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Statistical bulletin: Index of Production, January 2014 This product is designated as National Statistics

Released: 11 March 2014 Download PDF

Key Points

  • Users are reminded that all figures contained within this release are seasonally adjusted estimates.
  • Production output increased by 2.9% between January 2013 and January 2014. This increase reflects rises of 3.3% in manufacturing (the largest component of production) and 12.6% in water supply, sewerage & waste management output.
  • The main manufacturing components contributing to the increase between January 2013 and January 2014 were the manufacture of rubber, plastic products & other non-metallic mineral products; the manufacture of machinery and equipment not elsewhere classified; and the manufacture of transport equipment.
  • Total production increased by 0.1% between December 2013 and January 2014. The only downward contribution was from mining & quarrying, which decreased by 3.4%; all remaining sectors reflected upward contributions with manufacturing showing an increase of 0.4%.
  • The main components contributing to the increase in manufacturing between December 2013 and January 2014 were the manufacture of rubber, plastic products & other non-metallic mineral products; the manufacture of machinery and equipment not elsewhere classified; and the other manufacturing and repair.
  • In this release the earliest period open for revision was January 2012. There is no impact on the previously published GDP estimates from these revisions.

Key Figures

This bulletin presents the Index of Production (IoP) for the United Kingdom production industries, January 2014. 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 January 2014.

Table 1: Percentage changes

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
  2010=100        
Production 97.3 2.9 2.3 0.1 0.7
Manufacturing 101.0 3.3 2.2 0.4 0.7

Table source: Office for National Statistics

Table notes:

  1. Source: Primarily Monthly Business Survey (Production and Services) - Office for National Statistics

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Figure 1: Seasonally adjusted production and manufacturing

Figure 1: Seasonally adjusted production and manufacturing

Notes:

  1. Source: Primarily Monthly Business Survey (Production and Services) - Office for National Statistics

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Economic Context

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.

Following the 2008 downturn, production output returned to growth for a short period, before falling again in 2011/2012 (this coincided with falling GDP in the Euro area (EA18)). Total production output was particularly affected, falling below its downturn trough in Q4 2012, while manufacturing fell by a smaller amount. Conditions clearly improved in 2013; comparing Q4 2013 with Q4 2012, production and manufacturing both increased, by 2.2% and 1.8% respectively.

Figure 2: Quarterly seasonally adjusted production and manufacturing

Figure 2: Quarterly seasonally adjusted production and manufacturing

Notes:

  1. Source: Primarily Monthly Business Survey (Production and Services) - Office for National Statistics

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The recent divergence can be attributed to movements within the industry sub-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 Second Estimate of Q4 2013 Gross Domestic Product (GDP) estimated that the UK economy grew by 0.7%. Three out of the four of the main industrial groupings experienced growth in output, with the services and construction industries growing by 0.8% and 0.2% respectively. The agriculture, forestry & fishing industry contracted by 0.1%. 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 sectors remained more than 10% below their respective pre-downturn peaks.

Broader economic conditions do appear to be improving in the UK. The rate of inflation (as measured by the Consumer Price Index (CPI)) fell further in January to 1.9%, due to notable downward contributions from recreational goods & services, furniture & household goods and alcohol & tobacco products prices. This marks the first time the CPI growth rate has fallen below its Bank of England target since November 2009. The UK labour market also appears to be steadily improving, with the unemployment rate for October to December 2013 falling to 7.2%, a 0.4 percentage point fall compared with July to September 2013.

Annual producer input price inflation fell in January to -3.1%, a third consecutive fall. This steady slowdown in input price inflation has been followed by easing output price inflation, which stands at 1.2% over the same period.

Economic conditions in the euro area remain complex. The latest EA18 quarterly GDP figures show that output grew by 0.3% in Q4 2013, a third successive quarterly expansion. However, this followed a period of six consecutive quarterly contractions up until Q1 2013 and remained at 2.7% below the pre-downturn peak reached in Q1 2008. The EA18 consumer price inflation rate remained stable at 0.8% in the twelve months to January 2014, while the unemployment rate was unchanged at 12.0% in January, though the performance varies by country.

Economic conditions remain positive in the US, with GDP growing by 0.6% in Q4 2013 compared with Q3 2013, although the pace of growth has eased compared to the previous quarter. The US labour market continued to improve, with the unemployment rate falling 0.1 percentage points between December 2013 and January 2014 to 6.6%.

On a global level, production output amongst the G7 nations appears to have been growing steadily since the trough reached in Q2 2009 and expanded by a further 0.6% in Q3 2013 compared with Q2 2013. Despite the upward trend achieved over the past four years, output remained 6.8% below the pre-downturn peak reached in Q1 2008. This experience has, however, varied by country; for example production output in Japan, France, the UK and Italy remained more than 10% below their respective pre-downturn peaks.

GDP Impact and Components

In this release periods back to January 2012 are open for revision, in line with National Accounts revisions policy. There is no impact on the previously published GDP estimates from these revisions.

The estimates for the production industries are generally the first of the main components for the output approach to the measurement of GDP to be published (agriculture, construction and services are the other components). All the components are already available for Q4 2013. Details of the data already published can be found in Table 2.

Output in the construction industry for January 2014 will be published on 14 March 2014 and services output for the same period on 28 March 2014.

Table 2: GDP component tables, Quarter 1 2014

              Percentage change
         
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 11 Mar Jan .. .. 2.9 0.1
      Dec .. .. 1.9 0.5
      Q4 2.2 0.5 .. ..
               
               
Construction output 6.3 14 Feb Dec .. .. 6.3 2.0
      Q4 4.4 0.2 .. ..
               
               
Index of Services 77.8 26 Feb Dec .. .. 3.2 0.2
      Q4 2.7 0.8 .. ..
               
               
Retail Sales   21 Feb Jan .. .. 4.3 -1.5
      Dec .. .. 5.3 2.5
      Q4 3.2 0.5 .. ..
             
               
Agriculture 0.7   Q4 -6.2 -0.1 .. ..
               

Table source: Office for National Statistics

Table notes:

  1. The data for the index of production reflect the latest revisions published as part of this release.

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Production and Sectors Supplementary Analysis

Table 3: Headline growth rates and contributions to the Index of Production, January 2014

Description % of production Month on same month a year ago growth (%)  Contribution to production (% points) Month on previous month growth (%) Contribution to production (% points)
IoP 100.0 2.9 2.9 0.1 0.1
Sector B 15.1 -1.9 -0.23 -3.4 -0.40
Division 06 12.4 -7.4 -0.64 -5.8 -0.48
Sector C 68.4 3.3 2.34 0.4 0.26
Sector D 8.6 -3.0 -0.26 0.8 0.06
Sector E 7.9 12.6 1.09 1.9 0.18

Table notes:

  1. 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.

  2. Source: Primarily Monthly Business Survey (Production and Services) - Office for National Statistics

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Figure 3: Contribution to production growth month on same month a year ago

Growth rates can be found in the chart download or in the attached IoP 5 tables

Figure 3: Contribution to production growth month on same month a year ago

Notes:

  1. Source: Primarily Monthly Business Survey (Production and Services) - Office for National Statistics

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Figure 4: Contribution to production growth month on month

Growth rates can be found in the chart download or in the attached IoP 5 tables

Figure 4: Contribution to production growth month on month

Notes:

  1. Source: Primarily Monthly Business Survey (Production and Services) - Office for National Statistics

Download chart

Total production

Total production output in January 2014 increased by 2.9% compared with January 2013. This was the fifth consecutive increase since September 2013. The highest contribution to the increase was from manufacturing, the largest component of production, which increased by 3.3% and contributed 2.3 percentage points to total production. This was followed by water supply, sewerage & waste management output, which increased by 12.6% and contributed 1.1 percentage points. These rises were partially offset by decreases in electricity, gas, steam & air-conditioning output, which decreased by 3.0% and contributed 0.3 percentage points; and in the mining & quarrying output, which decreased by 1.9% and contributed 0.2 percentage points.
 
Total production output increased by 0.1% between December 2013 and January 2014. This increase reflected rises in manufacturing output, which increased by 0.4% and contributed 0.3 percentage points; water supply, sewerage & waste management output, which increased by 1.9% and contributed 0.2 percentage points; and from electricity, gas, steam & air-conditioning output, which increased by 0.8% and contributed 0.1 percentage points. These increases were partially offset by the mining and quarrying sector, which decreased by 3.4% and contributed 0.4 percentage points, having increased the previous month.

Manufacturing

Manufacturing output increased by 3.3% between January 2013 and January 2014, the highest increase since February 2011, with output increasing in seven of the 13 manufacturing subsectors. The largest upward contribution in manufacturing output was from the manufacture of rubber, plastic products & other non-metallic mineral products, which rose by 17.3% and contributed 1.3 percentage points to this industry's growth. The second largest contributor to the growth in manufacturing was from the manufacture of machinery & equipment not elsewhere classified, which increased by 13.2% and contributed 0.9 percentage points. This was followed by the manufacture of transport equipment, which increased by 5.4% and contributed 0.7 percentage points; the main contributor to this increase was from the motor vehicles, trailers & semi trailers industry, which increased by 6.6% compared with a year ago, and contributed 0.6 percentage points.

In contrast, the largest downward contributions to manufacturing came from the manufacture of basic pharmaceutical products & pharmaceutical preparations, which decreased by 9.0% and contributed 0.7 percentage points; the manufacture of computer, electronic & optical products, which decreased by 4.0% and contributed 0.3 percentage points; and the manufacture of coke & refined petroleum products, which decreased by 7.9% and contributed 0.2 percentage points.

Manufacturing output increased by 0.4% between December 2013 and January 2014, with output rising in nine of the 13 manufacturing subsectors. The largest contributor to manufacturing growth was the manufacture of rubber, plastic products & other non-metallic mineral products, which increased by 6.2% and contributed 0.5 percentage points. The main contributor to this increase was from the rubber & plastic products industry, which increased by 8.2% and contributed 0.4 percentage points. The next largest contributor to manufacturing growth was the manufacture of machinery & equipment not elsewhere classified, which increased by 5.2% and contributed 0.4 percentage points. This was followed by other manufacturing & repair, which increased by 3.2% and contributed 0.3 percentage points.

In contrast to the above increases, the largest downward contributions to the month on month manufacturing growth came from the manufacture of basic pharmaceutical products & pharmaceutical preparations, which decreased by 13.9% and contributed 1.1 percentage points, having increased the previous month; and the manufacture of coke & refined petroleum products, which fell by 7.3% and contributed 0.2 percentage points. Anecdotal evidence suggests that, in January 2014, refining was particularly low as a result of planned maintenance work being carried out at a number of refineries. This was followed by the manufacture of basic metals & metal products, which fell by 1.3% and contributed 0.2 percentage points.

Mining & quarrying

Mining & quarrying output decreased by 1.9% between January 2013 and January 2014. The largest contribution to this decrease came from the extraction of crude petroleum & natural gas, which decreased by 7.4% and contributed 5.3 percentage points to this sector. This was followed by a decrease in the mining of coal & lignite, which decreased by 32.0% and contributed 0.4 percentage points. These decreases were partially offset by an increase in other mining & quarrying output, which increased by 14.8% and contributed 3.9 percentage points.

Mining & quarrying output decreased by 3.4% in January 2014 compared with December 2013, having increased by 3.3% in the previous month. The largest contribution to the decrease came from the extraction of crude petroleum & natural gas, which fell by 5.8% and contributed 4.1 percentage points to the fall in this sector. Anecdotal evidence suggests that the severe weather conditions across the North Sea hampered production during January and was therefore a contributing factor to the reported decrease in output compared to the previous month and to the same month a year ago. This was followed by the mining of coal & lignite, which decreased by 0.2% and had a negligible contribution to the decrease in this sector. These decreases were partially offset by an increase in other mining & quarrying of 2.5%, which contributed 0.7 percentage points.

Electricity, gas, steam & air conditioning

Electricity, gas, steam & air conditioning output decreased by 3.0% in January 2014 compared with January 2013, a result of falls in both of its sectors. The manufacture of gas & distribution of gaseous fuels through mains fell by 9.9% and contributed 2.6 percentage points and electric power generation, transmission & distribution fell by 0.5% and contributed 0.4 percentage points to the fall.

Electricity, gas, steam & air conditioning output increased by 0.8% in January 2014 compared with December 2013. The increase reflects a rise of 1.4% in electric power generation, transmission & distribution, which contributed 1.1 percentage points. This rise was slightly offset by a fall in the manufacture of gas & distribution of gaseous fuels through mains of 1.1%, which contributed 0.3 percentage points.

Water & waste management

Water supply, sewerage & waste management output increased by 12.6% between January 2013 and January 2014, the ninth consecutive increase since April 2013, with increases in all of its sectors. The highest contributor to the growth in this sector was waste collection, treatment & disposal activities, which increased by 13.4% and contributed 6.0 percentage points. The next highest growth was sewerage, which increased by 17.7% and contributed 5.1 percentage points; this was followed by water collection, treatment & supply, which increased by 5.7% and contributed 1.5 percentage points; and remediation activities & other waste management services, which increased by 12.4% and contributed 0.1 percentage points to the growth in this sector.

Water supply, sewerage & waste management output increased by 1.9% between December 2013 and January 2014, with increases in three of its four subsectors. Sewerage increased by 4.4% and contributed 1.3 percentage points; Waste collection, treatment & disposal increased by 2.7% and contributed 1.2 percentage points; and remediation activities & other waste management services, which increased by 4.6% with negligible contribution to the increase in this sector. Offsetting these increases was a decrease in water collection, treatment & supply, which fell by 2.2% and contributed 0.6 percentage points.

Background notes

  1. What's new?

    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 2012.

    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.

    Upcoming changes

    The index of production release for February 2014, to be published on 08 April 2014, will have a revisions period back to January 2014.

  2. 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 2014.

  3. 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.

    • Index number
      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.

    • Seasonally adjusted
      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.

  4. Methods

    An article about the Index of Production methodology (147.9 Kb Pdf)  is available on the Office for National Statistics website.

    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 of various industries in the economy. It is one of the main data sources used in the compilation of the Index of Production.

    Seasonal adjustment
    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. 

    Deflation
    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.

  5. Quality

    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.

    Summary quality report
    A summary quality report (130.1 Kb Pdf) for this Statistical Bulletin can now be found on the ONS website.

    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 February 2014 will have a revisions period back to January 2014.

    National Accounts revision policy (27.8 Kb Pdf) can be found on the ONS website.

    Revision triangles
    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 February 2008 and January 2013 and the estimates published 12 months later. 

    Table 4: Revisions January 2014

    Growth rates Value in latest period Average   Absolute average
    Production - 3 month 0.7 -0.22 * 0.33
    Manufacturing - 3 month 0.7 -0.23 0.37
    Production - 1 month 0.1 -0.12 * 0.27
    Manufacturing - 1 month 0.4 -0.11 * 0.29

    Table source: Office for National Statistics

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    Spreadsheets give revisions triangles (3.94 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.

  6. Publication policy

    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.

  7. Accessing data

    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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  9. Next publication:  Tuesday 08 April 2014
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  10. Details of the policy governing the release of new data are available by visiting www.statisticsauthority.gov.uk/assessment/code-of-practice/index.html or from the Media Relations Office email: media.relations@ons.gsi.gov.uk

    These National Statistics are produced to high professional standards and released according to the arrangements approved by the UK Statistics Authority.

Statistical contacts

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Alaa Al-Hamad +44 (0)1633 455648 ONS alaa.al-hamad@ons.gsi.gov.uk
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