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Statistical bulletin: Index of Services, June 2014 This product is designated as National Statistics

Released: 15 August 2014 Download PDF

Key points

  • The Index of Services increased by 3.6% in June 2014 compared with June 2013. All of the four main components of the services industries increased in the most recent month compared with the same month a year ago.
  • The largest contributions came from: business services & finance, which contributed 1.7 percentage points to total growth; and distribution, hotels & restaurants, which contributed 0.9 percentage points to total growth.
  • The latest Index of Services estimates show that output increased by 0.3% between May 2014 and June 2014, the third consecutive 0.3% increase.
  • The Index of Services increased by 1.0% in Q2 2014 compared with Q1 2014. This figure was unchanged from the estimate used in the Preliminary Estimate of Gross Domestic Product (GDP) published on 25 July 2014 and is consistent with the Second Estimate published today.
  • The figures within this release are estimates and are on a seasonally adjusted basis. The earliest period open for revision in this release is April 2014.

Key Information

Table 1: Index of Services Key information, June 2014

United Kingdom

(Percentage change)
    Index number (2010=100) 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
Index of Services 108.1 3.6 3.3 0.3 1.0
             

Table source: Office for National Statistics

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The Index of Services measures the quantity of output from all UK services industries, which now account for more than three-quarters of the output approach to the measurement of gross domestic product.  Index values are presently referenced to 2010 so that the average for 2010 is equal to 100. Therefore an index value of 110 would indicate that output is 10% higher than the average for 2010. They are also adjusted for seasonal variations, unless stated otherwise. Care should be taken when using the month-on-month growth rates, due to their volatility. Please read the background notes section for an assessment of the quality of the Index of Services, as well as an explanation of the terms used in this bulletin.

As seen in Figure 1, the Index of Services increased by 3.6% in June 2014 compared with June 2013. In order of their contribution to growth (see reference table IOS1): business services & finance increased by 4.3%; distribution, hotels & restaurants increased by 4.8%; government & other services increased by 1.9%; and transport, storage & communication increased by 3.4%. Further detail on these movements can be found in the component analysis section.

Figure 1: IoS contributions(1) to the month on a year ago percentage change, June 2014

United Kingdom

Figure 1: IoS contributions(1) to the month on a year ago percentage change, June 2014
Source: Office for National Statistics

Notes:

  1. Individual contributions may not sum to the total due to rounding.
  2. Percentage change.

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Between May 2014 and June 2014, as seen in Figure 2, the Index of Services increased by 0.3%. All of the four main components increased, with the largest contribution to growth (see reference table IOS1) coming from business services & finance, which grew by 0.3%; transport, storage & communication increased by 0.8%; government & other services increased by 0.2%; and distribution, hotels & restaurants increased by 0.2%.

Industries reporting growth between May 2014 and June 2014, in order of their contribution to growth, included: other professional service activities which increased by 2.3%; wholesale and retail trade & repair of motor vehicles & motorcycles which increased by 1.7% and land transport which increased by 1.6%.  In contrast, industries reporting contraction included: real estate activites which decreased by 0.4%; computer programming, consultancy & related activities which decreased by 0.9% and accommodation which decreased by 2.8%.

More detail on individual components 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 June 2014 compared with the previous three months and compared with the three months ending June 2013.

Figure 2: IoS contributions(1) to the month-on-month percentage change, June 2014

United Kingdom

Figure 2: IoS contributions(1) to the month-on-month percentage change, June 2014
Source: Office for National Statistics

Notes:

  1. Individual contributions may not sum to the total due to rounding.
  2. Percentage change.

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Economic background

Figure 3: Index of Services, June 2001 - June 2014

United Kingdom

Figure 3: Index of Services, June 2001 - June 2014
Source: Office for National Statistics

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The latest Index of Services estimates show that output increased by 0.3% between May 2014 and June 2014, the third consecutive 0.3% increase.

In recent years, services have followed a slightly different path from gross domestic product (GDP) overall. Growth in the Index of Services since 2010 has reversed the decline seen in 2008 and 2009; in September 2013, the Index of Services surpassed its previous peak level recorded in February 2008 and the estimate for June 2014 was 2.9% above this February 2008 level. The latest Second Estimate of GDP estimates that in Q2 2014 GDP was 0.2% above the previous peak; the difference was primarily due to weakness in the construction and production industries during 2011 and 2012.

The effects felt from the 2008/2009 economic downturn were different in the main components of the services industries. The largest effects were in the distribution, hotels & restaurants industries and the transport, storage & communication industries, both of which experienced contractions of more than 10% between 2007 and 2009. A smaller contraction was reported in the business services & finance industries. Government & other services, by contrast, remained comparatively resilient, with output effectively constant; growth in human health activities offset decreases in other industries.

Since 2009, all four of the industry groupings experienced growth, but with different patterns. The distribution, hotels & restaurants industries experienced particularly slow growth prior to Q3 2012 but since then, growth has accelerated and in June 2014 output had exceeded the level of the previous peak in September 2007. Conversely, the transport, storage & communication industries grew strongly in 2010 and 2013, but output was stagnant for most of 2011 and 2012 and in June 2014 remained 1.0% below the April 2008 peak. Output in the business services & finance industries has grown more steadily and in June 2014 was 4.4% above the pre-downturn peak in February 2008. The pattern in the government & other services industries, meanwhile, showed slow but largely steady growth, the main contributor to growth was from  human health activities.

GDP impact and components

With a weight of 77.8%, the services industries are the largest industrial grouping in the output approach to measuring GDP. To aid users, the releases for the short-term economic indicators that feed directly into the output approach to measuring GDP include a table detailing growth in the four main industrial groupings (Table 2). It is anticipated that this will help users better understand the relationship between the individual short-term releases and GDP output.

Contribution to Q2 2014 GDP growth of 0.8%

The contribution an industry grouping makes to the GDP quarterly growth is dependent on the quarterly change in that industry grouping and its weight within the output approach to measuring GDP.

Figure 4: GDP contributions (1) to the quarter-on-quarter % change, Q2 2014

United Kingdom

Figure 4: GDP contributions (1) to the quarter-on-quarter % change, Q2 2014
Source: Office for National Statistics

Notes:

  1. Individual contributions may not sum due to rounding.
  2. Percentage change.

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Monthly estimates are produced for each industrial grouping except agriculture. The June estimates for production and construction were published on 6 August and 8 August 2014 respectively. The Second Estimate of GDP for Q2 2014 was published on 15 August 2014 alongside this bulletin.

Table 2: GDP output component tables Q2 2014, chained volume measure, seasonally adjusted

United Kingdom

Percentage change
Publication % of GDP Release date Quarter of GDP Most recent quarter on a year earlier  Most recent quarter on previous quarter
Index of Production 15.2 06 Aug Q2 2.1 0.3
Q1 2.4 0.7
           
Construction output 6.3 08 Aug Q2 4.8 0.0
Q1 6.7 1.5
           
Index of Services 77.8 15 Aug Q2 3.3 1.0
Q1 2.8 0.8
           
Retail Sales 24 July Q2 4.5 1.6
Q1 3.7 0.5
           
Agriculture 0.7 Q2 1.3 -0.2
           

Table source: Office for National Statistics

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Component analysis

Table 3: Growth rates and contributions(1) to the Index of Services, June 2014

United Kingdom

Percentage change
Description % of Services Month on a year earlier Volume (SA2) (%) Contribution to services (% points) Month-on-month growth Volume (SA) (%) Contribution to services (% points)
Total services industries 100 3.6 3.6 0.3 0.3
Distribution, hotels & restaurants 18 4.8 0.9 0.2 0.0
 
Transport, storage & communication 14 3.4 0.5 0.8 0.1
Business services & finance 39 4.3 1.7 0.3 0.1
Government & other services 29 1.9 0.5 0.2 0.0
           

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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Distribution, hotels & restaurants

The index of distribution, hotels & restaurants increased by 4.8% in June 2014 compared with June 2013, following an increase of 4.4% in May 2014 compared with the same month a year earlier. The main contributors to the increase were: retail trade, except of motor vehicles & motorcycles, which rose by 3.9%; wholesale & retail trade & repair of motor vehicles & motorcycles, which rose by 10.3%; and wholesale trade, except of motor vehicles & motorcycles, which rose by 5.3%.

Transport, storage & communication

The index of transport, storage & communication increased by 3.4% in June 2014 compared with June 2013, following an increase of 2.2% in May 2014 compared with the same month a year earlier. The main contributors to the increase were: computer programming, consultancy & related activities, which rose by 8.7%; land transport, which rose by 6.6%; and warehousing and support activities for transportation, which rose by 5.8%.

Business services & finance

The index of business services & finance increased by 4.3% in June 2014 compared with June 2013, following an increase of 4.2% in May 2014 compared with the same month a year earlier. The main contributors to the increase were: administrative & support service activities, which rose by 11.3%; other professional service activities, which rose by 8.7%; and real estate activities, which rose by 2.4%.

Government & other services

The index of government & other services increased by 1.9% in June 2014 compared with June 2013, following an increase of 1.7% in May 2014 compared with the same month a year earlier. The main contributors to the increase were: human health and social work activities, which rose by 2.5%; other service activities, which rose by 7.6%; and education, which rose by 1.3%.

Revisions

The Index of Services follows the  National Accounts Revisions policy (27.8 Kb Pdf) . Revisions are caused by a number of factors including, but not limited to, revisions to source data due to late response, actual data replacing forecast data and revisions to seasonal factors that are re-estimated every period. More information on Index of Services revisions is available on the Index of Services Methods page.

ONS produces revisions triangles (784.6 Kb ZIP) of services growth to provide users with one indication of the reliability of this key indicator. Statistical tests are performed on the average revision to test if it is statistically significantly different to zero. Further information can be found in background note 13.

In this release of data the earliest period open for revision is April 2014. There were no revisions to services month-on-month growth in this release of data.

Background notes

  1. What's new

    Blue Book 2014

    The Index of Services for July 2014 to be published on 30 September 2014 will include revisions back to 1997. This will be in line with the open revision period for the 2014 Blue Book publication in October 2014. The estimates will also be consistent with the Quarterly National Accounts published on 30 September 2014.

    These annual changes will include updating the reference year from 2010=100 to 2011=100, along with adding an additional year of chain-linking weights for 2011. As part of the annual GDP balancing process annual adjustments will also be made to the services sector to maintain coherence with the balanced GDP figures. ONS has developed an automatic function for assigning the annual adjustments to gross value added. This is designed to be as faithful as possible to the quarterly paths whilst adjusting the overall annual growth rate. The annual update of GDP will include the introduction of the European System of Accounts 2010 Classification. More details are given in the article ''Latest Developments to National Accounts' published on the ONS website.

  2. What do you think?

    As a user of our statistics we would welcome your feedback on this publication. If you would like to get in touch, please contact us via email ios.enquiries@ons.gsi.gov.uk.

  3. Special Events

    ONS maintains a list of candidate special events in the Special Events Calendar. As explained in ONS Special Events policy, it is not possible to separate the effects of special events from other changes in the series. While ONS has not classified the 2014 FIFA World Cup as a statistical special event, the Retail Sales May 2014 release highlighted that feedback from some retailers had suggested sales increased in May 2014 due to the build-up to it. There is no evidence to suggest that this event had an ongoing effect on other industries in June 2014.

  4. 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). These industries account for around 78% of gross domestic product (GDP) in 2010. The index is estimated using the same data sources and national accounts methodology as the quarterly estimate of services industries’ gross value added within the output approach to measuring GDP (GDP (O)). These consist of the distribution, hotels & restaurant industries (SIC 2007 sections G and I); transport, storage & communication (sections H and J), business services & finance (sections K to N); and government & other services (sections O to T).

  5. International comparison

    International comparison with the Index of Services is difficult, as most comparable economies do not produce equivalent estimates. Eurostat turnover in services estimates are not comparable with the Index of Services, as they exclude the wholesale and retail trade; furthermore, most of the estimates are only available quarterly. The United States of America also produces services output estimates, but only on a quarterly basis, with a four-month lag time. Japan has a direct equivalent of the Index of Services, but the estimates are not seasonally adjusted. The closest equivalent estimates are from Canada, which produces a monthly output estimate of GDP with a breakdown by industry (including an aggregate for services). There are also comparable quarterly estimates from Sweden.


    Short guide to national accounts

    The national accounts provide an integrated description of all economic activity within the economic territory of the UK, including activity involving both domestic units (that is individuals and institutions resident in the UK) and external units (those resident in other countries). In addition to being comprehensive, the accounts are fully integrated and internally consistent. More information can be found in UK national accounts: a short guide.

    How ONS statistics explain the economy

    The Index of Services is mentioned in a video summary which highlights 14 ways ONS statistics help you understand the economy. The video summary, along with an interactive version of the video, was released on the ONS website on 27 June 2014 alongside the Quarterly National Accounts for Q1 2014.

  6. 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) forecasts being 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).

    The monthly Index of Services statistical bulletin is usually published on the same day as the Gross Domestic Product Preliminary Estimate statistical bulletin, the Second Estimate of Gross Domestic Product statistical bulletin and the Quarterly National Accounts statistical bulletin.

    The data for the Index of Services in this statistical bulletin are generally consistent with the Second  estimate of GDP for Q2 2014, published on 15 August 2014. However, rounding can sometimes cause differences between the three-monthly growth rates presented in this release, compared with the quarterly growth rates presented in the second estimate of GDP. Data for the retail industry are broadly comparable with the Retail Sales release published on 24 July 2014, but as the two series operate under different revisions policies, there can be timing differences in the updating of the two series. Also, 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 approaches to measuring GDP. Therefore, inconsistencies between the two series are not unusual but tend to be small. There are also conceptual and coverage differences between retail sales and retail output which can lead to apparent inconsistencies.

  7. Definitions and explanations

    Definitions found within the main statistical bulletin are listed here:

    Index number

    An index number is a number which indicates the change in magnitude relative to the magnitude at a specified point, the latter usually taken as 100. For example, the level of GDP for Q2 2014 is given in Table 1 as 106.0. This means that GDP was 6.0% higher than the average in the reference period, which is currently 2010.

    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 effect of the day of the week and Easter are used respectively to make trading day and Easter adjustments prior to seasonal adjustment.

    Value (current price)

    Economic transactions involve the production of goods and the sale of goods and services (commodities). The monetary value (or current price) of these transactions is a product of the quantity produced or sold and the unit price. In a particular period, the total (aggregate) value of all transactions taking place in the economy is simply the sum of the individual transaction values in that period.

    Volume (constant price)

    When it comes to comparing the difference in aggregate values between two time periods, the observed movement is generally a combination of changes in quantity and changes in price. In a lot of cases, the interest of users of economic data lies in understanding the degree to which economic growth is being driven by changes in quantities (i.e. physical volumes of production and consumption). It is standard practice to present many economic statistics as volume series (showing changes in the level of the series that have not been affected by changes in price) and such series are referred to as 'at constant prices'.

    Deflation

    The process of removing price changes from a value series and converting to a volume series is known as deflation. All index numbers presented in this bulletin are volume measures and have had the effect of price changes removed.

    Chained volume measures

     The indices in this bulletin are presented as ‘chained volume’ measures, meaning that successive volume estimates have been linked (or chained) together. Annual chain-linking was introduced in 2003 and is considered preferable to producing standard volume series as chained volume measures more accurately reflect volume changes over time. More information on chain-linking can be found in the Tuke and Reed (2001) (92.8 Kb Pdf) article, and a paper on chain-linking weights in the output approach to measuring GDP can be found on the Methods and Sources page.

    Gross domestic product

    The total value of production activity 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 of consumption of fixed capital (or depreciation). It is presented in the accounts at market (or purchasers’) prices. A further distinction is that it can be at current prices or chained volume measures.

  8. Methods

    Index of Services methodology can be found on the ONS website.

  9. 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 data from the Monthly Business Survey (MBS): an ONS short-term survey on different parts 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 Civil Aviation Authority data for air transport. Other proxies, such as employment numbers, are also used. This is the case 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 X-12-ARIMA forecasting method and interpolating a monthly path using a cubic spline.

    An X-12-ARIMA forecast is also used where actual data at industry level 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 adheres to the Government Statistical Service Disclosure Control Policy (173.1 Kb Pdf) . More information can be found in the Quality and Methodology Information (QMI) report. (127 Kb Pdf)

  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.

    A Quality and Methodology Information (QMI) (127 Kb Pdf)  report for the Index of Services (IoS) was published on 20 December 2013. The report pulls together qualitative information on the five Eurostat criteria of quality (relevance, accuracy, timeliness, punctuality, accessibility & clarity, and comparability & coherence) and provides a summary of the methods used to compile the IoS output, describing the strengths and limitations of the estimates produced.

  11. Continuous Improvement of GDP: sources, methods and communication

    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.

    The Continuous Improvement of Gross Domestic Product article published in May 2014 provides an update of the work on industry reviews and wider improvements to GDP(O), IoP and IoS, and outlines the greater scope of the project as part of the GDP Continuous Improvement Programme.

    On 31 May 2013, ONS launched a public consultation on a five year work plan (2013/2014 – 2017/2018) for National Accounts and other outputs that have a close relationship. The finalised National Accounts and Related Statistics Work Plan has since been published on the ONS 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. An average revision close to zero is desirable as it suggests that revisions are not predictable in any one direction. The result of the test is that the average revision is not statistically significantly different from zero.

    Table 4 presents a summary of the differences published between June 2008 and June 2013 and the estimates published 12 months later.

    Table 4: Revisions between first publication and estimates twelve months later

    United Kingdom

    Percentage change
    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 1.0 -0.10 0.22
    Index of Services 1 month on 1 month growth rate 0.3 -0.06 0.21

    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 of those given pre-publication access to the contents of this release.

  15. Accessing data

    The data presented in the tables of this statistical bulletin are also available to download from the data section of this publication. A complete run of data is available as a time series dataset on the ONS website.

    ONS provides an analysis of past revisions in the IoS and other statistical bulletins. More information can be found in Revisions information in ONS First Releases (244.6 Kb Pdf)

  16. Following ONS

    You can follow ONS on Twitter and Facebook and 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.

    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.

  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

Statistical contacts

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