Statistical bulletin: Producer Price Index, February 2013

Key points

• In the year to February the output price index for goods produced by UK manufacturers (factory gate prices) rose 2.3%, compared with a rise of 2.1% in the year to January.
• Between January and February factory gate prices rose 0.8%, compared with a rise of 0.2% between December 2012 and January 2013.
• In the year to February core factory gate prices, excluding the more volatile food, beverages, tobacco & petroleum products, rose 1.3%, compared with a rise of 1.4% in the year to January.
• In the year to February the overall price of materials and fuels bought by UK manufacturers for processing, known as total input prices, rose 2.5%, up from a rise of 1.9% in the year to January.
• Between January and February the total input prices rose 3.2%, compared with a rise of 1.3% between December 2012 and January 2013.

A brief description of Producer Price Index

The Producer Price Index (PPI) is a monthly survey that measures the price changes of goods bought and sold by UK manufacturers and provides a key measure of inflation, alongside other indicators such as the  Consumer Prices Index (CPI) and Services Producer Prices Index (SPPI). This statistical bulletin contains a comprehensive selection of data on input and output index series. It contains producer price indices of materials and fuels purchased and output of manufacturing industry by broad sector.

The output price indices measure change in the prices of goods produced by UK manufacturers (these are often called 'factory gate prices').

The input price indices measure change in the prices of materials and fuels bought by UK manufacturers for processing. These are not limited to just those materials used in the final product, but also include what is required by the company in its normal day to day running.

Imported Price Indices (IPIs) are a series of economic indicators that measure change in the prices of goods and raw materials imported into the UK. IPIs are a key component of input price indices.

Exported Price Indices (EPIs) are a series of economic indicators that measure change in the prices of goods manufactured in the UK but destined for export markets.

Output prices: summary

Factory gate inflation slowed steadily from autumn 2011 until summer 2012 (Figure A). Core factory gate inflation, stripping out the more volatile food, beverages, tobacco & petroleum products, showed a similar pattern, although the decline was slower because crude oil prices were pushing up inflation in autumn 2011, and they have a lesser effect on core inflation. Looking at the more recent estimates (Table A), movements in factory gate prices over the 12 months to February were as follows:

• Factory gate prices rose 2.3%, up from a rise of 2.1% last month.

• Core factory gate prices rose 1.3%, compared with a rise of 1.4% last month.

• Factory gate inflation excluding excise duty stood at 2.1%, compared with a rise 1.9% in the year to January.

Between January and February 2013:

• Factory gate prices rose 0.8%, compared with a rise of 0.2% between December 2012 and January 2013. The main upward contributions to the monthly price rise were from petroleum, tobacco & alcohol and chemicals & pharmaceutical products. These were partially offset by a fall in the price of paper & printing products (see Table C).

• Core factory gate prices rose 0.3% the same movement as last month.

Table A: Output prices (home sales)

Table source: Office for National Statistics

Figure A: Output prices

Source: Index Numbers of Producer Prices (PPI): Provision of Price Information - Office for National Statistics

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Supplementary analysis - Output prices

Table B shows the annual percentage change in price across all product groups and Figure B shows their contribution to the annual factory gate inflation rate. Table C and Figure C show the same information but for the monthly factory gate inflation rate.

Table B: 12 months change to February 2013

Table source: Office for National Statistics

Figure B: Contribution to 12 months percentage change in total (2.3%)

Source: Index Numbers of Producer Prices (PPI): Provision of Price Information - Office for National Statistics

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Table C: 1 month change to February 2013

Table source: Office for National Statistics

Figure C: Contribution to 1 month percentage change in total (0.8%)

Source: Index Numbers of Producer Prices (PPI): Provision of Price Information - Office for National Statistics

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Output prices: summary of statistics

Factory gate prices rose 2.3% in the year to February, compared with a rise of 2.1% in the year to January. The price index rose 0.8% between January and February, compared with a rise of 0.2% between December 2012 and January 2013. The main contribution to the monthly rise was a 3.7% increase in the price of petroleum products (Table C). Paper and printing products was the only product group to see prices fall between January and February.

Petroleum product prices rose 3.7% between January and February and rose 1.4% in the year to February.

Tobacco & Alcohol product prices rose 0.8% between January and February and rose 6.2% in the year to February as shown in Tables B and C. The monthly rise was due to a 1.3% increase in the price of alcohol products.

Chemicals & Pharmaceuticals product prices rose 0.7% between January and February and rose 0.4% in the year to February. The monthly price rise was primarily due to a 1% increase in the price of chemicals and chemical products.

Core factory gate inflation

Core factory gate prices, which exclude the more volatile food, beverages, tobacco and petroleum product prices, giving a measure of the underlying factory gate inflation, rose 1.3% in the year to February, compared with a rise of 1.4% in the year to January. Between January and February, core factory gate inflation rose 0.3%. This index is not affected by changes in excise duty.

Input prices: summary

Since autumn 2011 the price of materials and fuels purchased by UK manufacturing industry, input prices, fell quite rapidly from an annual inflation of around 18% to deflation (prices lower than they were in the same month of the previous year) of around 2% in the middle of 2012 (Figure D). Over this period core input inflation (purchases by manufacturing industries other than the more volatile food, beverages, tobacco and petroleum industries) fell at similar levels.

Looking at the more recent data (Table D), the key movements were as follows:

• The total input price index rose 2.5%, compared with a rise of 1.9% in the year to January.

• The core input price index saw a rise of 1.8%, compared with a rise of 0.7% in the year to January.

• The price of imported materials as a whole (including crude oil) rose 1.4%, up from a fall of 0.4% last month. (Table 7 Input prices: detailed by commodity (not seasonally adjusted) - SIC 2007). (231.5 Kb Excel sheet)

Between January and February 2013:

• In seasonally adjusted terms, (see Table D) the input price index for the manufacturing industry excluding the food, beverages, tobacco & petroleum industries rose 1.5% between January and February up from a rise of 0.4% between December 2012 and January 2013.

• The total input price index rose 3.2%, compared with a rise of 1.3% between December 2012 and January 2013. The main upward contribution was a 7.1% increase in the price of crude oil. This was partially offset by a 0.2% fall in fuel prices and a 0.3% fall in imported home produced materials. All other input groups saw price rises over this period (see Table F).

Table D: Input prices

Table source: Office for National Statistics

Table notes:

1. NSA: Not seasonally adjusted

2. SA: Seasonally adjusted

Figure D: Input prices (materials & fuel) manufacturing industry

Source: Index Numbers of Producer Prices (PPI): Provision of Price Information - Office for National Statistics

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Notes for Input prices: summary

1. These indices include the Climate Change Levy which was introduced in June 2001.
2. These indices include the Aggregates Levy which was introduced in June 2002.

Supplementary analysis - Input prices

Table E and Figure E show the percentage change in the price of the main commodities groups over the year and their contributions to the total input index. Table F and Figure F show the same for the monthly input prices.

Table E: 12 months change to February 2013

Table source: Office for National Statistics

Figure E: Contribution to 12 months percentage change in total (2.5%)

Source: Index Numbers of Producer Prices (PPI): Provision of Price Information - Office for National Statistics

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Table F: 1 month change to February 2013

Table source: Office for National Statistics

Figure F: Contribution to 1 month percentage change in total (3.2%)

Source: Index Numbers of Producer Prices (PPI): Provision of Price Information - Office for National Statistics

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Input prices: summary of statistics

The overall input index for all manufacturing, that is the price of materials and fuels purchased by manufacturers, rose 2.5% in the year to February, compared with a rise of 1.9% in the year to January. 

The input index rose 3.2% between January and February, compared with a rise of 1.3% between December 2012 and January 2013. The main upward contributions to the monthly rise in the price index were from crude oil and other imported parts & equipment. The main downward contributions came from fuels and other home produced materials (see Table F and Figure F). 

The index of crude oils rose 7.1% between January and February, but showed no movement in the year to February.

The index for other imported parts & equipment rose 2.5% between January and February, compared with a rise of 2.3% in the year to February. (see Tables E and F).

Core input price index (excluding purchases from the food, beverages, tobacco & petroleum industries)

The core input price index in seasonally adjusted terms rose 1.5% between January and February. The unadjusted index rose 2.1% between January and February, with a 1.8% rise in the year to February.

Output prices: records for February 2013

All manufactured products  

Annual rate rose 2.3%, compared with 2.1% for the year to January. Last higher in October 2012 (2.6%). The monthly rate rose 0.8%, compared with a rise of 0.2% last month. Last higher in April 2011 (1.1%). 

Excluding food, beverages, tobacco & petroleum 

Annual rate 1.3%, compared with 1.4% for the year to January.  Last lower in September 2012 (1.2%). The monthly rate rose 0.3%, same as last month.

All manufactured products excluding duty 

Annual rate 2.1%, compared with 1.9% last month. Last higher in October 2012 (2.3%). Monthly rate 0.8%, up from  0.3% last month. Last higher in April 2011 (0.9%). 

Food products 

Annual rate rose 3.4%, compared with 3.2% last month. Last higher in March 2012 (4.1%). Monthly rate 0.4%, compared with 0.6% last month. Last lower in December 2012 (0.1%).

Tobacco & alcohol (inc duty) 

Annual rate  6.2%, down from 6.7% last month. Last lower in October 2011 (5.9%). Monthly rate 0.8%, up from -0.1% last month. Last higher April 2012 (2.8%). 

Clothing, textiles & leather 

Annual rate 1.2%, same as last month.  Last lower May 2010 (1.1%) Monthly rate 0.1%, down from 0.2% last month. Last lower December 2012 (-0.3%). 

Paper & printing 

Annual rate fell -0.9%, up from a fall of -1.0% last month. Last higher in November 2012 (-0.8%). Monthly rate -0.3%, down from 0.1% last month.  Last lower in August 2012 (-0.6%). 

Petroleum products 

Annual rate 1.4%, up from -1.0% last month. Last higher in October 2012 (2.8%). Monthly rate rose 3.7%, up from 0.6% last month. Last higher in August 2012 (3.8%).

Chemical & pharmaceutical products 

Annual rate 0.4% down from 0.9% last month. Last lower in November 2012 (-0.2%). Monthly rate 0.7%, up from 0.2% last month. Last higher in September 2012 (0.8%). 

Metal, machinery & equipment nec 

Annual rate -0.2%, same as last month.  Monthly rate 0.3%, no movement last month.  Last higher in February 2012 (0.4%). 

Computer, electrical & optical equipment 

Annual rate 3.4%, up from 2.8% last month.  Last higher in November 2010 (5.1%). Monthly rate 0.6%, up from 0.1% last month.  Last higher in April 2012 (2.4%). 

Transport equipment 

Annual rate 1.7%, up from 1.4% last month. Last higher in September 2011 (1.8%). Monthly rate 0.4%, up from 0.3% last month. Last higher in April 2012 (0.8%). 

Other manufactured products 

Annual rate 1.9%, down from 2.5% last month. Last lower in April 2010 (1.8%). Monthly rate 0.2%, down from 0.5% last month. Last lower in December 2012 (0.0%).

Input prices: records for February 2013

Materials & fuels purchased 

Annual rate 2.5%, up from 1.9% last month. Last higher in March 2012 (5.4%). Monthly rate 3.2%, up from 1.3% last month. Last higher in March 2011 (3.8%). 

Excluding food, beverages, tobacco & petroleum industries 

Annual rate 1.8%, up from 0.7% last month.  Last higher in April 2012 (2.2%). Monthly rate (seasonally adjusted) 1.5%, up from 0.4% last month. Last higher in April 2011 (2.0%). 

Imported materials as a whole (including crude oil)

Annual rate rose 1.4 %, from -0.4% last month. Last higher in March 2012 (5.3%). Monthly rate 3.6%, up from 1.8% last month. Last higher in March 2010 (4.6%).  

Fuel including climate change levy 

Annual rate 2.2%, down from 5.4% last month. Last lower in January 2011 (1.2%). Monthly rate -0.2%, same as last month. Last higher in December 2012 (1.3%).

Crude oil 

Annual rate 0.0%, no movement last month.   Monthly rate 7.1%,  up from 3.6% last month. Last higher in August 2012 (9.5%). 

Home food materials 

Annual rate 15.3%, down from 16.2% last month. Last lower in December 2012 (15.1%). Monthly rate 1.1%, up from -0.7% last month. Last higher in December 2012 (2.4%). 

Imported food materials 

Annual rate 5.0%, up from 4.0% last month. Last higher in November 2012 (5.6%). Monthly rate 1.8%, up from -0.1% last month. Last higher in February 2011 (2.0%). 

Other home-produced materials 

Annual rate 0.1%, up from -0.5% last month. Last higher in June 2012 (1.8%). Monthly rate -0.3%, down from no movement last month. Last lower in August 2012 (-1.7%). 

Imported metals

Annual rate -3.8%, up from -5.3% last month. Last higher in February 2012 (-2.8%). Monthly rate 3.6%, up from 2.0% last month. Last higher in September 2010 (4.1%). 

Imported chemicals 

Annual rate 2.1%, up from no movement last month.  Last higher in February 2012 (3.2%). Monthly rate 2.2%, up from 0.8% last month. Last higher in March 2010 (2.8%). 

Imported parts & equipment

Annual rate rose 2.3%, from -0.4% last month. Last higher in February 2012 (4.1%). Monthly rate 2.5%, up from 0.9% last month.  Never been higher than this month.  

Other imported materials

Annual rate 3.1%, up from 0.4% last month. Last higher in June 2012 (4.5%). Monthly rate 2.1%, up from 1.5% last month. Last higher in July 2011 (3.6%).

Revisions

For this bulletin reference tables 8R and 9R (231.5 Kb Excel sheet) highlight revisions to movements in price indices previously published in last month’s statistical bulletin. These are mainly caused by changes to the most recent estimates, as more price quotes are received, and revisions to seasonal adjustment factors, which are re-estimated every month. The headline figures for input prices for October and November have upwards revisions and there are no revisions for headline output prices. These revisions were mainly caused by quality adjustments due to late data.

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

Table source: Office for National Statistics

Table notes:

1. * Statistically significant.

Revisions to data provide one indication of the reliability of key indicators. The above table shows summary information on the size and direction of the revisions which have been made to the data covering a five year period. A statistical test has been applied to the average revision to find out if it is statistically significantly different from zero. An asterisk (*) shows that the test is significant.

The table presents a summary of the differences between the first estimates published between November 2006 and October 2011 and the estimates published 12 months later. These numbers include the effect of the reclassification onto SIC 2007.

Spreadsheets giving revisions triangles of estimates for all months from January 1998 through to December 2012 and the calculations behind the averages in the table are available in the reference table area of the ONS website;

Revision triangle for total output (12 months) (1.81 Mb Excel sheet)

Revision triangle for total output (1 month) (1.79 Mb Excel sheet)

Revision triangle for total input (12 months) (1.82 Mb Excel sheet)

Revision triangle for total input (1 month) (1.81 Mb Excel sheet)

Background notes

1. Improvements to be introduced next month

   From March 2013, ONS plans to stop the producing the PPI records. If these data are essential to you please notify ONS by emailing ppi@ons.gov.uk

2. Article about rebasing the PPI and SPPI onto 2010=100

   An article outlining plans to rebase the producer prices index and services producer price index, at the end of 2013, can be found on the ONS website.

3. Quality and Methodology Information

   A Quality and Methodology Information (QMI) (109.5 Kb Pdf) paper for the PPI describes in detail the intended uses of the statistics presented in this publication, their general quality and the methods used to produce them.

4. Producer Price Index and Services Producer Prices: implementation of SIC 2007

   Producer Prices has implemented the change to the Standard Industrial Classification 2007 (SIC 2007). The most significant change to PPI output prices involves the reclassification of ‘recovered secondary raw materials’ and ‘publishing’. These are no longer classified in the manufacturing sector, but are classified under services. In addition to this, a new SIC division, ‘repair, installation and maintenance of machinery and equipment’ has been created. Under SIC 2003 these activities were classified within the output of manufacturing, but as part of the specific industries where this activity took place.

   Fundamental changes have been made to the classification of the PPI Trade surveys, Import Price indices (IPI) and Export Price Indices (EPI). As part of the reclassification project the classification of these trade surveys have become compliant with Eurostat’s Short Term Statistics Regulation. The collection of IPI and EPI will now be on an SIC basis, a switch from the Standard International Trade Classification (SITC) and Combined Nomenclature (CN) previously used. PPI input prices are heavily dependent on IPI.

   For further information on the changes and impact of the SIC 2007 on prices please see the Economic and Labour Market Review for December 2010 (84.1 Kb Pdf) .

   Any comments about this work and its impact on PPI please contact Producer Price Index Operations on +44 (0)1633 45 6628 or email PPI Operations. 

5. Relevance to users

   Index numbers shown in the main text of this bulletin are on a net sector basis. The index for any sector relates only to transactions between that sector and other sectors, sales and purchases within sectors are excluded. However, the more detailed figures shown in reference tables 4 and 6 (231.5 Kb Excel sheet) are on a gross basis; that is, intra industry sales and purchases are included in each of these indices.

   Indices relate to average prices for a month. The full effect of a price change occurring part way through any month will only be reflected in the following month’s index.

   All index numbers exclude VAT. Excise duty (on cigarettes, manufactured tobacco, alcoholic liquor and petroleum products) are included, except where labelled otherwise. Since PPIs exclude VAT, they are not affected by the increase in the standard rate of VAT to 20% from 4 January 2011.

   The detailed input indices of prices of materials and fuels purchased by industry (reference table 6) (231.5 Kb Excel sheet) do not include the climate change levy (CCL). This is because each industry can, in practice, pay its own rate for the various forms of energy, depending on the various negotiated discounts and exemptions that apply.

6. Common pitfalls in interpreting series

   Expectations of accuracy and reliability in sample surveys are often too high. Revisions and sampling variability are inevitable consequences of the trade off between timeliness, accuracy and the burden on respondents. Details of sampling variability are included elsewhere in this bulletin.

   Very few statistical revisions arise as a result of ‘errors’ in the popular sense of the word. All estimates, by definition, are subject to statistical ‘error’ but, in this context, the word refers to the uncertainty 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 estimates to be reduced. Only rarely are there avoidable ‘errors’ such as human or system failures, and such mistakes are made quite clear when they are discovered and corrected.

7. Definitions and explanations

   Definitions found within the main statistical bulletin are listed here:

   Index number

   A measure of the average level of prices, quantities or other measured characteristics, relative to their level for a defined reference period of location. It is expressed as a percentage above or below, but relative to, the base index of 100.

   Seasonally adjusted

   Seasonal adjustment aids interpretation by removing effects associated with the time of the year or the arrangement of the calendar, which could obscure movements of interest. Seasonal adjustment removes regular variation from a time series. Regular variation includes effects due to month lengths, different activity near particular events, such as bank holidays and leap years.

8. Accuracy

   Figures for the latest two months are provisional and the latest five months are subject to revisions in light of (a) late and revised respondent data and (b), for the seasonally adjusted series; revisions to seasonal adjustment factors are re-estimated every month. A routine seasonal adjustment review is normally conducted in the autumn each year.

   Every five years, producer price indices are rebased, and their weights updated to reflect changes in the industry. The  article (51.5 Kb Pdf) referred to in background note 1, informs users about work underway to rebase PPIs from a 2005=100 basis to a 2010=100 basis, and update the weights. PPIs will move to a 2010=100 basis from autumn 2013. More information about the impact of rebasing will be published as the project progresses and will be drawn to users attention in the regular statistical bulletin.

9. Publication policy

   The complete run of data in the tables of this bulletin are also available to view and download in other electronic formats free of charge using the Office for National Statistics Datasets and Reference Table service (if you want the data associated with this bulletin click into Download data in this release option). Users can download the complete release in a choice of zipped formats or view and download their own selections of individual series.

   Details of the policy governing the release of new data are available from the Media Relations Office. A list of the names of those given pre-publication access to the contents of this bulletin is available on the Producer Price Index: Pre-Release Access List. (21.9 Kb Pdf)

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11. Code of Practice

    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 and released according to the arrangements approved by the UK Statistics Authority.

    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

    Next publication: 16 April 2013

    Media contact:

    Tel:  Luke Croydon or David Bradbury on +44 (0)845 6041858

    Emergency on-call: +44 (0)7867 906553

    E-mail:  media.relations@ons.gsi.gov.uk

    Statistical contact:

    Tel:  Liam Murray on +44 (0)1633 455811

    E-mail: ppi@ons.gsi.gov.uk

    PPI/SPPI Enquiries:

    Tel +44 (0)1633 455901 or +44 (0)1633 455941

12. 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

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

    Designation can be broadly interpreted to mean that the statistics:

    • meet identified user needs;
    • are well explained and readily accessible;
    • are produced according to sound methods; and
    • are managed impartially and objectively in the public interest.

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

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