Statistical bulletin: Index of Production, July 2011

Key points

• The seasonally adjusted index of production fell by 0.7 per cent in July 2011 compared to July 2010.
• The seasonally adjusted index of manufacturing rose by 1.9 per cent in July 2011 compared to July 2010.
• Between June 2011 and July 2011 overall production fell by 0.2 per cent, with manufacturing rising by 0.1 per cent.
• The manufacture of electrical & optical equipment was the main upwards driver on the month increasing by 1.0 per cent.

Key figures

Supplementary analysis

The seasonally adjusted index of production fell by 0.7 per cent in July 2011 compared with July 2010. A decrease of 14.3 per cent in the mining and quarrying sector was only partially offset by an increase of 1.9 per cent in the manufacturing sector.  The energy sector decreased by 1.7 per cent in July 2011 compared with a year ago. For the mining and quarrying sector this was the 10th consecutive month on a year ago fall. The manufacturing sector saw the 18th consecutive month on a year ago rise.

Between July 2011 and June 2011 the seasonally adjusted index of production fell by 0.2 per cent. The mining and quarrying sector fell by 1.4 per cent and the energy sector fell by 1.1 per cent. The manufacturing sector rose by 0.1 per cent.

Manufacturing

The seasonally adjusted manufacturing output rose by 0.1 per cent in July 2011 compared with June 2011. This monthly rise follows a fall in manufacturing of 0.5 per cent in quarter 2 2011 compared with quarter 1 2011.

The month on month picture is mixed with seven manufacturing industries rising and six falling. The largest contribution of any industry to the monthly manufacturing growth rate is no greater than 0.1 percentage points.

The largest contributors to the month on month rise in manufacturing output were the electrical and optical equipment industries which rose by 1.0 per cent, followed by the coke, refined petroleum and nuclear fuels industries which rose by 7.0 per cent. In contrast, the textiles and leather clothing industries fell by 3.5 per cent in July 2011 compared to June 2011.

Manufacturing output rose in July 2011 by 1.9 per cent compared to July 2010. The transport equipment industries rose by 10.4 per cent, contributing 1.1 percentage points to the month on a year ago manufacturing growth rate. The food, drink and tobacco industries rose by 3.9 per cent, contributing 0.6 percentage points.

Mining and quarrying

In July 2011, output of the mining and quarrying industries fell by 14.3 per cent compared to July 2010. The biggest decrease was in oil and gas production which fell by 16.3 per cent in July 2011 compared with a year ago.

Between July 2011 and June 2011 mining and quarrying decreased by 1.4 per cent. Oil and gas decreased by 1.5 per cent with maintenance reducing output at a number of sites.

Energy

Energy has fallen on the month and on the month a year ago. Energy supply fell between July 2011 and June 2011 by 1.1 per cent, with decreases in electricity supply of 2.0 per cent and water supply by 1.5 per cent. Gas supply increased by 2.4 per cent on the month.

Between July 2011 and July 2010 energy supply fell by 1.7 per cent with all three energy industries falling. Gas supply decreased by 7.3 per cent, electricity supply decreased by 0.3 per cent and water supply decreased by 0.4 per cent.

Production in detail

The Index of Production (IoP) measures the output of the production industries in the United Kingdom. Figures are adjusted for seasonal variations unless otherwise stated and the reference year is 2006 = 100. For an explanation of the terms used in this bulletin, please see the Background Notes section. Care should be taken when using the month on month growth rates due to their volatility. An assessment of the quality of the production statistics is available in the background notes.

Sector analysis

Mining and quarrying

The seasonally adjusted index of mining and quarrying in July 2011 fell by 14.3 per cent compared with July 2010. In particular:

          i)            oil and gas extraction decreased by 16.3 per cent

         ii)            the largest contributor to the 14.3 per cent year on year fall in overall mining and quarrying was approximately 15.4 percentage points from oil and gas extraction.

Manufacturing

The seasonally adjusted index of manufacturing in July 2011 rose by 1.9 per cent compared with July 2010. In detail:

         i)            output increased in nine of the 13 manufacturing sub-sectors and fell in four sub-sectors

        ii)            the largest increases in output were in the transport equipment industries which rose by 10.4 per cent and food, drink & tobacco industries which rose by 3.9 per cent

       iii)            within the transport equipment industries, the main rises were in the:

• mfr of motor vehicles                                                                18.8 per cent

• mfr of motor vehicle bodies & parts, engine parts                        14.2 per cent

        iv)            within the food, drink & tobacco industries, the main rises were in the:

• mfr of bread, biscuits, pastry goods & cakes                            9.7 per cent

• mfr of meat and meat products                                               5.7 per cent

Electricity, gas and water supply

The seasonally adjusted index of the electricity, gas and water supply industries in July 2011 fell by 1.7 per cent compared with July 2010. The main movements were:

         i)            gas supply output decreased by 7.3 per cent

        ii)            electricity supply output decreased by 0.3 per cent.

Revisions

This release conforms to the standard revisions policy for National Accounts. Table IOP5R shows the revisions to the estimates previously published on 09 August 2011. In this release, there are no periods open for revision.

Impact on GDP

There is no impact on previously published GDP estimates arising from this release of IoP data.

Summary statistics

Summary statistics for Index of Production and Index of Manufacturing July 2011.

Background notes

1. What's new?

   In accordance with the National Accounts revision policy, data will be supplied for the month of July 2011 only.

   Upcoming changes

   The index of Production release for August 2011 will have a revisions period back to January 1997.  This will be in line with the open revisions period for the 2011 Blue book publication.

   Index of Production currently produces the statistical bulletin and tables in accordance with the 2003 UK Standard Industrial Classification System (SIC03). There will be a move over to a system revised for 2007.  From the August 2011 release in October 2011, IoP will be classified on a 2007 UK SIC basis.  Further information can be found on the website.

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 2011.

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 2006=100 and are classified to the 2003 revision to the UK Standard Industrial Classification (SIC). The production industries, which accounted for 17.2 per cent of gross domestic product in 2006, cover mining and quarrying (Section C), manufacturing (Section D) and electricity, gas and water supply (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).

   Use of the data

   The ONS work programme consultation which ended in December looked at customers views on how ONS could address customers’ needs within a reducing budget.

   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.

4. Methods

   A link to the Index of Production methodology can be found here (42.7 Kb Pdf) .

   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 indicators 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.

   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.

   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 measured at constant basic prices. Deflators adjust the value series to take out the effect of price change to give the volume series.

5. Quality

   Basic quality information

   Common pitfalls in interpreting series: 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 National Statistics website.

   The 2005 median annual growth of MPI turnover, their associated standard errors and quality bands can now be found on the National Statistics website here.

   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 (previously the Monthly Production Inquiry MPI) and (b) revisions to seasonal adjustment factors which are re-estimated every period.

   In the next bulletin, which will contain figures for August 2011 and will be published on 11 October 2011, the period open for revision will be from January 1997.

   National Accounts revision policy is included here.

   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 table below presents a summary of the differences between the first estimates published between July 2005 and June 2010 and the estimates published 12 months later.

   Revisions July 2011

   		Value in		Revisions between first publication and estimates
   		latest period		produced twelve months later (% points)
   		(per cent)		Average over the last		Average over the last five
   				five years		years without regard to sign
   						(average absolute revision)
   Production output - 3 month on
   3 month growth rate		-0.4		-0.05		0.25
   Manufacturing output - 3 month
   on 3 month growth rate		0.5		-0.09		0.31
   Production output - 1 month
   growth rate		-0.2		-0.07		0.26
   Manufacuting output - 1 month
   growth rate		0.1		-0.05		0.27

   Table source: Office for National Statistics

   Download table

   • XLS format
     (14.5 Kb)

   Spreadsheets giving revisions triangles of estimates for all months from December 1997 through to the current month, and the calculations behind the averages in the above table, are available on the National Statistics website.

   Revision triangles. (1.25 Mb ZIP)

   A statistical test has been applied to the average revisions to find out if they are statistically significantly different from zero. No such differences have been found.

   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 will include normal changes due to late data and re-seasonal adjustment, but also significant methodological changes, the most recent of which occurred in October 2003 (see article “Index of Production redevelopment” in Economic Trends, October 2002).

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 National Statistics website.

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 (previously known as First Release) which present time series. Details can be found here.

   ONS now publishes revisions triangles for all the main published key indicators on the National Statistics website.

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9. Next publication:  Tuesday 11 October 2011

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