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Statistical bulletin: Index of Production, May 2012 This product is designated as National Statistics

Released: 10 July 2012 Download PDF

Key points

  • The seasonally adjusted Index of Production fell by 1.6 per cent in May 2012 compared with May 2011.
  • The seasonally adjusted Index of Manufacturing fell by 1.7 per cent in May 2012 compared with May 2011.
  • Production rose by 1.0 per cent between April 2012 and May 2012, with manufacturing rising by 1.2 per cent.
  • In 2012, the end of May bank holiday was moved to June resulting in an additional working day in May, which may have been a contributing factor to the month on month growth shown in the production and manufacturing sectors.
  • This month the revisions period is open from January 1997.

Key figures

Percentage change

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
  2009=100        
Production 100.1 -1.6 -2.1 1.0 -0.3
Manufacturing 105.4 -1.7 -1.6 1.2 -0.2

Table source: Office for National Statistics

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Supplementary analysis

The seasonally adjusted index of production fell by 1.6 per cent in May 2012 compared with May 2011. This is the 14th consecutive monthly fall on the same month a year ago.

The seasonally adjusted index of production rose by 1.0 per cent between April 2012 and May 2012. The manufacturing sector rose by 1.2 per cent and the electricity, gas, steam & air conditioning sector rose by 2.4 per cent. These increases were slightly offset by the water & waste management sector which fell by 0.7 per cent. The mining & quarrying sector remained unchanged in May 2012 compared with April 2012.

Manufacturing

The seasonally adjusted index of manufacturing fell by 1.7 per cent in May 2012 compared with May 2011. Ten manufacturing sub sectors fell with three rising. The largest contributions to the month on same month a year ago fall in manufacturing output were the manufacture of pharmaceutical products & preparations industries, which fell by 13.2 per cent, followed by the manufacture of food, drink & tobacco, which fell by 3.9 per cent.  The largest upward contribution came from the manufacture of transport equipment industries, which rose by 8.8 per cent.

Seasonally adjusted manufacturing output rose by 1.2 per cent in May 2012 compared with April 2012. Eight manufacturing sub sectors rose with five falling. The largest contributions to the month on month rise in manufacturing output were the manufacture of transport equipment industries, which rose by 3.7 per cent, followed by the manufacture of food, drink & tobacco, which rose by 2.2 per cent. Feedback from businesses in the food and drink industries indicated that warm weather and increased demand due to the Diamond Jubilee were factors contributing to the increase in production. In contrast, the manufacture of pharmaceutical products & preparations industries fell by 3.9 per cent.

In 2012, the end of May bank holiday was moved to June resulting in an additional working day in May, which may have been a contributing factor to the month on month growth shown in the production and manufacturing sectors. Users should be cautious when interpreting movements involving the May data. This is not a regular seasonal effect or calendar event and therefore no adjustment is made for it as part of the seasonal adjustment process. It is not possible to quantify the impact at this stage; retrospective analysis will be carried out, in line with ONS special events policy, when data for later periods are available.

Mining & quarrying

Output of the mining & quarrying industries fell by 9.6 per cent in May 2012 compared with May 2011. This was the 20th consecutive monthly fall on the same month on a year ago. The biggest contributor to the decrease was from the extraction of oil & gas which fell by 13.9 per cent. Between April 2012 and May 2012 mining & quarrying was flat.

Energy supply

Energy supply output in May 2012 rose by 6.5 per cent compared with May 2011, with electricity supply rising by 7.5 per cent and gas supply rising by 1.3 per cent.  Between April 2012 and May 2012 energy output supply rose by 2.4 per cent.  A rise of 4.2 per cent in electricity supply was only partially offset by a fall of 6.3 per cent in gas.

Water & waste management

Between May 2011 and May 2012 water & waste management output rose by 2.0 per cent.

Between April 2012 and May 2012 water & waste management output fell by 0.7 per cent.

GDP Impact

The estimates included in this release are consistent with Quarterly National Accounts published on 28 June 2012. Any revisions to quarters have therefore already been included in the previously published GDP estimates.

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 2009 = 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.

Headline growth rates and contributions to the Index of Production, May 2012

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 -1.60 1.0 1.02
Sector B 15.4 -9.6 -1.16 0.0 0.00
 Division 06 12.6 -13.9 -1.27 -0.6 -0.05
Sector C 67.0 -1.7 -1.20 1.2 0.84
Sector D 9.6 6.5 0.61 2.4 0.24
Sector E 8.0 2.0 0.16 -0.7 -0.06

Table source: Office for National Statistics

Table notes:

  1. Headline figures for the Index of Production are:

    Total Index of Production; Sector B Mining and quarrying; and within this Division 06 Oil and gas extraction; Sector C Manufacturing; Sector D Electricity, gas, steam and air conditioning; and Sector E Water supply, sewerage and waste management.

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

  3. The Index of Production is made up of four sectors: Mining and quarrying; Manufacturing; Electricity, gas, steam and air conditioning; and Water supply, sewerage and waste management. The larger the percentage contribution, the more likely the impact on the overall manufacturing growth rate will be significant.

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Manufacturing growth rates and contributions to the Index of Production, May 2012

Sub-sector Summary Description % of production Month on same month a year ago growth (%)  Contribution to production (% points) Month on previous month growth (%) Contribution to production (% points)
CA Food, beverages and tobacco 11.9 -3.9 -0.51 2.2 0.27
CB Textiles and leather products 2.0 -0.3 -0.01 2.2 0.05
CC Wood, paper and printing 5.5 -5.4 -0.27 -0.3 -0.01
CD Coke and petroleum 0.8 -3.3 -0.03 -0.9 -0.01
CE Chemical Products 6.1 -2.9 -0.18 -0.5 -0.03
CF Pharmaceutical Products 6.1 -13.2 -0.66 -3.9 -0.18
CG Rubber and plastic products 4.7 -2.6 -0.12 3.7 0.16
CH Metal products 8.6 -0.5 -0.05 1.4 0.13
CI Computer, electronic & optical  4.3 2.7 0.11 -1.2 -0.05
CJ Electrical equipment 2.1 14.8 0.32 0.6 0.01
CK Machinery and equipment 4.8 -0.1 -0.01 1.3 0.08
CL Transport equipment 5.7 8.8 0.65 3.7 0.30
CM Other manufacturing & repair 4.5 -9.1 -0.45 2.6 0.12

Table source: Office for National Statistics

Table notes:

  1. Individual contributions may not sum to the total due to rounding.
  2. Manufacturing consists of 13 sub-sectors listed above with the percentage of the total they account for. The larger the percentage contribution, the more likely the impact on the overall manufacturing growth rate will be significant.

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Sector analysis

Mining & quarrying

The seasonally adjusted index of mining & quarrying in May 2012 fell by 9.6 per cent compared with May 2011. In particular:

i)  extraction of crude petroleum & natural gases decreased by 13.9 per cent,

ii) the largest contributor to the 9.6 per cent month on same month a year ago fall in overall mining & quarrying was approximately 10.5 percentage points from the extraction of crude petroleum & natural gas.

Manufacturing

The seasonally adjusted index of manufacturing in May 2012 fell by 1.7 per cent compared with May 2011. In detail:

i) output decreased in ten of the 13 manufacturing sub-sectors and rose in three,

ii) the largest contributions to the decrease in output were in the manufacture of pharmaceutical products & preparations which fell by 13.2 per cent, and in the manufacture of food, drink & tobacco products, which fell by 3.9 per cent,

iii) the manufacture of basic pharmaceutical products & preparations industries, solely consisting of basic pharmaceutical products & preparations, fell by 13.2 per cent,

iv) within the manufacture of food, drink & tobacco products the main falls were in alcoholic beverages, which fell by 11.1 per cent and the manufacture of other food products which fell by 4.5 per cent,

v) the largest contributors to the 1.7 per cent month on same month a year ago fall in overall manufacturing were approximately 0.9 percentage points from pharmaceutical products & preparations and approximately 0.7 percentage points from food, drink & tobacco products.

Energy supply

The seasonally adjusted index of the electricity, gas, steam & air conditioning supply industries in May 2012 rose by 6.5 per cent compared with May 2011. The main movements were:

i) electric power generation, transmission & distribution, which increased by 7.5 per cent,

ii) manufacture of gas & gas distribution, which increased by 1.3 per cent,

iii) the largest contributor to the 6.5 per cent month on same month a year ago rise in overall electricity, gas, steam & air conditioning supply was approximately 6.3 percentage points from the electric power generation, transmission & distribution and approximately 0.2 percentage points from manufacture of gas; distribution of gaseous fuels through mains; steam & air conditioning supply.

Water supply & waste management

The seasonally adjusted index of the water supply, sewerage & waste management industries in May 2012 rose by 2.0 per cent compared with May 2011. The main movements were:

i) waste collection, treatment & disposal activities, which increased by 6.3 per cent,

ii) sewerage, which increased by 1.4 per cent,

iii) the largest contributor to the 2.0 per cent month on same month a year ago rise was 2.6 percentage points from waste collection, treatment & disposal activities.

Revisions

This release conforms to the standard revisions policy for National Accounts. (27.8 Kb Pdf) This release has a revision period back to January 1997 in line with the 2012 Blue Book data set.

Since last month, a number of late responses have been received to the Monthly Business Survey. The combined impact of these late data and seasonal adjustments factors being re-estimated and the annual updating of chain linked weights is the month on month growth rate for the Index of Production for April 2012 to be revised by -0.4.

Impact on GDP

The estimates included in this release are consistent with Quarterly National Accounts published on 28 June 2012. Any revisions to quarters have therefore already been included in the previously published GDP estimates.

Summary statistics

The monthly United Kingdom (UK) Index of Production (IoP) provides a timely indicator of growth in the output of production industries at constant prices. The IoP is a key economic indicator and one of the earliest short-term measures of economic activity and shares exactly the same industry coverage as the corresponding quarterly series within UK Gross Domestic Product (GDP).

The main output is a seasonally adjusted estimate of total production and broad sector groupings of mining & quarrying, manufacturing, energy and water supply & sewerage. In general, seasonally adjusted output estimates are available down to the National Accounts Supply Use Table (SUT) level.

Output estimates are calculated by taking value estimates and adjusting them to remove the impact of price changes, or by using direct volume estimates. 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.

Summary statistic tables (53.5 Kb Excel sheet) showing current growth rates compared with historical information for the IoP and the Index of Manufacturing (IoM) are available as part of this release.

Background notes

  1. What's new?

    In accordance with the National Acounts revision policy, the current revisions period is open back to January 1997, in line with the 2012 Blue Book dataset.

    The estimates in this statistical bulletin are consistent with this year's Blue Book, to be published on 31 July 2012. An article describing the content of Blue Book 2012 is available on the ONS website. The base year and reference year for chained volume estimates have both moved on from 2008 to 2009.

    The estimates included in this release are also consistent with Quarterly National Acounts published on 28 June 2012. This article looks at the impact of changes in the National Accounts and economic commentary for 2012 quarter 1.

    Special Events

    An article outlining the ONS policy on special events can be found here:

    As part of the celebrations for the Queen's Diamond Jubilee there were changes to the Bank Holiday's in May and June 2012. The late May bank holiday moved into June, and there was an additional day's holiday. The change to the holidays counts as a statistical special event in line with ONS's policy on Special Events. Caution should be taken when interpreting the movements in affected outputs that involve May and June 2012. 

    Upcoming changes

    The Index of Production release for June 2012 will have a revisions period back to April 2012.

  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 2012.

  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 2009=100 and are classified to the 2007 Standard Industrial Classification (SIC). The production industries, which accounted for 15.6 per cent of gross domestic product in 2009, cover mining and quarrying (Sector B), manufacturing (Sector C), gas and electric (Sector D), and water supply and 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 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 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.

    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 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.

    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 June 2012 will have a revisions period back to April 2012. 

    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 table below presents a summary of the differences between the first estimates published between June 2006 and May 2011 and the estimates published 12 months later.

    Revisions May 2012

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

    Growth rates Value in latest period Average revision   Absolute average revision
    Production - 3 month -0.3 -0.12 0.29
    Manufacturing - 3 month -0.2 -0.13 0.35
    Production - 1 month 1.0 -0.10 * 0.27
    Manufacturing - 1 month 1.2 -0.07 0.29

    Table source: Office for National Statistics

    Table notes:

    1. Averages shown are over the most recent five years. The absolute average is the average over the most recent five years without regard to sign.

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    Spreadsheets give revisions triangles (3.3 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 will 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. (87 Kb Pdf)

    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. Alternatively, for low-cost tailored data, call Online Services on 02075335675 or email tailored@statistics.gov.uk.

  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 National Statistics website.

    ONS now publishes revisions triangles (65.8 Kb Pdf) for all the main published key indicators on the National Statistics website.

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  9. Next publication:  Tuesday 07 August 2012

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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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