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Statistical bulletin: Index of Services, August 2012 This product is designated as National Statistics

Released: 25 October 2012 Download PDF

Key points

  • The seasonally adjusted Index of Services was estimated to have increased by 1.7 per cent in August 2012 compared with August 2011.
  • Three of the four service sector components were estimated to have increased in the most recent month compared with the same month a year ago.
  • Government & other services was estimated to have increased by 3.2 per cent and business services & finance increased by 1.2 per cent. These were the largest contributions to the increase.
  • Between July 2012 and August 2012, service sector output was estimated to have increased by 1.0 per cent.
  • The earliest period open for revision in this release is July 2012.

Key figures

Table 1: Index of Services Key Figures

Index of Services - August 2012

      (Percentage change)
    Index number Most recent month on a year earlier   Most recent 3 months on a year earlier   Most recent month on previous month   Most recent 3 months on previous 3 months
     2009=100
Index of Services 104.7 1.7 0.8 1.0 0.2

Table source: Office for National Statistics

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Supplementary analysis

The seasonally adjusted Index of Services was estimated to have increased by 1.7 per cent in August 2012 compared with August 2011. In order of their contribution to growth: government & other services increased by 3.2 per cent; business services & finance increased by 1.2 per cent; distribution, hotels & restaurants increased by 1.7 per cent; and transport, storage & communication remained flat.

The Index of Services was estimated to have increased by 1.0 per cent in August 2012 compared with July 2012. Business services & finance increased by 0.8 per cent; government & other services increased by 0.9 per cent; distribution, hotels & restaurants increased by 1.2 per cent and transport, storage & communication increased by 1.5 per cent.

More detail on individual divisions can be found in the IOSCOMP tables in the data section of this bulletin. The tables also provide information on the growth for the three months ending in August 2012 compared with the previous three months and compared with the three months ending August 2011.

The Olympics took place from 27 July to 12 August 2012 (with a few events starting on 25 July), and the Paralympics from 29 August to 9 September. The events are likely to have impacted on the economy in a number of ways (note that ‘Olympic’ or ‘Olympics’ below refers to both the Olympics and Paralympic events):

  • Sports activities, amusement and recreation: tickets for the Olympics were sold in tranches through 2011 and 2012 but, in accordance with national accounts principles, were allocated to July and August, when the output actually occurs. The impact of the ticket sales on IOS can be clearly seen in the lower level data for sports activities, which is part of the arts, entertainment & recreation aggregate in IOSCOMP.

  • Employment activities: employment agencies, which is included in administrative & support services activities, showed some strength in July and August and it is possible that some of this strength was related to the Olympics. However, there was no direct evidence from survey respondents to support this.

  • Creative arts and entertainment activities: the arts and entertainment sector has been showing some strength for some time, with quite strong growth in July and August. There was some evidence from survey returns that output was higher because of the Olympics.

  • Office administration: office administration was quite strong in July and August but the evidence on any Olympic effect was mixed, with some respondents suggesting that it may have had an adverse effect on the data, as opposed to explaining the strength.

  • Accommodation: month on month growth in hotels was greater in August and this is one area where one might expect to see an Olympic effect, albeit mainly in London. There was some evidence from survey returns that output was higher because of the Olympics.

  • Land transport: there was month on month growth in July and August in parts of the transport sector and some evidence from returns that this might have been due to the Olympics.

  • Retail: retail showed some strength in July and August but there was very little evidence of any significant Olympic effect. Indeed there was some feedback from online retailers that sales were lower as consumers watched the Olympics instead of shopping online.

  • Motion picture, video and TV programme production: the data here were quite weak for August and there was some evidence from survey respondents to support this weakness - 'people watching the Olympics instead'.

It is not possible to quantify the overall impact of the Olympics and indeed some of the activity may have displaced other activity (for example, the comments on watching the Olympics in preference to films or DVDs) but the text above provides some idea of where the main impacts were likely to have been. An article explaining how various elements are reflected in the National Accounts was published in July 2012. A separate article published today provides more information on the Olympics and the impact on the data.

Services in detail

The Index of Services measures the chained volume index movements of the UK service sector. The services sector now accounts for more than three quarters of total gross domestic product. 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 services statistics is available in the background notes.

Table 2: Growth rates and contributions to the Index of Services: August 2012

Description % of Services Month on a year earlier Volume (SA) (%) Contribution to services (% points) Month on month growth Volume (SA) (%) Contribution to services (% points)
Total Service Industries 100 1.7 1.7 1.0 1.0
Distribution, hotels & restaurants 18 1.7 0.3 1.2 0.2
 
Transport, storage & communication 14 - - 1.5 0.2
Business services & finance 38 1.2 0.4 0.8 0.3
Government & other services 30 3.2 1.0 0.9 0.3
           

Table source: Office for National Statistics

Table notes:

  1. Individual contributions may not sum to the total due to rounding
  2. SA = seasonally adjusted

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Sector analysis

Distribution, hotels & restaurants

The seasonally adjusted index of distribution, hotels & restaurants in August 2012 was estimated to have increased by 1.7 per cent compared with August 2011. In particular:

  • Output increased in four of the five components.

  • The main upward movements were in retail, which rose by 2.6 per cent, food & beverage services, which rose by 6.1 per cent, and motor trades, which increased by 6.4 per cent.

Transport, storage & communication

The seasonally adjusted index of transport, storage & communication in August 2012 was estimated to have remained flat compared with August 2011. In particular:

  • Output increased in three of the eight published components and decreased in five of the published components.

  • The main upward movements were in computer programming, consultancy & related activities, which rose by 3.2 per cent, and warehousing & transport support, which rose by 4.4 per cent, with the main downward movement in air transport, which fell by 10.1 per cent.

Business services & finance

The seasonally adjusted index of business services & finance in August 2012 was estimated to have increased by 1.2 per cent compared with August 2011. In particular:

  • Output increased in four of the five published components.

  • The main upward movements were in administrative & support service activities, which rose by 8.9 per cent, and other professional service activities, which rose by 1.2 per cent.

Government & other services

The seasonally adjusted index of government & other services in August 2012 was estimated to have increased by 3.2 per cent compared with August 2011. In particular:

  • Output increased in four of the six published components.

  • The main upward movement was in arts, entertainment & recreation, which rose by 35.2 per cent, mainly due to the inclusion of a proportion of Olympic ticket receipts in August 2012.

Revisions

This release conforms to the standard revisions policy for National Accounts. The earliest period open for revision is July 2012.

Background notes

  1. What's New?

    Economic Analysis

    Additional supporting economic analysis relating to the Index of Services release can be found at Economic Review

    Special Events

    An article outlining the ONS policy on special events can be found at ONS's policy on Special Events

    Industry Reviews

    An article Index of Services - Industry Reviews August 2012 was published on 1 August 2012 following up on the IoS Industry Reviews article published in March.  This article details the plans to be carried out by the ONS on the IoS Industry Review process.

  2. Understanding the data

    Short guide to the Index of Services

    The Index of Services shows the monthly movements in the gross value added of the service industries (2007 Standard Industrial Classification (SIC 2007) section G to T). This sector accounts for around 77 per cent of gross domestic product (GDP) in 2009. The index is estimated using the same data sources and national accounts methodology as the quarterly estimate of service industries’ gross value added within the output measure of GDP (GDP (O)). These consist of the distribution, hotels and restaurant industries (SIC 2007 section G and I), transport storage and communication (section H and J), business services and finance (sections K to N) and government and other services (sections O to T).

  3. Interpreting the data

    Some monthly data are volatile. When looking at growth rates, the headline Index of Services figures focus on the percentage change between the most recent month on a year earlier and the most recent three months on a year earlier.

    Figures for the most recent months are provisional and subject to revision in light of (a) late responses to surveys and administrative sources, (b) where forecasts are replaced by actual data and (c) revisions to seasonal adjustment factors, which are re-estimated every month and reviewed annually (changes from the latest review are included in this release).

    In the first and second months of each quarter the Index of Services statistical bulletin is published on the same days as the Gross Domestic Product Preliminary Estimate statistical bulletin and the Second Estimate of GDP (formerly UK Output, Income and Expenditure) statistical bulletin.

    In the third month of each quarter the Index of Services statistical bulletin is published on the first working day after the Quarterly National Accounts statistical bulletin.

    The data for the Index of Services in this statistical bulletin are consistent with the Quarterly National Accounts published on 25 October 2012. Data for the retail sector are broadly comparable with the Retail Sales Index published on 18 October 2012, although adjustments to the data within the IoS release are sometimes made at the time of the Blue Book to improve the coherence of the three measures of GDP (there can also be timing differences in the updating of the two series).

  4. 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.

    Gross Domestic Product

    The total value of output in the economic territory. It is the balancing item on the production account for the whole economy. Domestic product can be measured gross or net. It is presented in the new accounts at market (or purchaser's) prices. A further distinction is that it can be at current or constant prices.

    Index number

    A measure of the average level of prices, quantities or other measured characteristics relative to their level for a defined base reference period or location. It is usually expressed as a percentage above or below, but relative to, the base index of 100.

  5. Use of the data

    The ONS work programme consultation which ended in December 2010 looked at customers views on how ONS could address customers’ needs within a reducing budget.

  6. Methods

    A link is available to view the Index of Services methodology.

  7. Composition of the data

    The Index of Services uses a wide variety of different data, from many sources, which are produced on either an annual, quarterly or monthly basis.

    Some 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 Services.

    More information on Monthly Business Survey data can be found within the Economic and Labour Market Review release.

    Other sources use direct volume measures that do not need to be deflated, such as Royal Mail Group data regarding postal services and Civil Aviation Authority data for air transport. Other proxies, such as employment numbers, are used also. This occurs with Public Sector Employment, and Work Force Jobs data.

    Where monthly data are not available (for example when data are delivered quarterly or annually), monthly estimates are derived by forecasting data. This is done using the X12 Arima forecasting method and interpolating a monthly path using a cubic spline.

    An X12 Arima forecast is also used where actual data are not available for the latest period (a lower proportion of actual data are available for the latest month). When the forecast is replaced by actual data, this may lead to revisions to the published data.

    The IoS output is designated as a national statistic, although a number of components are experimental. The change to SIC 2007 moved some experimental components into national statistics components and vice versa.

    In the coming months a paper will be released providing an overview of these changes. The experimental components on a SIC 2003 basis were:

    • Water transport,

    • Financial intermediation.

    • Insurance and pension funding,

    • Activities auxiliary to financial intermediation,

    • Real estate activities,

    • Renting of machinery and equipment,

    • Computer and related activities,

    • Research and development,

    • Health and social work: private sector,

    • Activities of membership organisations not elsewhere classified,

    • Recreational, cultural and sporting activities: radio and TV, and betting and gaming,

    • Private households with employed persons.

  8. 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 adjustment.

  9. Basic quality information

    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 statements 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.

    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.

  10. 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 to derive the volume. These volumes are described as ‘at constant prices’.

    Within the Index of Services, all series, unless otherwise quoted, are measured at constant market prices. Deflators adjust the value series to take out the effect of price changes to give the volume series.

  11. Summary quality report

    A Summary quality report (127 Kb Pdf) for the Index of Services release is provided on the National Statistics website.

  12. National Accounts revisions policy

    Key documentation explaining the National Accounts revision policy (27.8 Kb Pdf) is available.

  13. Revisions triangles

    SIC 2007 revisions triangles are contained in a zip folder. This folder can be found within the data section of this bulletin.

    Revisions to data provide one indication of the reliability of key indicators. A statistical test has been applied to the average revision to find out if it is statistically significantly different from zero. The result of the test is that the average revision is not statistically significantly different from zero.

    The table below presents a summary of the differences published between August 2006 and July 2011 and the estimates published 12 months later.

    Table 3: Revisions between first publication and estimates twelve months later

      Value in latest period Revisions between first publication and estimates twelve months later
    Average over the last 60 months Average over the last 60 months without regard to sign (average absolute revision)
    Index of Services 3 month on 3 month growth rate 0.2 -0.02 0.23
    Index of Services 1 month on 1 month growth rate 1.0 -0.06 0.25

    Table source: Office for National Statistics

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  14. Publication policy

    Details of the policy governing the release of new data are available from the press office. Also available is a Pre release Access (25.8 Kb Pdf) 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 within the data section of this publication.

  15. Accessing data

    The complete run of data in the tables of this statistical bulletin is also available to download from the data section of this publication.

    ONS provides an analysis of past revisions in the IoS and other statistical bulletins which present time series at ONS Policy on Standards for presenting revisions in time series First Releases. (244.6 Kb Pdf)

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  17. 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.

    Code of Practice

  18. 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

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