This bulletin presents the Index of Production (IoP) for the United Kingdom production industries, September 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 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.
|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 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. Since then they have continued to contract. Comparing Q3 2013 with Q1 2011, production output fell by 3.5% and manufacturing output fell by 1.5%.
The growth in the difference can be attributed to movements within the other sub-industry groups that make up total production, chiefly the mining and quarrying industries. 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 ageing extraction equipment which has required extensive repairs and maintenance.
More recently, the Gross Domestic Product Preliminary Estimate indicated the UK economy grew by 0.8% in the third quarter of 2013.
Growth was broad based with all industry groupings contributing positively towards GDP. The service industries continued to be the main contributor, with output surpassing its Q1 2008 peak in the latest quarter. By contrast, in both the production and construction industries' output remains more than 12% lower than at the pre-downturn peak.
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 more favourable, rising by 1.2% in the year to September. Input prices for all manufactured goods increased by 1.1% over the same period.
Economic conditions in the euro area remain complex. The latest estimate of Euro Area GDP confirmed that output grew by 0.3% in Q2 2013 compared with Q1 2013. However, this comes after six consecutive quarters of negative growth. Inflation edged downwards to 1.1% in the twelve months to September 2013 while unemployment remained at 12.2% in September, although these vary by country.
By contrast, economic growth in the US picked up, growing by 1.6% in Q2 2013 compared with Q2 2012. The US labour market also continues to show signs of improvement; the unemployment rate edging downwards by 0.1 percentage points between August and September to 7.2%.
Looking at production in the G7 countries, the industries have grown steadily since 2011, expanding further by 0.6% in Q2 2013 compared to Q1 2013. Strong growth came from France, Germany and Japan while Italy continued to contract further.
The preliminary estimate of GDP, published on 25 October 2013, contained a forecasted rise of 0.5% for production in Q3 2013. This release of data estimates production rose by 0.6% between Q2 2013 and Q3 2013 and therefore the impact on the previously published Q3 2013 GDP estimate is minimal.
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 September 2013, the third 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 8 November 2013 and services output on 27 November 2013 for September 2013.
|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||06 Nov||Sep||..||..||2.2||0.9|
|Construction output||6.3||11 Oct||Aug||..||..||4.0||-0.1|
|Index of Services||77.8||25 Oct||Aug||..||..||1.5||0.4|
|Retail Sales||17 Oct||Sep||..||..||2.2||0.6|
The data for the index of production reflect the latest revisions published as part of this release.
|Description||% of production||Month on same month a year ago growth (%)||Contribution to production (% points)||Month on previous month growth (%)||Contribution to production (% points)|
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.
Total production rose by 0.6% in Q3 2013 when compared with Q2 2013. This increase was higher than forecasted for total production during the GDP preliminary estimates at 0.5%. The increase reflected rises of 0.9% in manufacturing; 1.6% in mining & quarrying and 3.5% in the water supply, sewerage & waste management sectors. The highest contribution to the increase in total production was manufacturing, which contributed 0.6 percentage points to the increase. These rises were partially offset by a fall in the electricity, gas, steam & air conditioning sector of 5.7% and contributed 0.5 percentage points.
Total production output increased by 2.2% between September 2012 and September 2013. This increase reflected rises of 0.8% in manufacturing, 11.5% in mining & quarrying and 7.1% in the water supply, sewerage & waste management sector. The highest contributor to the increase in total production was mining & quarrying, contributing 1.3 percentage points to the rise in total production. These rises were partially offset by a decrease of 3.4% in the electricity, gas, steam & air conditioning sector, which decreased the growth in total production by 0.3 percentage points.
In September 2013 (Figure 2), total production increased by 0.9% following a fall of 1.1% in August 2013. The increase in total production reflects rises of 1.2% in manufacturing which contributed 0.9 percentage points to the growth in total production; a rise of 1.5% in mining & quarrying, which contributed 0.2 percentage points to the growth, while the electricity, gas, steam & air conditioning sector was flat. These rises were slightly offset by a fall of 1.6% in water supply, sewerage & waste management, which contributed 0.1 percentage points.
Manufacturing rose by 0.9% in Q3 2013 when compared with Q2 2013, in line with the forecast included in the GDP preliminary estimate. Output increased in nine of its 13 subsectors. The largest upward contributions to manufacturing growth were from the manufacture of transport equipment, which rose by 4.6% and contributed 0.6 percentage points to this sector’s growth. The second largest contributor to the manufacturing growth was from other manufacturing & repair, which rose by 4.8% and contributed 0.4 percentage points to the manufacturing growth. This is followed by the manufacture of rubber & plastics products and other non-metallic mineral products, which rose by 2.9% and contributed 0.2 percentage points.
In contrast, the largest downward contributions were from the manufacture of basic pharmaceutical products & pharmaceutical preparations, which fell by 8.0% and decreased the manufacturing growth by 0.6 percentage points; having had an increase in growth between the previous two quarters. This is followed by the manufacture of electrical equipment, which fell by 3.5% and the manufacture of computer, electronic & optical products, which fell by 1.7%. These subsectors had limited impact on the manufacturing growth of 0.1 percentage points each.
Manufacturing output increased by 0.8% between September 2012 and September 2013, with output increasing in four of the 13 manufacturing subsectors. The largest upward contributions to manufacturing growth came from the manufacture of transport equipment, which rose by 15.3% and contributed 2.0 percentage points to the growth. The majority of this strength, 1.3 percentage points, came from the manufacture of motor vehicles, trailers & semi trailers. The second largest contributor to the growth was the other manufacturing & repair, which increased by 7.0% and contributed 0.6 percentage points; this was followed by the manufacture of wood & paper products and printing, which increased by 6.1% and contributed 0.4 percentage points.
In contrast, the largest downward contribution to the growth in manufacturing came from the manufacture of machinery & equipment not elsewhere classified, which fell by 8.5% and contributed 0.7 percentage points to the growth; the manufacture of food products, beverages & tobacco, which fell by 3.0% and deducted 0.5 percentage points from the manufacturing growth; and the manufacture of basic pharmaceutical products & pharmaceutical preparations, which fell by 4.6% and contributed 0.4 percentage points.
Manufacturing output increased by 1.2% in September 2013 following a fall of 1.2% in August 2013. There were increases in seven of the 13 manufacturing subsectors. The largest contributions to the increase in manufacturing were: the manufacture of basic pharmaceutical products & pharmaceutical preparations, which increased by 9.4% and contributed 0.6 percentage points to the growth; the manufacture of transport equipment, which rose by 3.4% and contributed 0.5 percentage points to the growth and the manufacture of computer, electronic & optical, which rose by 2.6% and contributed 0.2 percentage points.
In the manufacture of transport equipment, the majority of growth, 0.4 percentage points, was attributed to motor vehicles, trailers & semi trailers. Anecdotal evidence suggest that new car registrations, models & exports were identified as possible reasons to the growth in this industry.
In contrast, the largest downward contribution to this month’s manufacturing growth came from the manufacture of coke & refined petroleum products, which decreased by 6.1% and contributed 0.1 percentage points to the manufacturing growth.
Output of the mining & quarrying sector rose by 1.6% in Q3 2013 when compared with Q2 2013. The increase reflected a rise of 2.4% in the extraction of crude petroleum & natural gas and contributed 1.7 percentage points to the growth in this sector. The increase in growth follows a period of disruption in production reported between April and June: there have been reports of temporary planned and unplanned shutdowns of some of the largest oil and gas terminals for maintenance reasons.
In contrast to this rise there were falls in the mining of coal & lignite, which fell by 19.5% and contributed 0.2 percentage points to the negative growth in this sector, reflecting the weakness in this industry over recent quarters. There was also a fall in other mining & quarrying of 0.1% with negligible downward contribution to the growth.
Mining & quarrying output increased by 11.5% between September 2012 and September 2013. The largest contribution to the increase in growth came from the extraction of crude petroleum & natural gas, which increased by 9.9% and contributed 7.1 percentage points to the growth in this sector. There was also an increase in the other mining & quarrying sector of 17.4%, which contributed 4.6 percentage points to the growth in this sector. These rises were slightly offset by a downward contribution to the growth in the mining of coal & lignite, which decreased by 22.6% and contributed 0.2 percentage points to the growth.
Mining & quarrying output increased by 1.5% between August 2013 and September 2013. The largest contribution to this increase came from the extraction of crude petroleum and natural gas industry, which increased by 1.7% and contributed 1.2 percentage points to the growth in this sector. Anecdotal evidence suggested that the growth was due to increase in oil & gas production signalling the end of the summer maintenance period and an uplift in demand; partly as a result of lower temperatures and the slight increase in gas used for the purpose of electricity generations. Another contribution to the growth in this sector was came from other mining & quarrying, which rose by 1.0% and contributed 0.3 percentage points to the growth. In contrast there was a slight fall in the mining of coal & lignite of 0.4% offsetting these rises with negligible downward contribution to the growth.
Electricity, gas, steam & air conditioning output fell by 5.7% in Q3 2013 when compared with Q2 2013 with falls in both of its sectors. The manufacture of gas & distribution of fuel fell by 15.6% and contributed 4.0 percentage points to the fall in this sector; the electric power generation, transmission & distribution, which fell by 2.3% contributed 1.7 percentage points to the fall. The fall in this sector reflects both electricity and gas output falling in Q3. This was due to a reduction in the demand for gas in the production of electricity, in favour of other sources such as nuclear and coal. There was also a reduction in overall demand for space-heating, as a result of the warmer than average temperature during the two months leading to September.
Electricity, gas, steam & air conditioning output decreased by 3.4% between September 2012 and September 2013; a result of falls in both of its sectors. Electrical power generation, transmission & distribution fell by 3.4% and contributed 2.6 percentage points to the fall in this sector. The supply of gas, steam & air conditioning fell by 3.2% and contributed 3.4 percentage points to the fall.
Between August 2013 and September 2013 the electricity, gas, steam & air conditioning sector was flat. The supply of gas, steam & air conditioning, increased by 6.4% and contributed 1.4 percentage points to this sector. Offsetting the rise was a fall in the electrical power generation, transmission & distribution, which fell by 1.7%, contributing 1.4 percentage points.
Water supply, sewerage & waste management output rose by 3.5% in Q3 2013 when compared with Q2 2013 with rises in all of its subsectors. Waste collection, treatment & disposal activities rose by 2.9% and contributed 1.3 percentage points; water collection, treatment & supply rose by 4.6% and contributed 1.2 percentage points to this sector increase; sewerage rose by 3.3% and contributed 0.9 percentage points; and remediation activities & other waste management services rose by 2.1% (this had a negligible contribution to the rise).
Water supply, sewerage & waste management output increased by 7.1% between September 2012 and September 2013 with increases in all of its sectors. Waste collection, treatment & disposal activities, which increased by 6.5% and contributed 2.9 percentage points; sewerage increased by 10.2% and contributed 2.8 percentage points; water collection, treatment & supply output increased by 4.8% and contributed 1.3 percentage points; and remediation activities & other waste management services rose by 7.3% and contributed 0.1 percentage points to the rise.
Water supply, sewerage & waste management output decreased by 1.6% between August 2013 and September 2013, with falls in all its subsectors. This is the second fall following four consecutive months of positive growth to which the warmer than average temperatures were a contributing factor. This month’s decrease reflects falls in waste collection, treatment & disposal, which fell by 1.7% and contributed 0.8 percentage points; sewerage, which fell by 1.7% and contributed 0.5 percentage points; water collection, treatment & supply, which fell by 1.3% and contributed 0.3 percentage points; and remediation activities & other waste management services fell by 1.9%.
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 July 2013.
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.
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.
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.
The index of production release for October 2013, to be published on 10 December 2013, will have a revisions period back to January 2012.
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.
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 and Her Majesty’s Treasury, 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 measured at constant basic prices. 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 October 2013 will have a revisions period back to January 2012.
National Accounts revision policy (27.9 Kb Pdf) can be found on the National Statistics website.
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 October 2007 and September 2012 and the estimates published 12 months later.
|Growth rates||Value in latest period||Average||Absolute average|
|Production - 3 month||0.6||-0.18||0.32|
|Manufacturing - 3 month||0.9||-0.19||0.37|
|Production - 1 month||0.9||-0.13||*||0.27|
|Manufacturing - 1 month||1.2||-0.10||0.29|
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.
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: Tuesday 10 December 2013
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