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

Released: 25 July 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 1.5% in May 2013 compared with May 2012. All of the components of the services industries increased in the most recent month compared with the same month a year ago.
  • The largest contributions came from distribution, hotels & restaurants, which contributed 0.6 percentage points (pp) of growth to the index, and government & other services, which contributed 0.4 pp to total growth.
  • May 2013 had a normal pattern of holidays, following the changes to Bank Holidays for the Queen's Diamond Jubilee in 2012, which meant May 2012 had one more working day than usual. Users should therefore show caution when interpreting the annual changes to May 2013.
  • The latest Index of Services estimates show that output increased by 0.2% between April 2013 and May 2013, following a 0.3% increase between March 2013 and April 2013.
  • The earliest period open for revision in this release is April 2013. Data in this release are consistent with the Gross Domestic Product Preliminary Estimate, Q2 2013 published on 25 July 2013.

Key figures

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

(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 104.5 1.5 1.6 0.2 0.8
             

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 latest Index of Services estimates show that output increased by 0.2% between April 2013 and May 2013, following a 0.3% increase between March 2013 and April 2013.

In recent years, services have followed a different path from gross domestic product (GDP) overall. Growth in the Index of Services since 2010 has reversed most of the decline seen in 2008 and 2009, so that services output is now only 0.2% below to its pre-contraction peak. By contrast, weaker growth in other industries means that GDP remains some 3.3% below the previous peak.

The effects felt from the 2008/2009 economic contraction have differed between the main components of the services industries. The largest effects were in the distribution, hotels & restaurants industries and transport, storage & communication industries, both of which experienced contractions of more than 10% between 2007 and 2009. A smaller contraction was reported in business services & finance industries. Government & other services, by contrast, grew slowly throughout the period, reflecting the effect of automatic fiscal stabilisers (such as increasing demand for government services related to unemployment, careers, and skills).

Since 2009, all four of these industry groupings have grown at a broadly similar rate, but with different patterns of growth. The distribution, hotels & restaurants industries experienced a particularly slow recovery prior to the second half of 2012, but growth has accelerated significantly since then, although only around half of the lost output since its peak in September 2007 has been recovered. Output in the transport, storage & communication industries also remains substantially below its April 2008 peak, as strong growth in 2010 was followed by stagnation in 2011 and 2012. By contrast, growth has been steadier in the business services & finance industries, where output is very close to its pre-contraction peak. The pattern in the government & other services industries remains one of continued slow growth; it is important to note that this pattern was evident before the economic contraction, as well as during and after it.

Table 2: GDP output component tables (Quarter 2 2013)

Chained volume measures seasonally adjusted

Percentage change
Publication % of GDP Release date Month /Quarter of GDP 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 15.2 09 July 2013 May -1.9 0.2 -2.3 -
      Apr -1.9 0.4 -1.4 -0.1
               
               
Construction output 1 6.3 12 July 2013 May -4.8 - -4.8 -
      Apr -4.9 -1.2 -2.2 4.6
               
Index of Services 77.8 25 July 2013 May 1.6 0.8 1.5 0.2
      Apr 1.8 0.8 2.1 0.3
               
Retail Sales   18 July 2013 Jun 1.8 0.9 2.2 0.2
      May 0.7 0.8 2.1 2.1
      Apr 0.8 1.0 1.0 -1.0
               
               
Agriculture 0.7 25 July 2013 Q2 -5.6 1.1 .. ..
               

Table source: Office for National Statistics

Table notes:

  1. Construction output is a constant price seasonally adjusted measure
  2. No data is represented by ..

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Table 2 shows the main industrial groupings that make up the output approach to GDP. In the output approach of GDP, IOS is the key component with a weight of 77.8%. The May estimates for production and construction outputs were published on 9 July 2013 and 12 July 2013 respectively, with the May estimate for services published on 25 July 2013 alongside the preliminary estimate for Q2 2013.

Supplementary analysis

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

Figure 2 :IoS contributions to the month on a year ago percentage change (May 2013)
Source: Office for National Statistics

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As seen in Figure 2, the Index of Services increased by 1.5% in May 2013 compared with May 2012, following growth of 2.1% in April 2013 compared with April 2012. In order of their contribution to growth: distribution, hotels & restaurants increased by 3.6%; government & other services increased by 1.5%; business services & finance increased by 0.7%; and transport, storage & communication increased by 0.9%. Further detail on these movements can be found in the component analysis section.

Figure 3: IoS contributions to the month on month percentage change (May 2013)

Figure 3: IoS contributions to the month on month percentage change (May 2013)
Source: Office for National Statistics

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Between April 2013 and May 2013, as seen in Figure 3, the Index of Services increased by 0.2%. The largest contribution to this growth came from distribution, hotels & restaurants, which increased by 1.2%; business services & finance also increased, by 0.3%. In contrast, government & other services decreased by 0.3%, and transport, storage & communication decreased by 0.2%.

Industries which contributed strongly to the growth between April 2013 and May 2013 include retail trade, which increased by 2.1%, other professional service activities, which increased by 1.3%, and financial service activities (except insurance and pension funding), which increased by 1.0%. Industries partially offsetting these increases include computer programming, consultancy & related activities, which decreased by 2.8%, following a particularly strong April, and human health & social work activities, which decreased by 0.4%.

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

Services in detail

The Index of Services measures the chained volume index movements of the UK services industries. The services industries now account for more than three quarters of the output approach to the measurement of gross domestic product. Figures are adjusted for seasonal variations unless otherwise stated and the reference year is 2010=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 (May 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 1.5 1.5 0.2 0.2
Distribution, hotels & restaurants 18 3.6 0.6 1.2 0.2
 
Transport, storage & communication 14 0.9 0.1 -0.2 0.0
Business services & finance 39 0.7 0.3 0.3 0.1
Government & other services 29 1.5 0.4 -0.3 -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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Component analysis

Distribution, hotels & restaurants

The index of distribution, hotels & restaurants increased by 3.6% in May 2013 compared with May 2012. The main contributors to the increase were in wholesale trade, which rose by 6.9%, and wholesale, retail & repair of motor vehicles & motorcycles, which rose by 11.4%.

Transport, storage & communication

The index of transport, storage & communication increased by 0.9% in May 2013 compared with May 2012. This increase was largely attributed to computer programming, consultancy & related activities, which rose by 3.9%; there were also contributions from telecommunications, which rose by 1.5%, and publishing, audiovisual & broadcasting activities, which rose by 1.1%.

Business services & finance

The index of business services & finance increased by 0.7% in May 2013 compared with May 2012. The main contributors to the increase were in other professional service activities, which rose by 4.4%, and real estate activities, which rose by 1.8%.

Government & other services

The index of government & other services increased by 1.5% in May 2013 compared with May 2012. The main contributors to the increase were in human health & social work activities, which rose by 3.7%, and arts, entertainment & 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 April 2013.

 

Background notes

  1. What's New?

    Blue Book 2013

    This release of data is consistent with the data used for Blue Book 2013, due for release on 31 July 2013, and the Gross Domestic Product Preliminary Estimates, published on 25 July 2013. The last year of chain linked weights has been updated from 2009 to 2010. A reference table giving  the full breakdown of weights changes for the output measure of IOS between Blue Book 2012 and Blue Book 2013 can be found in the Data section of this release.

    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.

    The GDP Output Improvement Report, published on 27 June 2013, provides a detailed update of the work on industry reviews and wider improvements to IoP, IoS, and GDP(O), and outlines the greater scope of the project as part of the GDP Continuous Improvement Programme.

  2. Special Events in 2012

    There were 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 Q3 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 were 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.

    As part of the celebrations for the Queen's Diamond Jubilee there were changes to bank holidays in May and June 2012. The change to the holidays count as a statistical special event in line with ONS's policy on Special Events. In 2012 there was only one bank holiday in May in 2012 instead of the usual two. This event is not regular, so no adjustment has been made to account for it as part of the seasonal adjustment process. Users are therefore likely to see an effect related to an additional working day in May 2012 in the estimate of the annual change (and there will be a similar effect on the annual change in June associated with two fewer working days in June 2012). More information on the movements in series in 2012 can be found on the ONS website.

  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 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, 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) 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).

    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 Gross Domestic Product Preliminary statistical bulletin respectively. 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 July 2013. Data for the retail sector are broadly comparable with the Retail Sales Index published on 18 July 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 approaches to measuring 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 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. 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.

    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. 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 (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.

  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 chain volume measures at basic 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.

    Table 4 presents a summary of the differences published between June 2007 and May 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 0.8 -0.05 0.24
    Index of Services 1 month on 1 month growth rate 0.2 -0.07 0.23

    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.

    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 Revisions information in ONS 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 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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Robert Doody +44 (0)1633 455803 Office for National Statistics ios.enquiries@ons.gsi.gov.uk
Contact Us +44 (0)845 6013034 Office for National Statistics info@ons.gsi.gov.uk
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