This bulletin presents the Index of Production (IoP) for the United Kingdom production industries, November 2013. Users are reminded that all figures contained within this release are seasonally adjusted estimates, unless otherwise stated. The reference year for these estimates is 2010=100 and they are mainly based on a monthly business survey (MBS) of approximately 6,000 businesses, covering all the territory of the UK without geographical breakdown. The IoP is one of the earliest indicators of growth and it measures gross value added in the manufacturing (the largest component of production), mining & quarrying, energy supply and water supply & waste management sectors. The total IoP estimate and various breakdowns are widely used in private and public sector institutions. Care should be taken when using the month on month growth rates due to their volatility. For an explanation of the terms used in this bulletin and other information, please see the background notes section. Table 1 shows the key figures for this release. Figure 1 shows the production and manufacturing series from August 2011 to November 2013.
|Index number||Month on the same month a year ago||3 months on the same 3 months a year ago||Month on previous month||3 months on previous 3 months|
As seen in figure 2, the pace of growth in manufacturing exceeded that of total production between 2003 and 2007. This trend, however, was temporarily interrupted following the economic downturn in 2008, where manufacturing fell by a greater extent than total production. Since the second half of 2010, growth in manufacturing has returned to its pre-downturn trend of outpacing growth in total production. Comparing Q3 2013 with Q1 2013, manufacturing output rose by 1.7% and total production output increased by 1.4%.
The recent divergence can be attributed to movements within the sub-industry groupings that make up total production, namely the mining and quarrying industries. The decline of oil & gas extraction over the past 13 years has provided downward pressure on production, this can predominantly be attributed to North Sea oil and gas reserves becoming increasingly challenging to extract and ageing extraction equipment requiring extensive repairs and maintenance.
More recently, the Quarterly National Accounts’ estimate of gross domestic product (GDP) confirmed that the UK economy grew by 0.8% in Q3 2013, unrevised from both the preliminary and second estimates.
Growth was broad-based with all industry groupings contributing positively towards GDP. The services industries continued to be the main contributors, with output in the latest quarter surpassing its pre-downturn peak in Q1 2008. By contrast, output in both the production and construction industries remained more than 10% below their respective pre-downturn peaks. It is also worth noting that, during the latest two quarters, growth in construction output has been notably higher compared with the production industries.
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. However, the rate of inflation fell further in November due to notable contributions from food and utilities (gas and electricity). The prices of goods produced by UK manufacturers – or ‘factory gate prices’ – rose by 0.8% in the year to November. Input prices for all manufactured goods fell by 1.0% over the same period.
Economic conditions in the euro area remain complex. The latest EA17 GDP figures estimated that output grew by 0.1% in Q3 2013 compared with Q2 2013, a second successive quarterly expansion. However, this comes after a period of six consecutive quarterly contractions up to Q1 2013. The rate of consumer price inflation rose to 0.9% in the twelve months to November 2013, while unemployment fell slightly to 12.1% in October, although these statistics vary by country.
Economic conditions in the US strengthened further, with GDP growing by 1.0% in Q3 2013 compared with Q2 2013. The US labour market also improved, with the unemployment rate falling by 0.3 percentage points between October and November 2013 to 7.0%.
On a global level, production output amongst the G7 nations appears to have been growing steadily since 2011, expanding by a further 0.6% in Q3 2013 compared with Q2 2013. This experience, however, varies by country with production output in the UK, France and Italy still remaining below levels reached in Q1 2011.
In this release, the earliest period open for revision was October 2013, in line with National Accounts revisions policy (27.9 Kb Pdf) . Therefore, there is no impact on previously published estimates of GDP quarterly growth rates.
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 Q3 2013. Details of the data already published can be found in Table 2.
Output in the construction industry in November 2013 will be published on 10 January 2014 and services output for the same period on 28 January 2014.
|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||10 Jan||Nov||..||..||2.5||0.0|
|Construction output||6.3||10 Jan||Nov||..||..||2.2||-4.0|
|Index of Services||77.8||20 Dec||Oct||..||..||2.1||0.1|
|Retail Sales||19 Dec||Nov||..||..||2.0||0.3|
The data for the index of production reflect the latest revisions published as part of this release.
Total production output in November 2013 increased by 2.5% compared with November 2012. Manufacturing, the largest component of production, rose by 2.8%, the highest growth since May 2011. The water supply, sewerage & waste management sector rose by 5.6% and mining & quarrying rose by 2.4%. These rises were partially offset by a decrease in electricity, gas, steam & air-conditioning output of 2.8%
Between October 2013 and November 2013, production and manufacturing both remained unchanged at 0.0% growth (Figure 2). This is the first time this has occurred since August 1986, following upward growth to both in October of 0.3% and 0.2% respectively. Within total production, there were also falls of 2.2% in mining & quarrying and a fall of 0.3% in the water, sewerage & waste management sector. These falls were offset by a rise of 3.0% in the electricity, gas, steam & air conditioning sector.
Manufacturing output increased by 2.8% between November 2012 and November 2013, with output rising in 11 of the 13 manufacturing subsectors. The largest upward contribution in manufacturing output was from the manufacture of transport equipment, which rose by 12.3% and contributed 1.7 percentage points to this sector’s growth. The majority of this strength, 1.2 percentage points, came from the manufacture of motor vehicles, trailers & semi trailers. The second largest contributor to the growth in manufacturing was other manufacturing & repair, which increased by 10.5% and contributed 0.8 percentage points. This was followed by the manufacture of basic metals & metal products, which increased by 2.6% and contributed 0.3 percentage points; the main contributor to this increase was the growth in the basic iron and steel industry, which increased by 34.3% compared with a year ago, the highest growth since records began in January 1998 and contributed 3.8 percentage points to the subsector's growth. Anecdotal evidence suggests that the growth was due to increased demand in all steel products, especially cold drawn bars and tubes.
By contrast, the downward contributions came from the manufacture of machinery & equipment not elsewhere classified, which fell by 6.9% and contributed 0.5 percentage points and the manufacture of computer, electronic & optical products, which fell by 6.4% and contributed 0.4 percentage points.
Manufacturing output remained unchanged at 0.0% growth between October 2013 and November 2013 following a rise of 0.2% in the previous month. There were increases in eight of the 13 manufacturing subsectors. The largest contributor to manufacturing growth was the manufacture of rubber, plastic products & other non-metallic mineral products, which rose by 2.1% and contributed 0.2 percentage points. The next largest contributor was the manufacture of food products, beverages & tobacco, which rose by 0.9% and contributed 0.1 percentage points. This was followed by the manufacture of basic metals & metal products, which rose by 0.4% and had negligible upward contribution to manufacturing growth, less than 0.1 percentage points.
In contrast to the above rises, the largest downward contributions to the month on month manufacturing growth came from the manufacture of machinery & equipment not elsewhere classified, which fell by 1.7% and contributed 0.1 percentage points; the manufacture of basic pharmaceutical products & pharmaceutical preparations, which fell by 1.6% and contributed 0.1 percentage points. This was followed by the manufacture of transport equipment, which fell by 0.6% and contributed 0.1 percentage points; the majority of this fall was attributed to the manufacture of motor vehicles, trailers & semi trailers.
Mining & quarrying output increased by 2.4% between November 2012 and November 2013. The largest contribution to this increase came from other mining & quarrying output, which rose by 17.7% and contributed 4.5 percentage points to the growth. This increase was partially offset by decreases in the extraction of crude petroleum & natural gas, which fell by 2.0% and contributed 1.5 percentage points; and also a decrease in the mining of coal & lignite, which fell by 41.8% and contributed 0.6 percentage points.
Mining & quarrying output decreased by 2.2% in November 2013 compared with October 2013.The largest contribution to the decrease came from the extraction of crude petroleum & natural gas, which fell by 3.0% and contributed 2.1 percentage points to the fall in this sector. This was followed by other mining & quarrying, which fell by 0.4%, and contributed 0.1 percentage points. These decreases were partially offset by an increase in the mining of coal & lignite of 17.3%, the largest increase since January 2013, which contributed 0.1 percentage points.
Electricity, gas, steam & air conditioning output decreased by 2.8% between November 2012 and November 2013, a result of falls in both of its sectors. The supply of gas, steam & air conditioning fell by 5.8% and contributed 1.5 percentage points and electrical power generation, transmission & distribution fell by 1.8% and contributed 1.3 percentage points to the fall.
Electricity, gas, steam & air conditioning output increased by 3.0% in November 2013 compared with October 2013. The increase reflects a rise of 15.7% in the supply of gas, steam & air conditioning, which contributed 3.6 percentage points. This rise was slightly offset by a fall in electrical power generation, transmission & distribution of 0.8%, which contributed 0.6 percentage points.
Water supply, sewerage & waste management output increased by 5.6% between November 2012 and November 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 6.6% and contributed 2.9 percentage points. The next highest was sewerage, which increased by 5.4% and contributed 1.6 percentage points; this was followed by water collection, treatment & supply, which increased by 4.3% and contributed 1.1 percentage points; and remediation activities & other waste management services, which increased by 6.5% and contributed 0.1 percentage points to the growth in this sector.
Water supply, sewerage & waste management output decreased by 0.3% between October 2013 and November 2013, with decreases in three of its four subsectors. Waste collection, treatment & disposal decreased by 1.7% and contributed 0.8 percentage points; sewerage decreased by 0.2% and contributed 0.1 percentage points; and remediation activities & other waste management services decreased by 2.8% with negligible contribution to the decrease in this sector. Offsetting these decreases was an increase in water collection, treatment & supply, which rose by 2.4% and contributed 0.6 percentage points.
This release conforms to the standard revisions policy for National Accounts (27.9 Kb Pdf) . In accordance with the policy, the current revisions period is open back to October 2013.
A report titled GDP Output Improvement Report November 2013 (73.9 Kb Pdf) was published on 22 November 2013. This report provides a detailed update of the work on industry reviews and wider improvements to IoP, IoS, GDPO and outlines the greater scope of the project as part of the GDP Continuous Improvement Programme.
The index of production release for December 2013, to be published on 07 February 2014, will have a revisions period back to January 2013.
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Understanding the data
Short guide to the Index of Production
This statistical bulletin gives details of the index of output of the production industries in the United Kingdom. Index numbers of output in this statistical bulletin are on the base 2010=100 and are classified to the 2007 Standard Industrial Classification (SIC). The production industries, which accounted for 15.2% of gross domestic product in 2010, cover mining & quarrying (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.
A measure of the average level of prices, quantities or other measured characteristics relative to their level for a defined reference period or location. It is usually expressed as a percentage.
Seasonal adjustment aids interpretation by removing effects associated with the time of the year or the arrangement of the calendar, which could obscure movements of interest.
Use of the data
The IoP is a key economic indicator and one of the earliest short-term measures of economic activity. The main output is a seasonally adjusted estimate of total production and broad sector groupings of mining & quarrying, manufacturing, energy and water supply & sewerage. The total IoP estimate and various breakdowns are widely used in private and public sector institutions, particularly the Bank of England, Her Majesty’s Treasury and the Office for Budget Responsibility, to assist in informed policy and decision making.
Composition of the data
The Index of Production uses a variety of different data from sources which are produced on either a quarterly or monthly basis.
Most of the series are derived using current price turnover deflated by a suitable price index. This includes the Monthly Business Survey (MBS) data; an ONS short-term survey on different sectors of the economy. It is one of the main data sources used in the compilation of the Index of Production.
The index numbers in this statistical bulletin are all seasonally adjusted. This aids interpretation by removing annually recurring fluctuations, for example, due to holidays or other regular seasonal patterns. Unadjusted data are also available.
Seasonal adjustment removes regular variation from a time series. Regular variation includes effects due to month lengths, different activity near particular events such as shopping activity before Christmas, and regular holidays such as the May bank holiday. Some features of the calendar are not regular each year, but are predictable if we have enough data - for example the number of certain days of the week in a month may have an effect, or the impact of the timing of Easter. As Easter changes between March and April we can estimate its effect on time series and allocate it between March and April depending on where Easter falls. Estimates of the effects of day of the week and Easter are used respectively to make trading day and Easter adjustments prior to seasonal adjustments.
Although leap years only happen every four years, they are predictable and regular and their impact can be estimated. Hence, if there is a leap year effect, it is removed as part of regular seasonal adjustment.
It is common for the value of a group of financial transactions to be measured in several time periods. The values measured will include both the change in the volume sold and the effect of the change of prices over that year. Deflation is the process whereby the effect of price change is removed from a set of values.
All series, unless otherwise quoted, are chained volume measures. Deflators adjust the value series to take out the effect of price change to give the volume series.
Basic quality information
A common pitfall in interpreting data is that expectations of accuracy and reliability in early estimates are often too high. Revisions are an inevitable consequence of the trade off between timeliness and accuracy. Early estimates are based on incomplete data.
Very few statistical revisions arise as a result of ‘errors’ in the popular sense of the word. All estimates, by definition, are subject to statistical ‘error’ but in this context the word refers to the uncertainty inherent in any process or calculation that uses sampling, estimation or modelling. Most revisions reflect either the adoption of new statistical techniques, or the incorporation of new information which allows the statistical error of previous estimates to be reduced. Only rarely are there avoidable ‘errors’ such as human or system failures, and such mistakes are made quite clear when they do occur.
National Accounts revisions policy
Figures for the most recent months are provisional and subject to revision in light of (a) late responses to the Monthly Business Survey MBS and (b) revisions to seasonal adjustment factors which are re-estimated every period.
The index of production release for December 2013 will have a revisions period back to January 2013.
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 December 2007 and November 2012 and the estimates published 12 months later.
|Growth rates||Value in latest period||Average||Absolute average|
|Production - 3 month||0.3||-0.21||0.33|
|Manufacturing - 3 month||0.6||-0.20||0.37|
|Production - 1 month||0.0||-0.12||*||0.26|
|Manufacturing - 1 month||0.0||-0.10||*||0.28|
Spreadsheets give revisions triangles (3.86 Mb ZIP) of estimates for all months from March 1998 through to the current month.
A statistical test has been applied to the average revisions to find out if they are statistically significantly different from zero. An asterisk (*) indicates if a figure has been found to be statistically significant from zero.
The table uses historical data for the most recent 60 months, comparing the estimate at first publication with the estimate as published 12 months later. The numbers which underpin these averages include normal changes due to late data and re-seasonal adjustment, but also significant methodological changes, the most recent being the introduction of the 2007 Standard Industrial Classification in October 2011.
Details of the policy governing the release of new data are available from the press office. Also available is a list of those given pre-publication access to the contents of this release.
A complete set of series in the statistical bulletin are available to download free of charge on the Data section of the Office for National Statistics website. Alternatively, for low-cost tailored data, call Online Services on 0845 601 3034
or email Customer Contact Centre.
The complete run of data in the tables of this statistical bulletin is also available to view and download in electronic format free of charge using the ONS Time Series Data service. Users can download the complete bulletin in a choice of zipped formats, or view and download their own selections of individual series.
ONS provides an analysis of past revisions in the IoP and other statistical bulletins (244.6 Kb Pdf) which present time series. Details can be found on the Office for National Statistics website.
ONS publishes revisions triangles (65.8 Kb Pdf) for all the main published key indicators on the Office for National Statistics website.
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publication: Friday 07 February 2014
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