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Statistical bulletin: Index of Production, July 2013 This product is designated as National Statistics

Released: 06 September 2013 Download PDF

Key points

  • Users are reminded that all figures contained within this release are seasonally adjusted estimates.
  • Production output decreased by 1.6% between July 2012 and July 2013. Three of the four main sectors were lower than they were a year ago. Manufacturing fell by 0.7% over the same period.
  • The main manufacturing components contributing to the decrease between July 2012 and July 2013 were the manufacture of machinery & equipment not elsewhere classified; the manufacture of basic metals & metal products; and the manufacture of basic pharmaceutical products & pharmaceutical preparations.
  • Production was flat (0.0% growth) between June 2013 and July 2013. Manufacturing increased by 0.2% over the same period, the second consecutive increase.
  • The main manufacturing components contributing to the increase between June 2013 and July 2013 were other manufacturing & repair; the manufacture of machinery & equipment not elsewhere classified; and the manufacture of computer, electronic & optical products.
  • July 2013 was 2.8 degrees warmer than a year earlier, 1.8 degrees warmer than the long term average for July and 4.3 degrees warmer than June. This affected output within a number of sectors for example beverage production, electricity and water supply.
  • In this release, periods back to April 2013 are open for revision.

Key figures

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

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 96.6 -1.6 -0.9 0.0 0.9
Manufacturing 100.6 -0.7 -0.5 0.2 0.9

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Figure 1: Seasonally adjusted production and manufacturing

Figure 1: Seasonally adjusted production and manufacturing
Source: Monthly Business Survey (Production and Services) - Office for National Statistics

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Economic context

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. Comparing Q2 2013 with a year earlier, production output fell by 0.8% and manufacturing output fell by 0.6%.

Figure 2: Quarterly seasonally adjusted production and manufacturing

Figure 2: Quarterly seasonally adjusted production and manufacturing
Source: Monthly Business Survey (Production and Services) - Office for National Statistics

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The decline of oil & gas extraction over the last 13 years has provided a notable downward pressure on production. This has been due to North Sea oil and gas reserves becoming more difficult to extract and aging extraction equipment which has required extensive repairs and maintenance.

More recently, quarter-on-quarter growth in production of 0.7% 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 2.1% in the year to July. Input prices for all manufactured goods increased by 1.1% 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 Consumer Price Inflation was 1.6% in July, stable compared with June, 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 Q1 2013 with Q4 2012, G7 production grew by 0.7%. Looking at the country level there is wide disparity in performance. Production in Canada, Japan and the United States has grown while the other G7 nations, including the UK, have stagnated, or in Italy’s case, continued to decline further.

GDP Impact and Components

In this release, periods back to April 2013 are open for revision. There is minimal impact on previously published GDP estimate arising from this release (less than 0.02 percentage points).

The estimates for the production industries are the first of the main components for the output approach to the measurement of GDP (construction and services are the other components) to be published for July 2013, the first 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 13 September 2013 and services output on 27 September 2013 for July 2013.

Table 2: GDP component tables (Quarter 2 2013)

Chained volume measures seasonally adjusted

        Percentage change
Publication % of GDP Release date Quarter Most recent 3 months on a year earlier  Most recent 3 months on 3 months earlier 
         
Index of Production 1 15.2 6 Sep Q2 -0.8 0.7
    Q1 -2.6 0.3
           
           
Construction output 6.3 9 Aug Q2 -0.5 1.4
      Q1 -6.3 -1.8
           
           
Index of Services 77.8 23 Aug Q2 2.1 0.6
    Q1 1.3 0.5
           
           
Retail Sales   15 Aug Q2 1.6 1.1
      Q1 0.1 0.4
         
           
Agriculture 0.7 23 Aug Q2 -4.9 1.7
      Q1 -8.7 -6.3
           
 
 

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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Supplementary analysis

Total production

Total production output in July 2013 decreased by 1.6% compared with July 2012. This decrease reflects falls of 0.7% in manufacturing, 9.7% in mining & quarrying and 4.0% in the electricity, gas, steam & air conditioning sector. These falls were partially offset by an increase of 5.6% in the water supply, sewerage & waste management sector.

There was no change in total production between June 2013 and July 2013 (Figure 2). Manufacturing increased by 0.2% between these periods. The water supply, sewerage & waste management sector rose by 1.2%, where evidence suggests the higher than average temperature in July resulted in increased water usage.

These increases were offset by decreases of 0.5% in mining & quarrying and 2.2% in the electricity, gas, steam & air conditioning sector. These decreases respectively reflect the impact of reduction in other mining & quarrying output following the growth in this industry during June and also reflect the gradual rise in temperature over the recent months.

Manufacturing

Manufacturing output decreased by 0.7% between July 2012 and July 2013. The largest downward contributions in manufacturing output were: the manufacture of machinery & equipment not elsewhere classified, which fell by 10.7%; the manufacture of basic metals & metal products, which fell by 6.2%; and the manufacture of basic pharmaceutical products & pharmaceutical preparations, which fell by 3.9%. In contrast, the largest upward contributions came from the manufacture of transport equipment, which rose by 6.5%; other manufacturing & repair, which rose by 8.2%; and the manufacture of wood, paper products & printing, which rose by 3.1%.

Manufacturing increased by 0.2% between June 2013 and July 2013. The largest upward contributions in manufacturing output were: other manufacturing & repair, which rose by 4.5%; the manufacture of machinery & equipment not elsewhere classified, which rose by 3.7%; and the manufacture of computer, electronic & optical products, which rose by 3.7%. In contrast, the largest downward contributions came from the manufacture of basic pharmaceutical products & pharmaceutical preparations, which fell by 4.7%; the manufacture of electrical equipment, which fell by 6.9%; and the manufacture of chemicals & chemical products, which fell by 3.6%.

Mining & quarrying

Mining & quarrying output decreased by 9.7% between July 2012 and July 2013. The largest downward contribution came from oil & gas extraction, which fell by 17.2%, and the mining of coal & lignite, which fell by 26.9%. These falls were partially offset by a rise of 17.6% in the other mining & quarrying sector.

Mining & quarrying output decreased by 0.5% between June 2013 and July 2013. The largest downward contribution came from other mining & quarrying, which fell by 2.9%, and the mining of coal & lignite, which fell by 3.2%. These decreases were partially offset by an increase of 0.5% in oil & gas extraction. The latter reflects an increase in crude oil production output compared with June.

Electricity, gas, steam & air conditioning

Electricity, gas, steam & air conditioning output decreased by 4.0% between July 2012 and July 2013; this was as a result of falls in both of its sectors. The supply of gas, steam & air conditioning fell by 9.5% and electrical power generation, transmission & distribution fell by 2.2%.

Electricity, gas, steam & air conditioning output decreased by 2.2% between June 2013 and July 2013; this was as a result of decreases in both of its sectors. The supply of gas, steam & air conditioning fell by 8.5% and electrical power generation, transmission & distribution fell by 0.2%. The higher than usual temperature in July is the main contributing factor to these decreases.

Water & waste management

Water supply, sewerage & waste management output increased by 5.6% between July 2012 and July 2013. Waste collection, treatment & disposal activities rose by 6.6%; water collection, treatment & supply rose by 10.8% and remediation activities & other waste management services rose by 7.0%. There was no change in the growth of sewerage output.

Water supply, sewerage & waste management output increased by 1.2% between June 2013 and July 2013. The higher than usual temperature in July and resultant increase in water supply contributed to a 5.2% increase in water collection, treatment & supply. Remediation activities & other waste management services rose by 0.5%. Offsetting the increases were decreases in sewerage output, which fell by 0.1% and in waste collection, treatment & disposal, which fell by 0.2%.

Sector analysis

Table 3: Headline growth rates and contributions to the Index of Production July 2013

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 -1.6 -1.6 0.0 0.0
Sector B 15.1 -9.7 -1.23 -0.5 -0.06
Division 06 12.4 -17.2 -1.69 0.5 0.04
Sector C 68.4 -0.7 -0.50 0.2 0.18
Sector D 8.6 -4.0 -0.33 -2.2 -0.18
Sector E 7.9 5.6 0.48 1.2 0.11

Table source: Office for National Statistics

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. Individual contributions may not sum to the total due to rounding.

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

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Mining & quarrying

Mining & quarrying output decreased by 9.7% in July 2013 compared with July 2012.

i) Oil & gas extraction decreased by 17.2% and contributed -13.3 percentage points to the decrease in this sector. This 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 during the months of May and June.

ii) The mining of coal & lignite decreased by 26.9% and contributed -0.3 percentage points to the fall in mining & quarrying. This 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.

Mining & quarrying output decreased by 0.5% in July 2013 compared to June 2013.

i) Other mining & quarrying was the main contributor to the decline, falling by 2.9% and contributing -0.9 percentage points. This reduction follows strong growth in the industry in June.

Manufacturing

Manufacturing decreased by 0.7% in July 2013 compared with July 2012.

i) Output decreased in nine of the 13 manufacturing sub-sectors and increased in four.

ii) The highest contributor to the decrease in manufacturing was the manufacture of machinery & equipment not elsewhere classified, which fell by 10.7% and contributed -0.9 percentage points to the fall in manufacturing.

iii) The decrease in manufacturing output was largely offset by the manufacture of transport equipment, which increased by 6.5% and contributed 0.9 percentage points to manufacturing growth. This increase continues the positive growth shown in this industry over recent months.

Manufacturing output increased by 0.2% in July 2013 compared with June 2013.

i) Output increased in six of the 13 manufacturing sub-sectors and decreased in seven.

ii) The highest contributor to the increase was other manufacturing & repair, which increased by 4.5% and contributed 0.4 percentage points to the rise in manufacturing.

iii) The increase in manufacturing was largely offset by the manufacture of basic pharmaceutical products & pharmaceutical preparations, which decreased by 4.7% and contributed -0.4 percentage points to manufacturing.

Energy supply

Electricity, gas, steam & air conditioning supply decreased by 4.0% in July 2013 compared with July 2012.

i) The highest contributor to the decrease in this sector was the supply of gas, steam & air conditioning, which decreased by 9.5% and contributed -2.4 percentage points to the fall in this sector.

Electricity, gas, steam & air conditioning supply decreased by 2.2% in July 2013 compared with June 2013.

i) The highest contributor to the decrease was the supply of gas, steam & air conditioning, which decreased by 8.5% and contributed -2.1 percentage points to the fall in this sector. The higher than usual temperature in July was a contributing factor to the monthly fall in demand.

Water supply and waste management

Water supply, sewerage & waste management increased by 5.6% in July 2013 compared with July 2012.

i) The highest contributor was waste collection, treatment & disposal activities, which increased by 6.6% and contributed 2.9 percentage points to the increase in this sector.

Water supply, sewerage & waste management increased by 1.2% in July 2013 compared with June 2013.

i) The highest contributor to the increase in this period was water collection, treatment & supply. This increased by 5.2% and contributed 1.3 percentage points to the rise in this sector, supported by increased use of water for gardening as a result of the warmer than average weather.

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 April 2013.

    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.

    ONS will be hosting an event in London on  2 October 2013, which will allow it to consult and engage with users. The 'GDP Improvement seminar: Output approach' featured in the latest GDP Output Improvement Report (June 2013 (226.7 Kb Pdf) ) and will commence at 1pm at a venue to be confirmed. The agenda will be confirmed shortly. If you or another member of your organisation would be interested in attending please contact IoS.quality@ons.gov.uk to register your interest.

    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.

    Upcoming changes

    The index of production release for August 2013, to be published on 9 October 2013, will have a revisions period back to July 2013.

  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 2013.

  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 (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.

    • 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 and Her Majesty’s Treasury, 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 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.

    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 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
    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 Office for National Statistics 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 August 2013 will have a revisions period back to July 2013.

    National Accounts revision policy (27.8 Kb Pdf) can be found on the National Statistics 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 August 2007 and July 2012 and the estimates published 12 months later. 

    Table 4: Revisions July 2013

    Revisions between first publication and estimates produced 12 months later (percentage points)

    Growth rates Value in latest period Average   Absolute average
    Production - 3 month 0.9 -0.16 0.31
    Manufacturing - 3 month 0.9 -0.18 0.36
    Production - 1 month 0.0 -0.11 * 0.25
    Manufacturing - 1 month 0.2 -0.10 0.29

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    Spreadsheets give revisions triangles (3.81 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) (previously known as First Release) 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:  Wednesday 09 October 2013
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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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