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

Released: 27 February 2013 Download PDF

Key points

  • The seasonally adjusted Index of Services was estimated to have increased by 0.6% in December 2012 compared with December 2011, with three of the four service sector components having increased in the most recent month compared with the same month a year ago.
  • Distribution, hotels & restaurants was estimated to have increased by 2.0% and government & other services was estimated to have increased by 1.0%. These were the largest contributions to the increase.
  • Between quarter three and quarter four 2012, services sector output decreased by 0.1%. This was slightly weaker than the estimate used in the Gross Domestic Product Preliminary Estimate for quarter four 2012, which estimated that total output from the service sector was flat between the two quarters. The data for the Index of Services in this statistical bulletin are consistent with the Second Estimate of GDP published today.
  • Between November 2012 and December 2012, service sector output decreased by 0.4%.
  • The earliest period open for revision in this release is January 2012.
  • Users are reminded that the figures within this release are estimates.

Key figures

Table 1: Key Figures

Index of Services - December 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 103.7 0.6 1.2 -0.4 -0.1
             

Table source: Office for National Statistics

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Economic background

Figure 1: Index of Services

Figure 1: Index of Services
Source: Office for National Statistics

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The Index of Services prior to the financial crisis enjoyed a prolonged period of growth, with all four sectors growing in the run up to 2008. The Index of Services has not followed the path of GDP and its double dip. Following the decline in 2008/2009 total services has grown steadily and has returned to, and slightly surpassed, its pre-recession peak. The weakness seen in GDP is being driven by other sectors of the economy, with GDP still roughly 3% below its pre-recession peak.

The effects felt by the 2008/2009 recession have differed between the main industrial sectors of the services sector. Quarterly data shows business, services & finance is only slightly under its pre-recession peak. However, distribution, hotels & restaurants and transport, storage & communication are still some way below their pre-recession peak. The latter has witnessed stagnation in its recovery over the past two years. The government & other services sector proved to be the most resilient. After registering two quarters of decline it has grown and is now above its pre-recession peak. This is to be expected during a recession as automatic fiscal stabilisers come into effect, such as demand for government services related to unemployment, careers and skills are increased. The financial crisis caused a large increase in unemployment, it now sits just under 8%, well above the 5% witnessed pre financial crisis. 

Supplementary analysis

The seasonally adjusted Index of Services was estimated to have increased by 0.6% in December 2012 compared with December 2011. In order of their contribution to growth: distribution, hotels & restaurants increased by 2.0%; government & other services increased by 1.0%; transport, storage & communication increased by 0.5%. In contrast, business services & finance decreased by 0.3%.

The Index of Services was estimated to have decreased by 0.1% in the fourth quarter of 2012 compared with the third quarter of 2012, following a rise of 1.2% between quarter two and quarter three. In order of their contribution to the fall in the latest quarter: government & other services decreased by 0.8% and distribution, hotels & restaurants decreased by 0.5%. In contrast, transport, storage & communication increased by 1.2% and business services & finance increased by 0.2%

The level of the service sector in the third quarter 2012 was boosted by the Olympics and Paralympics (the Games). Some evidence of ‘fall-back’ in the fourth quarter of 2012 following this one-off event can be seen in the following industries:

  • Arts, entertainment & recreation, which decreased by 10.4% in quarter four following a significant rise of 16.7% in quarter three.

  • Accommodation services, which decreased by 3.4% in quarter four following a rise of 3.4% in quarter three.

  • Food & beverages services, which decreased by 1.4% in quarter four following a rise of 1.5% in quarter three.

  • Land Transport, which decreased by 0.4% in quarter four following a positive rise of 1.5% in quarter three.

It is not possible to quantify the overall impact of the Games and indeed some of the activity may have displaced other activity. Retrospective analysis will be carried out, in line with the ONS special events policy, when data for later periods are available.

Between November and December 2012 the Index of Services was estimated to have decreased by 0.4%. In order of their contribution to the fall in the latest month: business services & finance decreased by 0.8%; distribution, hotels & restaurants decreased by 0.4%; government & other services decreased by 0.2%. In contrast, transport, storage & communication increased by 0.5% in the latest month.

Between 2011 and 2012 the Index of Services was estimated to have increased by 1.0%.  In order of their contribution to growth: government & other services increased by 1.6%; business services & finance increased by 1.1%; distribution, hotels & restaurants increased by 0.8%. In contrast transport, storage & communication decreased by 0.1%

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 December 2012 compared with the previous three months and compared with the three months ending December 2011.

 

Services in detail

The Index of Services measures the chained volume index movements of the UK service sector. The service 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: December 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 0.6 0.6 -0.4 -0.4
Distribution, hotels & restaurants 18 2.0 0.4 -0.4 -0.1
Transport, storage & communication 14 0.5 0.1 0.5 0.1
Business services & finance 38 -0.3 -0.1 -0.8 -0.3
Government & other services 30 1.0 0.3 -0.2 -0.1

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 December 2012 was estimated to have increased by 2.0% compared with December 2011. The main upward movements were in motor trades, which rose by 14.7%, and food & beverage services, which rose by 2.9%.

Transport, storage & communication

The seasonally adjusted index of transport, storage & communication in December 2012 was estimated to have increased by 0.5% compared with December 2011. The main upward movements were in publishing, audiovisual & broadcasting activities, which rose by 5.0%, warehousing & support activities for transportation, which rose by 6.4%, and computer programming, consultancy & related activities, which rose by 1.8%.

Business services & finance

The seasonally adjusted index of business services & finance in December 2012 was estimated to have decreased by 0.3% compared with December 2011. The main downward movements were in financial service activities, which fell by 3.7%, other professional, scientific & technical activities, which fell by 4.2%, and other professional service activities, which fell by 0.8%. These downward movements were partially offset by administrative & support service activities, which rose by 6.7%, and real estate activities, which rose by 1.0%.

Government & other services

The seasonally adjusted index of government & other services in December 2012 was estimated to have increased by 1.0% compared with December 2011. The main upward movements were in human health & social work activities, which rose by 2.4%, and arts entertainment and recreation, which rose by 4.9%.

Revisions

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

Background notes

  1. What's New?

    Special Events in 2012

    There have been a number of special events in 2012. This commentary is intended to help users to interpret the statistics in the light of these events. As explained in ONS’s Special Events policy, it is not possible to separate the effects of special events from other changes in the series.

    The Diamond Jubilee celebrations saw changes to the normal pattern of bank holidays in May and June, and an additional day's holiday in June; all of these changes affected estimates for quarter 2 of 2012 and an article gave more information on how the estimates were compiled over this period. 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 effects of the Olympics and Paralympics were reflected in the estimates for the months of quarter 3 of 2012. More details of how certain series were expected to be affected were given in an Information Note. Detailed articles describing possible effects on GDP and comparing with earlier Olympic Games was published by ONS on 25 October and 25 January 2013. Wider effects, for example the presence of the Olympics influencing the number of non-Olympics tourist visits, may of course have affected any of the summer months.

    The result of these special events in 2012 has been to introduce additional uncertainty in the interpretation of movements between Q2 and Q3 and between Q3 and Q4. Users should therefore consider all the information available when interpreting the statistics.

  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) sections G to T). This sector accounts for around 77% 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 sections G and I), transport storage and communication (sections 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 Second Estimate of GDP published on 27 February 2013. Data for the retail sector are broadly comparable with the Retail Sales Index published on 15 February 2013, 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 Index of Services has been designated as National Statistics by the United Kingdom Statistics Authority, although a number of components are experimental. In August 2012 the article Index of Services - Industry Reviews was published, highlighting the industries that are classed as experimental and the work that is ongoing to remove the experimental label.

  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 January 2007 and December 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 -0.1 -0.03 0.24
    Index of Services 1 month on 1 month growth rate -0.4 -0.06 0.24

    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 List (23.5 Kb Pdf)   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) .

  16. Following ONS

    You can follow ONS on Twitter, Facebook  or view the latest podcasts on YouTube.

  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

    The United Kingdom Statistics Authority has designated these statistics as National Statistics, in accordance with the Statistics and Registration Service Act 2007 and signifying compliance with the Code of Practice for Official Statistics.

    Designation can be broadly interpreted to mean that the statistics:

    • meet identified user needs,

    • are well explained and readily accessible,

    • are produced according to sound methods,

    • and are managed impartially and objectively in the public interest.

    Once statistics have been designated as National Statistics it is a statutory requirement that the Code of Practice shall continue to be observed.

  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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