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Statistical bulletin: Index of Services, February 2013 This product is designated as National Statistics

Released: 25 April 2013 Download PDF

Key points

  • Users are reminded that the figures within this release are estimates and are on a seasonally adjusted basis.
  • The Index of Services increased by 2.2% in February 2013 compared with February 2012. All of the components of the services sector increased in the most recent month compared with the same month a year ago.
  • The largest contributions came from distribution, hotels & restaurants, which contributed 0.8% of growth to the index, and business services and finance, which also contributed 0.8% to total growth.
  • These estimates for the services industries mean that, subject to revision, all the main components for the output measure of GDP (construction, production and services) are published for January and February 2013 the first two months of Quarter 1 2013. The March estimates for production and construction output will be published on 9 May 2013 and the 10 May 2013 respectively, with the March estimate for services published on 23 May 2013 alongside the Second Estimate of Gross Domestic Product for Quarter 1 2013. For more information see Table 2 GDP components tables.
  • The earliest period open for revision in this release is January 2013.

Key figures

Table 1: Index of Services key figures (February 2013)

Index of Services - February 2013

(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 104.9 2.2 1.2 0.8 0.1
             

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Economic background

Figure 1: Index of Services

Figure 1: Index of Services

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The latest Index of Services estimates show that output increased by 0.8% between January 2013 and February 2013, following an increase of 0.3% between December 2012 and January 2013.

The Index of Services has not followed the same path as GDP. Following the decline in 2008/2009, total output has grown, surpassing its pre-recession peak in August 2012, and its February 2013 level represents another new peak. The weakness seen in the output measure of GDP can be largely attributed to the production and construction industries. GDP (output, income and expenditure) is still around 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 the business, services & finance sector is only slightly under its pre-recession peak. However, the distribution, hotels & restaurants sector remains some way below its pre-recession peak, as does the transport, storage & communication sector. The latter has witnessed stagnation in its recovery over the past two years.

The government & other services sector has proved to be the most resilient, with continual growth since 2009, and is now above its pre-recession peak. This is to be expected during periods of low or negative economic growth as automatic fiscal stabilisers come into effect, such as increasing demand for government services related to unemployment, careers and skills. Unemployment increased significantly during most of 2008 and the first part of 2009, and has remained around 8% since May 2009, compared to pre-recession levels of around 5%.

The latest data, however, point to these differences narrowing. The distribution, hotels & restaurants sector recorded growth of 2.1% between January and February 2013, while the government & other services sector recorded growth of only 0.3% over the same period and has now grown less since 2009 than the other three sectors in the index.

Table 2 : GDP component tables (Quarter 1 2013)

Constant price seasonally adjusted
Publication   % of GDP   Release date   Month of GDP   Percentage change
Most recent 3 months on a year earlier  Most recent 3 months on 3 months earlier  Most recent month on the same month a year ago Most recent month on the previous month
               
Index of Production 15.6 09-Apr Feb -2.5 0.3 -2.2 1.0
    12-Mar Jan -2.6 -1.0 -3.1 -1.3
               
               
Construction output1 6.8 12-Apr Feb -8.9 -16.0 -7.0 5.5
    08-Mar Jan -8.7 -1.5 -7.9 -6.3
               
               
Index of Services 77.0 25-Apr Feb 1.2 0.1 2.2 0.8
    28-Mar Jan 0.9 -0.2 0.8 0.3
               
Retail Sales   21-Mar Feb 0.8 -0.2 2.6 2.1
    15-Feb Jan 0.2 -0.6 -0.5 -0.7
               
               
Agriculture 0.6 25-Apr     -3.7    
               

Table notes:

  1. Construction output is non-seasonally adjusted.

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These estimates for the services industries mean that, subject to revision, all the main components for the output measure of GDP (construction, production and services) are published for January and February 2013 the first two months of Quarter 1 2013. The March estimates for production and construction output will be published on 9 May 2013 and 10 May 2013 respectively, with the March estimate for services published on the 23 May 2013 alongside the Second Estimate of Gross Domestic Product for Quarter 1 2013.

Supplementary analysis

Figure 2: IOS contributions to the month on a year ago percentage change (February 2013)

Figure 2: IOS contributions to the month on a year ago percentage change (February 2013)

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As seen in Figure 2 the Index of Services increased by 2.2% in February 2013 compared with February 2012, following growth of 0.8% in January 2013 compared with January 2012. In order of their contribution to growth: business services & finance increased by 2.0%; distribution, hotels & restaurants also increased by 4.5%; government & other services increased by 1.2%; and transport, storage & communication increased by 1.8%. Further detail on these movements can be found in the sector analysis section.

Figure 3: IOS contributions to the month on month percentage change (February 2013)

Figure 3: IOS contributions to the month on month percentage change (February 2013)

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Between January 2013 and February 2013, as seen in figure 3, the Index of Services increased by 0.8%. This growth reflects widespread increases across all industries within all four components of the service sector. In order of their contribution to the rise in the latest month: distribution, hotels & restaurants output increased by 2.1%; business services & finance increased by 0.7%; transport, storage & communication increased by 0.8%; and government & other services increased by 0.3%.

Industries showing particularly strong growth between January 2013 and February 2013,  include other professional service activities, which increased by 2.2%; retail, which increased by 2.1%; motor trades, which increased by 3.7%; and food and beverage services, which increased by 2.6%.  There was some feedback from businesses which suggests the strong growth in February in retail and food & beverage services was due to a ‘bounce back’ after the bad weather conditions in January, however, there is little evidence of the bad weather having a significant effect on the wider service sector.

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 February 2013 compared with the previous three months and compared with the three months ending February 2012.

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 the output measure of 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 3: Growth rates and contributions to the Index of Services (February 2013)

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 2.2 2.2 0.8 0.8
Distribution, hotels & restaurants 18 4.5 0.8 2.1 0.4
 
Transport, storage & communication 14 1.8 0.3 0.8 0.1
Business services & finance 38 2.0 0.8 0.7 0.3
Government & other services 30 1.2 0.4 0.3 0.1
           

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 index of distribution, hotels & restaurants increased by 4.5% in February 2013 compared with February 2012. The main upward movements were in motor trades, which rose by 14.5%, and wholesale, which rose by 6.0%.

Transport, storage & communication

The index of transport, storage & communication increased by 1.8% in February 2013 compared with February 2012. The main upward movements were in publishing, audiovisual & broadcasting activities, which rose by 9.4%; warehousing & support activities for transportation, which rose by 3.8%; and land transport, which rose by 3.4%.

Business services & finance

The index of business services & finance increased by 2.0% in February 2013 compared with February 2012. The main upward movements were in administrative & support service activities, which rose by 5.1%; other professional service activities, which rose by 4.6%; and real estate activities, which rose by 1.2%.

Government & other services

The index of government & other services increased by 1.2% in February 2013 compared with February 2012. The main upward movements were in activities of households as employers of domestic personnel, which rose by 15.2%, and other service activities, which rose by 3.1%.

Revisions

This release conforms to the standard revisions policy for National Accounts. The earliest period open for revision in this release is January 2013.

Background notes

  1. What's New?

    Continuous Improvement of GDP: sources, methods and communication

    An article providing an overview of current and planned continuous improvement work in relation to producing estimates of quarterly and annual GDP can be found in the Guidance and Methodology area.

  2. 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 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 2012 (229 Kb Pdf) and 25 January 2013 (197.9 Kb Pdf) . 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.

  3. 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).

  4. 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 Gross Domestic Product Preliminary Estimate published on 25 April 2013. Data for the retail sector are broadly comparable with the Retail Sales Index published on 18 April 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).

  5. 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.

  6. 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.

  7. Methods

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

  8. 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 (2.65 Mb Pdf) .

    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 (446.3 Kb Pdf) was published, highlighting the industries that are classed as experimental and the work that is ongoing to remove the experimental label.

  9. 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.

  10. 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.

  11. 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.

  12. Summary quality report

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

  13. National Accounts revisions policy

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

  14. 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 March 2007 and February 2012 and the estimates published 12 months later.

    Table 4: 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 -0.04 0.24
    Index of Services 1 month on 1 month growth rate 0.8 -0.06 0.23

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  15. 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 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.

  16. 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) .

  17. Following ONS

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

  18. 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 UK 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.

  19. 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

Statistical contacts

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Robert Doody +44 (0)1633 455803 Office for National Statistics ios.enquiries@ons.gsi.gov.uk
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