This bulletin presents the Index of Production (IoP) for the United Kingdom production industries, December 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 mainly based on a monthly business survey (MBS) of approximately 6,000 businesses, covering all the territory of the UK without geographical breakdown. The IoP is one of the earliest indicators of growth and it measures gross value added in the manufacturing (the largest component of production), 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 shows the key figures for this release. Figure 1 shows the production and manufacturing series from August 2011 to December 2013.
|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 seen in Figure 2, the pace of growth in manufacturing exceeded that of total production between 2003 and 2007. This trend, however, was temporarily interrupted following the economic downturn in 2008, where manufacturing fell by a greater extent than total production. Since the second half of 2010, growth in manufacturing has returned to its pre-downturn trend of outpacing growth in total production. Comparing Q4 2013 with Q4 2012, manufacturing output rose by 1.9% and total production output increased by 2.3%.
The recent divergence can be attributed to movements within the sub-industry groupings that make up total production, namely the mining and quarrying industries. The decline of oil & gas extraction over the past 13 years has provided downward pressure on production, this can predominantly be attributed to North Sea oil and gas reserves becoming increasingly challenging to extract and ageing extraction equipment requiring extensive repairs and maintenance.
More recently, the Preliminary Estimate of Q4 2013 Gross Domestic Product (GDP) indicated that the UK economy grew by 0.7%. Three out of the four of the main industrial groupings experienced growth in output, with the construction industry contracting. The services industries continued to be the main contributor to growth, with output in the latest quarter rising above the pre-downturn peak reached in Q1 2008 by 1.3%. By contrast, output in both the production and construction industries remained more than 10% below their respective pre-downturn peaks.
Broader economic conditions remain difficult in the UK, however, they do appear to be improving. The rate of UK Consumer Price Inflation (CPI) continues to exceed growth in total average weekly earnings, therefore placing downward pressure on real wages. However, the rate of inflation fell further in December to 2.0% due to notable downward contributions from food & non-alcoholic beverages and recreational goods & services prices. This marks the first time CPI has met its Bank of England target since April 2006.
The rate of Producer Price Inflation (PPI) of goods produced by UK manufacturers – or ‘factory gate prices’ – rose by 1.0% in the year to December. Input prices for all manufactured goods fell by 1.2% over the same period.
Economic conditions in the euro area (EA18) remain complex. The latest EA18 quarterly GDP figures estimated that output grew by 0.1% in Q3 2013, a second successive quarterly expansion. However, this follows a period of six consecutive quarterly contractions up until Q1 2013. The rate of consumer price inflation fell to 0.7% in the twelve months to January 2014, while the unemployment rate remained stable at 12.0% in December, though the performance varies by country.
Economic conditions in the US strengthened further, with GDP growing by 0.8% in Q4 2013 compared with Q3 2013. The US labour market also improved, with the unemployment rate falling 0.3 percentage points between November and December 2013 to 6.7%.
On a global level, production output amongst the G7 nations appears to have been growing steadily since 2011, expanding by a further 0.6% in Q3 2013 compared to Q2 2013. This experience however varies by country, with production output in the UK, France and Italy still remaining below levels reached in Q1 2011.
The preliminary estimate of GDP, published on 28 January 2014, contained a forecasted rise of 0.7% for production in Q4 2013. This release of data estimates production rose by 0.5% between Q3 2013 and Q4 2013. However, due to the weight of the production industries within the economy, the impact on the previously published Q4 2013 GDP estimate is minimal.
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 December 2013, the third month of Q4 2013. All the components are already available for Q3 2013. Details of the data already published can be found in table 2.
Output in the construction industry will be published on 14 February 2014 and services output on 26 February 2014 for December 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||7 Feb||Dec||..||..||1.8||0.4|
|Construction output||6.3||10 Jan||Nov||..||..||2.2||-4.0|
|Index of Services||77.8||28 Jan||Nov||..||..||2.6||0.4|
|Retail Sales||17 Jan||Dec||..||..||5.3||2.6|
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 increased by 0.5% in Q4 2013 compared with Q3 2013. This increase was lower than the forecasted rise of 0.7% contained within the GDP preliminary estimate. The increase in total production reflected rises of 0.7% in manufacturing; 1.8% in the electricity, gas, steam & air conditioning sector and 0.8% in the water supply, sewerage & waste management sectors. The largest contribution to the increase in total production came from manufacturing, which contributed 0.5 percentage points to the increase. These rises were partially offset by a fall in the mining & quarrying sector of 1.9%, which contributed 0.2 percentage points.
Total production output increased by 1.8% between December 2012 and December 2013. This increase reflected rises of 1.5% in manufacturing, 2.6% in mining & quarrying and 7.9% in the water supply, sewerage & waste management sector. The largest contributor to the increase in total production was manufacturing, which contributed 1.1 percentage points. These rises were partially offset by a decrease of 3.0% in the electricity, gas, steam & air conditioning sector, which decreased the growth in total production by 0.3 percentage points.
In December 2013 (Figure 2), total production increased by 0.4% following a fall of 0.1% in November 2013, revised from 0.0%. The increase in total production reflects rises of 0.3% in manufacturing, which contributed 0.2 percentage points to the growth and a rise of 2.9% in mining & quarrying, which contributed 0.3 percentage points to the growth. These rises were slightly offset by a fall of 1.3% in the electricity, gas, steam & air conditioning sector, which contributed 0.1 percentage points; and in the water supply, sewerage & waste management sector, with negligible contribution.
Manufacturing output increased by 0.7% in Q4 2013 compared with Q3 2013. This increase was slightly lower than forecasted during the GDP preliminary estimates at 0.9%. Output increased in six of its 13 subsectors. The largest upward contributions to manufacturing growth were from the manufacture of basic pharmaceutical products & pharmaceutical preparations, which rose by 4.0% and the manufacture of transport equipment, which rose by 2.0%; both contributed 0.3 percentage points each to this sector’s growth. These were followed by the manufacture of basic metals & metal products, which rose by 2.2% and contributed just under 0.3 percentage points.
In contrast, the largest downward contribution was from the manufacture of food products, beverages & tobacco, which fell by 1.3% and had a negative contribution to manufacturing growth of 0.2 percentage points, having had an increase in growth between the previous two quarters. The manufacture of computer, electronic & optical products also fell by 2.5% and contributed just under 0.2 percentage points. This was followed by the manufacture of wood, paper products & printing, which fell by 1.4% and decreased the manufacturing growth by 0.1 percentage points.
Manufacturing output increased by 1.5% between December 2012 and December 2013, with output rising in eight of the 13 manufacturing subsectors. The largest upward contribution to manufacturing output was from the manufacture of transport equipment, which rose by 7.6% and contributed 1.0 percentage points to this sector’s growth. The majority of this strength, 0.5 percentage points, came from the manufacture of motor vehicles, trailers & semi trailers. The second largest contributor to the growth in manufacturing was other manufacturing & repair, which increased by 8.2% and contributed 0.6 percentage points. This was followed by the manufacture of wood, paper products & printing, which increased by 6.5% and contributed 0.4 percentage points.
By contrast, the downward contributions to manufacturing came from the manufacture of machinery & equipment not elsewhere classified, which fell by 12.2% and contributed 1.0 percentage point; the manufacture of computer, electronic & optical products, which fell by 7.6% and contributed 0.5 percentage points; and the manufacture of electrical equipment, which fell by 5.9% and contributed 0.2 percentage points.
Manufacturing output increased by 0.3% between November 2013 and December 2013 following a fall of 0.1% in the previous month having being revised from 0.0%. There were increases in seven of the 13 manufacturing subsectors. The largest contributor to manufacturing growth was the manufacture of basic pharmaceutical products & pharmaceutical preparations, which rose by 4.5% and contributed 0.3 percentage points. The next largest contributor was the manufacture of coke & refined petroleum products, which rose by 11.2% and contributed 0.2 percentage points. This was followed by the manufacture of food products, beverages & tobacco, which rose by 1.0% and contributed 0.2 percentage points to manufacturing growth.
In contrast to the above rises, the largest downward contributions to the month on month manufacturing growth came from the manufacture of transport equipment, which fell by 2.8% and contributed 0.4 percentage points. The majority of this weakness, 0.6 percentage points, came from the manufacture of motor vehicles, trailers & semi trailers. Anecdotal evidence seems to suggest that the weakness this month is industry wide with some contribution to the fall due to the changing pattern of industry shutdowns. The next largest downward contribution came from the manufacture of textiles, wearing apparel & leather products, which fell by 3.3% and contributed 0.1 percentage points. This was followed by the manufacture of basic metals & metal products, which fell by 0.6% and contributed less than 0.1 percentage points.
Output of the mining & quarrying industry decreased by 1.9% in Q4 2013 compared with Q3 2013, having increased between the previous two quarters. The decrease reflected a fall of 3.4% in the extraction of crude petroleum & natural gas, which contributed 2.4 percentage points. In contrast, offsetting this decrease were increases in other mining & quarrying, which rose by 1.9% and contributed 0.5 percentage points to the growth in this sector. There was also a rise in the mining of coal & lignite of 2.1%, with negligible upward contribution to the growth.
Mining & quarrying output increased by 2.6% between December 2012 and December 2013. The largest contribution to the increase in growth came from other mining & quarrying, which increased by 15.1% and contributed 3.8 percentage points. Offsetting this increase were decreases in the extraction of crude petroleum & natural gas, which fell by 1.0% and contributed 0.7 percentage points; and in the mining of coal & lignite, which decreased by 33.2% and contributed 0.4 percentage points.
Mining & quarrying output increased by 2.9% between November 2013 and December 2013. The largest contribution to this increase came from the extraction of crude petroleum & natural gas, which increased by 4.7% and contributed 3.3 percentage points to the growth. Mining of coal & lignite increased by 2.2%, with negligible contribution to the sector’s growth. Partially offsetting these rises was a decrease in other mining & quarrying, which fell by 1.7% and contributed 0.5 percentage points to the growth.
Electricity, gas, steam & air conditioning industry output increased by 1.8% in Q4 2013 when compared with Q3 2013. The growth in this sector follows a fall of 5.9% in Q3 2013, where a reduction in demand for gas in the production of electricity and a reduction in demand due to warmer than average temperatures were contributing factors. Within this sector the manufacture of gas & distribution of fuel rose by 10.1% and contributed 2.3 percentage points to the increase in this sector; whilst electric power generation, transmission & distribution fell by 0.7% and contributed 0.6 percentage points.
Electricity, gas, steam & air conditioning output decreased by 3.0% between December 2012 and December 2013; a result of falls in both of its sectors. The manufacture of gas & distribution of fuel fell by 7.3% and contributed 1.9 percentage points to the fall. Electric power generation, transmission & distribution fell by 1.5% and contributed 1.1 percentage points to the fall.
Between November 2013 and December 2013 the electricity, gas, steam & air conditioning sector output decreased by 1.3%, following an increase in the previous month. The main contributor to the decrease was the manufacture of gas & distribution of fuel, which decreased by 8.2% and contributed 2.2 percentage points to the fall in this sector. Partially offsetting the fall was a rise in electrical power generation, transmission & distribution, which increased by 1.3% and contributed 1.0 percentage points.
Water supply, sewerage & waste management output increased by 0.8% in Q4 2013 compared with Q3 2013. The largest contribution to the increase was from sewerage, which rose by 3.2% and contributed 0.9 percentage points; waste collection, treatment & disposal activities rose by 1.2% and contributed 0.5 percentage points. Partially offsetting these increases was a decrease in water collection, treatment & supply, which fell by 2.4% and contributed 0.6 percentage points to this sector; and in remediation activities & other waste management services, which fell by 1.1% (this had a negligible contribution).
Water supply, sewerage & waste management output increased by 7.9% between December 2012 and December 2013 with increases in all of its sectors. Sewerage, increased by 12.1% and contributed 3.5 percentage points; waste collection, treatment & disposal activities increased by 6.4% and contributed 2.9 percentage points; water collection, treatment & supply output increased by 6.0% and contributed 1.6 percentage points; and remediation activities & other waste management services rose by 7.6% and contributed 0.1 percentage points to the rise.
Water supply, sewerage & waste management output decreased by 0.2% between November 2013 and December 2013. The largest contribution to the decrease was from waste collection, treatment & disposal activities, which fell by 2.1% and contributed 1.0 percentage points. Remediation activities & other waste management services fell by 3.0% and contributed less than 0.1 percentage points. Offsetting these decreases were increases in sewerage, which rose by 2.3% and contributed 0.7 percentage points to this sector; and in water collection, treatment & supply, which rose by 0.3% and contributed 0.1 percentage points.
This release conforms to the standard revisions policy for National Accounts (27.8 Kb Pdf) . In accordance with the policy, the current revisions period is open back to January 2013.
A report titled GDP Output Improvement Report November 2013 (73.9 Kb Pdf) was published on 22 November 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.
The index of production release for January 2014, to be published on 11 March 2014, will have a revisions period back to January 2012.
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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 (Section B), manufacturing (Section C), gas & electric (Section D), and water supply & sewerage (Section 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, Her Majesty’s Treasury and the Office for Budget Responsibility, 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 chained volume measures. 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 January 2014 will have a revisions period back to January 2012.
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 January 2008 and December 2012 and the estimates published 12 months later.
|Growth rates||Value in latest period||Average||Absolute average|
|Production - 3 month||0.5||-0.21||0.33|
|Manufacturing - 3 month||0.7||-0.21||0.38|
|Production - 1 month||0.5||-0.13||*||0.26|
|Manufacturing - 1 month||0.3||-0.11||*||0.29|
Spreadsheets give revisions triangles (3.9 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: Tuesday 11 March 2014
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