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

Released: 10 December 2013 Download PDF

Key points

  • Users are reminded that all figures contained within this release are seasonally adjusted estimates.
  • Production output increased by 3.2% between October 2012 and October 2013. This increase reflects rises of 2.7% in manufacturing (the largest component of production), 13.4% in mining & quarrying and 8.8% in water supply, sewerage & waste management sectors.
  • The main manufacturing components contributing to the increase between October 2012 and October 2013 were the manufacture of transport equipment; other manufacturing & repair; and the manufacture of wood, paper products & printing.
  • The largest upward contribution between October 2012 and October 2013 was, once again, from the manufacture of transport equipment, which rose by 16.8%. The majority of this strength came from the manufacture of motor vehicles, trailers & semi trailers.
  • Total production increased by 0.4% between September 2013 and October 2013. There were upward contributions from three of the four main sectors, the exception being mining & quarrying.
  • Manufacturing output increased by 0.4% between September 2013 and October 2013 and was the largest contributor to total production growth.
  • The main components contributing to the increase in manufacturing between September 2013 and October 2013 were the manufacture of transport equipment; the manufacture of machinery & equipment not elsewhere classified; and the manufacture of rubber, plastic products & non-metallic mineral products.
  • In this release, periods back to January 2012 are open for revision, in line with National Accounts revisions policy.

Key figures

This bulletin presents the Index of Production (IoP) for the United Kingdom production industries, October 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 the 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 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 97.1 3.2 1.3 0.4 0.1
Manufacturing 101.1 2.7 1.0 0.4 0.5

Table source: Office for National Statistics

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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 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 returned to its pre-downturn trend of outpacing growth in total production. Comparing Q3 2013 with Q1 2013, manufacturing output increased by 1.7% and total production output increased by 1.4%.

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 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 Second Estimate of Gross Domestic Product (GDP) confirmed that the UK economy grew by 0.8% in the third quarter of 2013, unrevised from the Preliminary Estimate. 

Growth was broad-based with all industry groupings contributing positively towards GDP. The services industries continued to be the main contributor, with output surpassing its pre-downturn peak, which occurred in Q1 2008, in the latest quarter. By contrast, both the production and construction industries' output remained more than 12% below their respective pre-downturn peaks.

Broader economic conditions remain difficult as UK consumer price inflation growth continues to exceed growth in total average weekly earnings, therefore squeezing the real income of households. However, the rate of inflation fell in October due to notable contributions from transport and education. The prices of goods produced by UK manufacturers – or ‘factory gate prices’ – rose by 0.9% in the year to October. Input prices for all manufactured goods fell by 0.3% 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 to Q2 2013, a second successive quarterly expansion. However, this comes after a period of six consecutive quarterly contractions up until Q1 2013. The rate of consumer price inflation edged further downwards to 0.7% in the twelve months to October 2013 while unemployment fell slightly to 12.1% in October, although these vary by country.

Economic growth in the US strengthened further, growing by 0.7% in Q3 2013 compared with Q2 2013. However, the US labour market worsened slightly, reporting that the unemployment rate edged upwards by 0.1 percentage points between September and October to 7.3%.

On a global level, production output amongst the G7 nations has been growing steadily since 2011, expanding by a further 0.5% in Q2 2013 compared to Q1 2013. This experience however varies by country, as output within all G7 members, barring the US and Germany, remains below levels reached in Q1 2011.

GDP Impact and Components

In this release, periods back to January 2012 are open for revision, in line with National Accounts revisions policy (27.8 Kb Pdf) . All revisions to Index of Production quarters are estimated to have minimal impact (less than 0.05 percentage points) on previously published estimates of GDP quarterly growth rates.

The estimates for the production industries are the first of the main components for the output approach to the measurement of GDP (agriculture, construction and services are the other components) to be published for October 2013, the first month of Q4 2013. 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 October 2013 will be published on 13 December 2013 and services output for the same period on 20 December 2013.

Table 2: GDP component tables, Quarter 3 2013

              Percentage change
         
Publication % of GDP Release date Month / Quarter of GDP Most recent quarter on a year earlier  Most recent quarter on quarter earlier  Most recent month on the same month a year ago Most recent month on the previous month
             
Index of Production 1 15.2 10 Dec Oct .. .. 3.2 0.4
      Q3 -0.1 0.6 .. ..
               
               
Construction output 6.3 8 Nov Q3 4.1 1.7 .. ..
               
               
Index of Services 77.8 27 Nov Q3 1.9 0.7 .. ..
               
               
Retail Sales   14 Nov Oct .. .. 1.8 -0.7
      Q3 2.1 1.3 .. ..
             
               
Agriculture 0.7   Q3 -4.2 -1.4 .. ..
               

Table source: Office for National Statistics

Table notes:

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

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Production and sectors supplementary analysis

Table 3: Headline growth rates and contributions to the Index of Production, October 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 3.2 3.2 0.4 0.4
Sector B 15.1 13.4 1.43 -1.1 -0.13
Division 06 12.4 11.9 0.90 -2.5 -0.21
Sector C 68.4 2.7 1.94 0.4 0.26
Sector D 8.6 -9.9 -0.90 0.9 0.07
Sector E 7.9 8.8 0.77 1.8 0.16

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.

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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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Total production

Total production output in October 2013 increased by 3.2% compared with October 2012, the highest growth since January 2011. This increase reflected rises in three of the four main components of the IoP. Manufacturing increased by 2.7%, the highest growth since May 2011, and contributed 1.9 percentage points; mining & quarrying increased by 13.4% and contributed 1.4 percentage points; and water supply, sewerage & waste management increased by 8.8% and contributed 0.8 percentage points to the increase in the IoP. These rises were partially offset by a decrease in electricity, gas, steam & air-conditioning output of 9.9%, which contributed 0.9 percentage points.

Between September 2013 and October 2013 (Figure 2), total production increased by 0.4%, following growth in September of 0.9%. The increase in total production reflects rises of 0.4% in manufacturing, which contributed 0.3 percentage points to the growth in total production; 1.8% in water supply, sewerage & waste management, which contributed 0.2 percentage points; and 0.9% in the electricity, gas, steam & air conditioning sector, which contributed 0.1 percentage points to the rise in total production. These rises were offset by a fall of 1.1% in mining & quarrying, which contributed 0.1 percentage points.

Manufacturing

Manufacturing output increased by 2.7% between October 2012 and October 2013, with output rising in seven of the 13 manufacturing subsectors. The largest upward contributions in manufacturing output were from the manufacture of transport equipment, which rose by 16.8% and contributed 2.2 percentage points to the growth. The majority of this strength, 1.6 percentage points, came from the manufacture of motor vehicles, trailers & semi trailers. The second largest contributor to the growth was other manufacturing & repair, which increased by 11.1% and contributed 0.9 percentage points; this was followed by the manufacture of wood, paper products & printing, which increased by 4.9% and contributed 0.3 percentage points. These are the same three industries which contributed most to manufacturing growth between September 2012 and September 2013.

In contrast, the largest downward contribution came from the manufacture of computer, electronic & optical products, which fell by 7.6% and contributed 0.5 percentage points. This was followed by the manufacture of food products, beverages & tobacco, which decreased by 1.6% and contributed 0.3 percentage points; and the manufacture of machinery & equipment not elsewhere classified, which decreased by 2.9% and contributed 0.2 percentage points.

Manufacturing output increased by 0.4% between September 2013 and October 2013 following a 1.2% rise in September. There were increases in seven of the 13 manufacturing subsectors. The largest contributor to the increase in manufacturing was the manufacture of transport equipment, which rose by 2.0% and contributed 0.3 percentage points, continuing the strength seen in this industry over recent months. Anecdotal evidence and feedback suggests that this growth was mainly due to strong sales and exports. The next largest contributor was the manufacture of machinery & equipment not elsewhere classified, which rose by 4.0% and contributed 0.3 percentage points. Anecdotal evidence suggests that new contracts and global exports were once again the main driver to this industry’s monthly growth. This was followed by the manufacture of rubber, plastic products & non-metallic mineral products, which rose by 1.5% and contributed 0.1 percentage points to the increase in manufacturing.

In contrast to the above rises, the largest downward contribution to the month on month manufacturing growth came from the manufacture of food products, beverages & tobacco, which fell by 1.4% and contributed 0.2 percentage points (within this sub-sector, the main contributor to the fall was the manufacture of alcoholic beverages). This was followed by the manufacture of wood, paper products & printing; and the manufacture of pharmaceutical products & preparations, both with negligible downward contributions.

Mining & quarrying

Mining & quarrying output increased by 13.4% between October 2012 and October 2013. The largest contribution to this growth came from the extraction of crude petroleum & natural gas, which increased by 11.9% and contributed 8.5 percentage points. This is the second consecutive increase, reflecting the improvement this industry is showing compared with a year ago, when planned maintenance and shutdowns in some of the North Sea oil and gas fields impacted on output. There was also an increase in other mining & quarrying output of 19.3%, which contributed 5.3 percentage points to the growth in this sector. These rises were offset by a downward contribution from the mining of coal & lignite, which decreased by 32.9% and contributed 0.4 percentage points.

Mining & quarrying output decreased by 1.1% in October 2013 when compared with September 2013. The largest contribution to this decrease came from the extraction of crude petroleum & natural gas, which, having increased by 0.9% in September, fell by 2.5% and contributed 1.8 percentage points to the fall in this sector. This was followed by the mining of coal & lignite which decreased by 5.4% and had a negligible contribution to this sector's decrease. In contrast to the decrease, there was a slight rise in other mining & quarrying of 2.7%, which contributed 0.7 percentage points.

Electricity, gas, steam & air conditioning

Electricity, gas, steam & air conditioning output decreased by 9.9% between October 2012 and October 2013; a result of falls in both of its sectors. The supply of gas, steam & air conditioning fell by 20.1% and contributed 5.2 percentage points and electrical power generation, transmission & distribution fell by 6.4% and contributed 4.7 percentage points to the fall.

Electricity, gas, steam & air conditioning output increased by 0.9% in October 2013 when compared to September 2013. The increase reflects a rise of 1.3 % in electrical power generation, transmission & distribution, which contributed 1.0 percentage points; and a decrease in the supply of gas, steam & air conditioning, which fell by 0.4% and contributed 0.1 percentage points.

The increased demand in overall sector output in October was mostly a result of the slight drop in temperature (1.4 degrees lower than September). However, it is still down on a year earlier as the average temperature in October 2013 was 3.0 degrees warmer than October 2012, which reduced demand for electricity.

Water & waste management

Water supply, sewerage & waste management output increased by 8.8% between October 2012 and October 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 15.8% and contributed 6.8 percentage points. Anecdotal evidence suggests that export of scrap metal and large contracts are reasons for the increase in growth. The next highest was water collection, treatment & supply, which increased by 4.3% and contributed 1.1 percentage points; this was followed by sewerage, which increased by 2.6% and contributed 0.8 percentage points; and remediation activities & other waste management services, which rose by 16.0% and contributed 0.1 percentage points to the increase in this sector.

Water supply, sewerage & waste management output increased by 1.8% between September 2013 and October 2013 with increases in three of its four subsectors. Waste collection, treatment & disposal, increased by 3.8% and contributed 1.7 percentage points; sewerage increased by 2.3% and contributed 0.6 percentage points; and remediation activities & other waste management services increased by 4.1% with negligible contribution to the increase in this sector. Offsetting these rises was a decrease in water collection, treatment & supply, which fell by 2.4% and contributed 0.6 percentage points.

Background notes

  1. What's new?

    This release conforms to the standard revisions policy for National Accounts (27.8 Kb Pdf) . In accordance with the policy, the current revisions period is open back to January 2012.

    A report titled GDP Output Improvement Report November 2013 (73.9 Kb Pdf) was published on 22 November 2013. This report provides a detailed update of the work on industry reviews and wider improvements to IoP, IoS, GDPO and outlines the greater scope of the project as part of the GDP Continuous Improvement Programme.

    Upcoming changes

    The index of production release for November 2013, to be published on 10 January 2014, will have a revisions period back to October 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, Her Majesty’s Treasury and the Office for Budget Responsbility, 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 chained volume measures. Deflators adjust the value series to take out the effect of price change to give the volume series.

  5. Quality

    Basic quality information
    A common pitfall in interpreting data is that expectations of accuracy and reliability in early estimates are often too high. Revisions are an inevitable consequence of the trade off between timeliness and accuracy. Early estimates are based on incomplete data.

    Very few statistical revisions arise as a result of ‘errors’ in the popular sense of the word. All estimates, by definition, are subject to statistical ‘error’ but in this context the word refers to the uncertainty inherent in any process or calculation that uses sampling, estimation or modelling. Most revisions reflect either the adoption of new statistical techniques, or the incorporation of new information which allows the statistical error of previous estimates to be reduced. Only rarely are there avoidable ‘errors’ such as human or system failures, and such mistakes are made quite clear when they do occur.

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

    National Accounts revisions policy
    Figures for the most recent months are provisional and subject to revision in light of (a) late responses to the Monthly Business Survey MBS and (b) revisions to seasonal adjustment factors which are re-estimated every period.

    The index of production release for November 2013 will have a revisions period back to October 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 November 2007 and October 2012 and the estimates published 12 months later. 

    Table 4: Revisions October 2013

    Growth rates Value in latest period Average   Absolute average
    Production - 3 month 0.1 -0.19 0.33
    Manufacturing - 3 month 0.5 -0.19 0.38
    Production - 1 month 0.4 -0.13 * 0.26
    Manufacturing - 1 month 0.4 -0.11 * 0.29

    Table source: Office for National Statistics

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    Spreadsheets give revisions triangles (3.85 Mb ZIP) of estimates for all months from March 1998 through to the current month.

    A statistical test has been applied to the average revisions to find out if they are statistically significantly different from zero. An asterisk (*) indicates if a figure has been found to be statistically significant from zero.

    The table uses historical data for the most recent 60 months, comparing the estimate at first publication with the estimate as published 12 months later. The numbers which underpin these averages include normal changes due to late data and re-seasonal adjustment, but also significant methodological changes, the most recent being the introduction of the 2007 Standard Industrial Classification in October 2011.

  6. Publication policy

    Details of the policy governing the release of new data are available from the press office. Also available is a list of those given pre-publication access to the contents of this release.
    A complete set of series in the statistical bulletin are available to download free of charge on the Data section of the Office for National Statistics website. Alternatively, for low-cost tailored data, call Online Services on 0845 601 3034 
    or email Customer Contact Centre.

  7. Accessing data

    The complete run of data in the tables of this statistical bulletin is also available to view and download in electronic format free of charge using the ONS Time Series Data service. Users can download the complete bulletin in a choice of zipped formats, or view and download their own selections of individual series.

    ONS provides an analysis of past revisions in the IoP and other statistical bulletins (244.6 Kb Pdf) which present time series. Details can be found on the Office for National Statistics website.

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

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  9. Next publication:  Friday 10 January 2014
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    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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