and reviewed annually (changes from the latest review are included in this release).
Definitions and explanations
Definitions found within the main statistical bulletin are listed here:
Chained volume measure
An index number from a chain index of quantity. The index number for the reference period of the index may be set equal to 100 or to the estimated monetary value of the item in the reference period.
A measure of the average level of prices, quantities or other measured characteristics relative to their level for a defined reference period or location. It is usually expressed as a percentage.
Seasonal adjustment aids interpretation by removing effects associated with the time of the year or the arrangement of the calendar, which could obscure movements of interest.
Use of the data
The IoP is a key economic indicator and one of the earliest short-term measures of economic activity. The main output is a seasonally adjusted estimate of total production and broad sector groupings of mining & quarrying, manufacturing, energy and water supply & sewerage. The total IoP estimate and various breakdowns are widely used in private and public sector institutions, particularly the Bank of England and Her Majesty’s Treasury, to assist in informed policy and decision making.
Composition of the data
The Index of Production uses a variety of different data from sources which are produced on either a quarterly or monthly basis.
Most of the series are derived using current price turnover deflated by a suitable price index. This includes the Monthly Business Survey (MBS) data; an ONS short-term survey on different sectors of the economy. It is one of the main data sources used in the compilation of the Index of Production.
The index numbers in this statistical bulletin are all seasonally adjusted. This aids interpretation by removing annually recurring fluctuations, for example, due to holidays or other regular seasonal patterns. Unadjusted data are also available.
Seasonal adjustment removes regular variation from a time series. Regular variation includes effects due to month lengths, different activity near particular events such as shopping activity before Christmas, and regular holidays such as the May bank holiday. Some features of the calendar are not regular each year, but are predictable if we have enough data - for example the number of certain days of the week in a month may have an effect, or the impact of the timing of Easter. As Easter changes between March and April we can estimate its effect on time series and allocate it between March and April depending on where Easter falls. Estimates of the effects of day of the week and Easter are used respectively to make trading day and Easter adjustments prior to seasonal adjustments.
Although leap years only happen every four years, they are predictable and regular and their impact can be estimated. Hence, if there is a leap year effect, it is removed as part of regular seasonal adjustment.
It is common for the value of a group of financial transactions to be measured in several time periods. The values measured will include both the change in the volume sold and the effect of the change of prices over that year. Deflation is the process whereby the effect of price change is removed from a set of values.
All series, unless otherwise quoted, are measured at constant basic prices. Deflators adjust the value series to take out the effect of price change to give the volume series.
Basic quality information
A common pitfall in interpreting data is that expectations of accuracy and reliability in early estimates are often too high. Revisions are an inevitable consequence of the trade off between timeliness and accuracy. Early estimates are based on incomplete data.
Very few statistical revisions arise as a result of ‘errors’ in the popular sense of the word. All estimates, by definition, are subject to statistical ‘error’ but in this context the word refers to the uncertainty inherent in any process or calculation that uses sampling, estimation or modelling. Most revisions reflect either the adoption of new statistical techniques, or the incorporation of new information which allows the statistical error of previous estimates to be reduced. Only rarely are there avoidable ‘errors’ such as human or system failures, and such mistakes are made quite clear when they do occur.
National Accounts revisions policy
Figures for the most recent months are provisional and subject to revision in light of (a) late responses to the Monthly Business Survey MBS and (b) revisions to seasonal adjustment factors which are re-estimated every period.
The index of production release for September 2013 will have a revisions period back to July 2013.
National Accounts revision policy (67.8 Kb Pdf) can be found on the National Statistics website.
One indication of the reliability of the key indicators in this bulletin can be obtained by monitoring the size of revisions. The table below is based on the revisions which have occurred over the last five years. Please note that these indicators only report summary measures for revisions. The revised data may, themselves, be subject to sampling or other sources of error.
The following table presents a summary of the differences between the first estimates published between September 2007 and August 2012 and the estimates published 12 months later.
|Growth rates||Value in latest period||Average||Absolute average|
|Production - 3 month||1.1||-0.17||0.31|
|Manufacturing - 3 month||1.2||-0.18||0.37|
|Production - 1 month||-1.1||-0.11||*||0.25|
|Manufacturing - 1 month||-1.2||-0.10||0.29|
Spreadsheets give revisions triangles (3.84 Mb ZIP) of estimates for all months from March 1998 through to the current month.
A statistical test has been applied to the average revisions to find out if they are statistically significantly different from zero. An asterisk (*) indicates if a figure has been found to be statistically significant from zero.
The table uses historical data for the most recent 60 months, comparing the estimate at first publication with the estimate as published 12 months later. The numbers which underpin these averages include normal changes due to late data and re-seasonal adjustment, but also significant methodological changes, the most recent being the introduction of the 2007 Standard Industrial Classification in October 2011.
Details of the policy governing the release of new data are available from the press office. Also available is a list of those given pre-publication access to the contents of this release.
A complete set of series in the statistical bulletin are available to download free of charge on the Data section of the Office for National Statistics website. Alternatively, for low-cost tailored data, call Online Services on 0845 601 3034
or email Customer Contact Centre.
The complete run of data in the tables of this statistical bulletin is also available to view and download in electronic format free of charge using the ONS Time Series Data service. Users can download the complete bulletin in a choice of zipped formats, or view and download their own selections of individual series.
ONS provides an analysis of past revisions in the IoP and other statistical bulletins (244.6 Kb Pdf) which present time series. Details can be found on the Office for National Statistics website.
ONS publishes revisions triangles (65.8 Kb Pdf) for all the main published key indicators on the Office for National Statistics website.
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publication: Wednesday 06 November 2013
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