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

Released: 25 July 2014 Download PDF

Key points

  • The Index of Services increased by 3.3% in May 2014, compared with May 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 0.8 percentage points to total growth.
  • The latest Index of Services estimates show that output increased by 0.3% between April 2014 and May 2014, the second consecutive 0.3% increase.
  • 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, May 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 107.8 3.3 3.2 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.

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

United Kingdom

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

Notes:

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

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As seen in Figure 1, the Index of Services increased by 3.3% in May 2014, compared with May 2013. In order of their contribution to growth (see reference table IOS1): business services & finance increased by 4.3%; distribution, hotels & restaurants increased by 4.4%; government & other services increased by 1.7%; and transport, storage & communication increased by 2.0%. Further detail on these movements can be found in the component analysis section.

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

United Kingdom

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

Notes:

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

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Between April 2014 and May 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 0.4%. Government & other services increased by 0.2%; distribution, hotels & restaurants increased by 0.3%; and transport, storage & communication increased by 0.2%.

 
Industries reporting growth between April 2014 and May 2014, in order of their contribution to growth, included: administrative & support services activities, which increased by 1.2%; wholesale trade, except of motor vehicles & motorcycles, which increased by 1.3%; and other professional service activities, which increased by 0.8%. In contrast, industries reporting contraction included: telecommunications, which decreased by 1.8%; retail trade, except of motor vehicles & motorcycles, which decreased by 0.5%; and publishing, audiovisual & broadcasting activities, which decreased by 1.0%.

 
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 2014 compared with the previous three months and compared with the three months ending May 2013.

Economic background

Figure 3: Index of Services, May 2014

United Kingdom

Figure 3: Index of Services, May 2014
Source: Office for National Statistics

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The latest Index of Services estimates show that output increased by 0.3% between April 2014 and May 2014, the second 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 May 2014 was 2.6% above this February 2008 level. The latest Preliminary Estimate of GDP estimates that in Q2 2014 GDP was 0.2% above the previous peak; the difference is 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 have experienced growth, but with different patterns. The distribution, hotels & restaurants industries experienced particularly slow growth prior to Q3 2012; but has grown rapidly since and in May 2014 output was just 0.1% below 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 May 2014 remained 1.9% below the April 2008 peak. Output in the business services & finance industries has grown more steadily and in May 2014 was 4.2% above the pre-downturn peak in February 2008. The pattern in the government & other services industries, meanwhile, is of slow but largely steady growth, mostly driven by human health activities.

GDP impact and components

Table 2 shows recent changes in output in the main industrial groupings that make up the output approach to the measurement of GDP: agriculture, production, construction, and services. The key component is services, with a weight of 77.8%; production has a weight of 15.2%, construction 6.3% and agriculture 0.7%.

Monthly estimates are produced for each industrial grouping except agriculture. The April estimates for production and construction were published on 8 July and 11 July 2014 respectively. The Preliminary Estimate of GDP for Q2 2014 was published on 25 July 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 Month 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 08 July May 2.5 0.6 2.3 -0.7
      Apr 2.6 1.1 2.9 0.3
 
Construction output 6.3 11 July May 4.9 -0.8 3.5 -1.1
      Apr 5.2 -0.1 4.6 1.2
             
Index of Services 77.8 25 July May 3.2 1.0 3.3 0.3
      Apr 2.9 0.9 3.1 0.3
             
Retail Sales2   19 June May 4.9 1.3 3.9 -0.5
      Apr 4.7 1.5 6.5 1.0
     
Agriculture 0.7   Q2 1.4 -0.2 .. ..
               

Table source: Office for National Statistics

Table notes:

  1. No data is represented by ..
  2. Data are presented as at 19 June 2014, due to the timing of the availability of data.

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Component analysis

Table 3: Growth rates and contributions(1) to the Index of Services, May 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 3.3 3.3 0.3 0.3
           
Distribution, hotels & restaurants 18 4.4 0.8 0.3 0.0
           
Transport, storage & communication 14 2.0 0.3 0.2 0.0
           
Business services & finance 39 4.3 1.7 0.4 0.2
           
Government & other services 29 1.7 0.5 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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Distribution, hotels & restaurants
The index of distribution, hotels & restaurants increased by 4.4% in May 2014, compared with May 2013. The main contributors to the increase were: retail trade, except of motor vehicles & motorcycles, which rose by 3.8%; wholesale & retail trade & repair of motor vehicles & motorcycles, which rose by 9.8%; and wholesale trade, except of motor vehicles & motorcycles, which rose by 4.8%.

Transport, storage & communication
The index of transport, storage & communication increased by 2.0% in May 2014, compared with May 2013. The main contributors to the increase were: computer programming, consultancy & related activities, which rose by 8.2%; land transport, which rose by 5.8%; and warehousing and support activities for transportation which rose by 3.7%.

Business services & finance
The index of business services & finance increased by 4.3% in May 2014, compared with May 2013. The main contributors to the increase were: administrative & support service activities, which rose by 11.4%; other professional sevice activities which rose by 7.1%; and real estate activities, which rose by 2.8%.

Government & other services
The index of government & other services increased by 1.7% in May 2014, compared with May 2013. The main contributors to the increase were: human health and social work activities, which rose by 2.0%; other service activities which rose by 7.2%; and education, which rose by 1.4%.


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 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.

  2. 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 effect on other industries in May 2014.

  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). 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).

    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.

    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.

  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).

    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 Preliminary estimate of GDP for Q2 2014, published on 25 July 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 Preliminary estimate of GDP. Data for the retail industry are broadly comparable with the Retail Sales release published on 19 June 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.

  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 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 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

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

  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 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 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)

  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 caused by differing 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 working days in a month or the date of Easter may have a significant effect. 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. 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.

  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. 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 May 2008 and May 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 0.22

    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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