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Statistical bulletin: Producer Price Inflation, January 2014 This product is designated as National Statistics

Released: 18 February 2014 Download PDF

Key points

  • The output price index for goods produced by UK manufacturers (factory gate prices), rose 0.9% in the year to January 2014, compared with a rise of 1.0% in the year to December 2013.
  • Factory gate prices rose 0.3% between December 2013 and January 2014, compared with no movement between November and December.
  • Core factory gate prices, which exclude the more volatile food, beverages, tobacco and petroleum products, rose 1.2% in the year to January 2014, compared with a rise of 1.0% in the year to December 2013.
  • The overall price of materials and fuels bought by UK manufacturers for processing (total input prices), fell 3.1% in the year to January 2014, compared with a fall of 1.0% in the year to December 2013.
  • Total input prices fell 0.9% between December 2013 and January 2014, compared with a rise of 0.2% between November and December.

What is Producer Price Inflation (PPI)?

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.

The factory gate price (the output price) is the price of goods sold by UK manufacturers, and is the actual cost of manufacturing goods before any additional charges are added which would give a profit. It includes costs such as labour, raw materials and energy, as well as costs such as interest on loans, site/building maintenance or rent.

Core factory gate inflation excludes price movements from food, beverages, petroleum and tobacco & alcohol products, which tend to have volatile price movements. It should give a better indication of the underlying output inflation rates.

The input price is the cost of goods bought by UK manufacturers for the use in manufacturing, such as the actual cost of materials and fuels bought for processing.

Core input inflation strips out purchases from the more volatile food, beverage, tobacco and petroleum industries to give an indication of the underlying input inflation pressures facing the UK manufacturing sector.

Output prices: summary

Factory gate inflation stands at 0.9%. Output inflation has slowed steadily from autumn 2011, falling from an annual rate of 5.3% in September 2011 to 1.3% in July 2012.  Output inflation remained steady at around 1.5% before dropping again to 1.0% in April 2013. Output inflation increased slightly during summer 2013 but has been reducing since July 2013. Core factory gate inflation, stripping out the more volatile food, beverages, tobacco and petroleum products, showed a similar pattern, running at a lower rate and showing a smaller degree of volatility (Figure A). 

Looking at the latest estimates (Table A), movements in factory gate prices over the 12 months to January 2014 were as follows:

  • Factory gate prices rose 0.9%, compared with a rise of 1.0% last month.

  • Core factory gate prices rose 1.2%, compared with a rise of 1.0% last month.

  • Factory gate inflation excluding excise duty stood at 1.0%, compared with a rise of 1.1% in the year to December 2013.

Between December 2013 and January 2014:

  • Factory gate prices rose 0.3%, compared with no movement between November and December. The main upward contribution to the monthly price was from clothing, textiles & leather products, partially offset by a fall in petroleum products  (see Table C and Figure C).

  • Core factory gate prices rose 0.5%, compared with a rise of 0.1% last month.

Table A: Output prices (home sales)

Percentage change (not seasonally adjusted)
      All manufactured products Excluding food, beverages, tobacco & petroleum All manufactured products excluding duty
      1 month 12 months 1 month 12 months 1 month 12 months
2013   Aug 0.1 1.5 0.0 0.9 0.1 1.7
    Sep 0.0 1.2 0.0 0.8 0.0 1.4
    Oct -0.3 0.8 0.0 0.8 -0.2 1.1
    Nov -0.2 0.8 -0.1 0.7 -0.1 1.0
    Dec  0.0 1.0  0.1  1.0  -0.1  1.1
2014   Jan 0.3 0.9 0.5 1.2 0.3 1.0

Table source: Office for National Statistics

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Figure A: Output prices

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 January 2014

Product group Percentage change
Food products 1.8
Tobacco & alcohol 2.1
Clothing, textiles & leather 2.2
Paper & printing 1.0
Petroleum products -3.0
Chemicals & pharmaceuticals -1.7
Metal, machinery & equipment 1.4
Computer, electrical & optical 1.9
Transport equipment 0.4
Other manufactured products 1.3
   
All manufacturing 0.9

Table source: Office for National Statistics

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Figure B: Contribution to 12 months growth rate (0.9%), January 2014

Figure B: Contribution to 12 months growth rate (0.9%), January 2014
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 January 2014

Product group Percentage change
Food products 0.3
Tobacco & alcohol -0.1
Clothing, textiles & leather 1.4
Paper & printing 0.1
Petroleum products -1.4
Chemicals & pharmaceuticals 0.6
Metal, machinery & equipment 0.3
Computer, electrical & optical 0.0
Transport equipment 0.1
Other manufactured products 0.5
   
All manufacturing 0.3

Table source: Office for National Statistics

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Figure C: Contribution to 1 month growth rate (0.3%), January 2014

Figure C: Contribution to 1 month growth rate (0.3%), January 2014
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 0.9% in the year to January 2014, compared with a rise of 1.0% in the year to December 2013. The main contribution to the annual rate came from food products and clothing, textiles & leather products. The increases were partially offset by decreases in the price of petroleum products and chemicals & pharmaceutical products.  

The price index rose 0.3% between December 2013 and January 2014, compared with no movement between November and December. The main upward movement in the month was in clothing, textiles & leather products, which was partially offset by petroleum products (Table C). 

Food product prices rose 1.8% in the year to January 2014, compared with a rise of 2.0% in the year to December 2013. The index rose 0.3% between December 2013 and January 2014, compared with a fall of 0.4% between November and December. The main contribution to the rise in prices seen this month is due to an increase in the price of dairy products, which rose by 1.5%.

Clothing, textiles & leather product prices rose 2.2% in the year to January 2014, compared with a rise of 0.8% in the year to December 2013. The index rose 1.4% between December 2013 and January 2014, compared with a rise of 0.1% between November and December. The main contribution to the increase in prices this month is due to womens' or girls’ dresses and skirts.  

Petroleum product prices fell 3.0% in the year to January 2014, compared with a fall of 0.9% in the year to December 2013. The index fell 1.4% between December 2013 and January 2014, compared with a rise of 0.6% between November and December. The decrease this month was caused mainly by the fall in the prices of diesel and gas oil (1.7%). 

Chemicals and pharmaceutical prices decreased 1.7% in the year to January 2014, compared with a fall of 2.2% in the year to December 2013. The index rose 0.6% between December 2013 and January 2014, compared with a rise of 0.2% between November and December. The main contribution to the rise in prices for this month is due to 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 1.2% in the year to January 2014. Between December 2013 and January 2014, core factory gate inflation rose 0.5%.

Input prices: summary

Since autumn 2011 price inflation of materials and fuels purchased by the UK manufacturing industry (input prices) fell quite rapidly from an annual inflation of around 16% 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 latest data (Table D), the key movements in the year to January 2014 were as follows:

Between December 2013 and January 2014:

  • The total input price index fell 0.9% but rose 0.2% between November and December. The main downward pressure came from crude oil (Table F).
  • In seasonally adjusted terms, (see Table D) the input price index for the manufacturing industry excluding the food, beverages, tobacco & petroleum industries fell 0.6% between December 2013 and January 2014, compared with a fall of 0.5% last month. 

Table D: Input prices

Percentage change
       Materials & fuels purchased  Excluding food, beverages, tobacco & petroleum industries
       1 month  12 months  1 month  12 month  1 month
       (NSA)1  (NSA)1  (NSA)1  (NSA)1  (SA)2
2013   Aug -1.0 1.8 -0.8 1.4 -0.5
  Sep  -0.9 1.0 -0.9 0.4 -0.8
    Oct -0.4 0.0 0.2 -0.2 -0.2
    Nov -0.6 -0.9 -0.3 -1.0 -0.6
    Dec 0.2 -1.0 -0.3 -1.4 -0.5
2014   Jan -0.9 -3.1 -0.4 -2.8 -0.6
       

Table source: Office for National Statistics

Table notes:

  1. NSA: Not Seasonally Adjusted

  2. SA: Seasonally Adjusted

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

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 (CCL) which was introduced in April 2001.
  2. These indices include the Aggregates Levy which was introduced in April 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 January 2014

Product group Percentage change
Fuel incl. CCL 6.0
Crude oil  -6.7
Home food materials -4.7
Imported food materials 6.4
Other home-prod. materials 1.6
Imported metals -11.7
Imported chemicals -1.5
Imported parts & equipment -4.9
Other imported materials -1.9
   
All manufacturing -3.1

Table source: Office for National Statistics

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Figure E: Contribution to 12 months growth rate (-3.1%), January 2014

Figure E: Contribution to 12 months growth rate (-3.1%), January 2014
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 January 2014

Product group Percentage change
Fuel incl. CCL -0.2
Crude oil  -3.1
Home food materials 0.3
Imported food materials -0.5
Other home-prod. materials 0.3
Imported metals 0.4
Imported chemicals -0.5
Imported parts & equipment -0.6
Other imported materials -0.2
 
All manufacturing -0.9

Table source: Office for National Statistics

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Figure F: Contribution to 1 month growth rate (-0.9%), January 2014

Figure F: Contribution to 1 month growth rate (-0.9%), January 2014
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, fell 3.1% in the year to January 2014, compared with a fall of 1.0% in the year to December 2013. This decrease was caused mainly by a reduction in crude oil prices, which fell 6.7% in the year to January 2014, and imported metal prices, which fell 11.7% over the last year. However, these falls were partially offset by rises in the price of fuels and imported food, which increased by 6.0% and 6.4% respectively.   

The input index fell 0.9% between December 2013 and January 2014, compared with a rise of 0.2% between November and December. This was caused mainly by a fall in the price of crude oil (see Table F and Figure F).

The index for crude oil fell 6.7% in the year to January 2014, down from a fall of 0.3% in the year to December 2013. The index fell 3.1% between December 2013 and January 2014, down from a rise of 1.7% between November and December (Tables E and F). This decrease was caused by imported crude oil.

The index for imported metals fell 11.7% in the year to January 2014, down from a fall of 10.1% in the year to December 2013.  The index rose 0.4% between December 2013 and January 2014, up from a fall of 2.6% between November and December. The increase was caused mainly by a rise in the prices of imported platinum, which increased by 3.3% between December 2013 and January 2014. This is the first monthly increase for the index since February 2013, which rose 4.5%.  

Fuel prices rose 6.0% in the year to January 2014, up from a rise of 5.6% in the year to December 2013. The index fell 0.2% between December 2013 and January 2014, down from a rise of 2.8% between November and December. The main downward contribution to the decrease on the month came from domestic coal.

Prices for imported food rose 6.4% in the year to January 2014, compared with an increase of 7.1% in the year to December 2013. The index fell 0.5% between December 2013 and January 2014, the same movement between November and December. The main contributor to this decrease was the price of imported oils and fats.

Home produced food prices fell 4.7% in the year to January 2014, up from a fall of 5.8% in the year to December 2013. The index rose 0.3% between December 2013 and January 2014, compared with a fall of 0.7% between November and December. The main cause of the rise came from an increase in the price of home produced fish.

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

The core input price index, in seasonally adjusted terms, fell 0.6% between December 2013 and January 2014. The unadjusted index fell 0.4% between December 2013 and January 2014, and fell 2.8% in the year to January 2014.

Revisions

For this bulletin reference tables 8R and 9R (247 Kb Excel sheet) highlight revisions to movements in price indices previously published in last month’s statistical bulletin.  The revisions usually presented in these tables are generally 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 have small revisions. These revisions were mainly caused by late data.

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

Percentages
     Revisions between first publication and estimates twelve months later
  Value in last period Average over the last 5 years  Average over the last 5 years without regard to sign (average absolute revision)
Total output: 12 months 0.9 -0.13 0.20
Total output: 1 month 0.3 0.02 0.09
Total input: 12 months -3.1 0.34* 0.60*
Total input: 1 month -0.9 0.14* 0.37*

Table source: Office for National Statistics

Table notes:

  1. * Statistically significant.

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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 December 2007 and December 2012 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 2013 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) (2.01 Mb Excel sheet)

Revision triangle for total output (1 month) (1.98 Mb Excel sheet)

Revision triangle for total input (12 months) (2.03 Mb Excel sheet)

Revision triangle for total input (1 month) (2.01 Mb Excel sheet)

Background notes

  1. How are we doing?

    We are constantly aiming to improve this release and its associated commentary. We would welcome any feedback you might have, and would be particularly interested in knowing how you make use of these data to inform your work. Please contact us via email: ppi@ons.gsi.gov.uk

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

    As previously announced, ONS has taken forward the rebasing of the PPI onto a 2010=100 basis. The first published data using 2010=100 was released in November 2013. An article describing the results of this assessment was also published on 12 November 2013.  If you have any questions or queries regarding the impact of rebasing on PPI data, please contact PPI operations.

  3. Quality and Methodology Information

    A Quality and Methodology Information (QMI) (95.6 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 (247 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) (247 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.

    Prices

    All characteristics that determine the price of the products - including quantity of units sold, transport provided, rebates, service conditions, guarantee conditions and destination - are taken into account.

    The appropriate price is the basic price, which excludes VAT and similar deductible taxes directly linked to turnover, as well as all duties and taxes on the goods and services invoiced by the unit, whereas any subsidies on products received by the producer are added.

    Transport costs are included but only as part of the product specification.

    An actual transaction price and not a list price is given to show the true development of price movements.

    The output price index takes into account the quality changes in products.

    The price collected in period t refers to orders booked during period t (time of the order), not when the commodities leave the factory gates.

    For output prices on the non-domestic market, the price is calculated at national frontiers, FOB (free on board). This means that the seller pays for transportation of the goods to the port of shipment, plus loading costs, and the buyer pays freight, insurance, unloading costs and transportation from the port of destination to the factory.

  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.

  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.

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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.

    Office email: media.relations@ons.gsi.gov.uk

    Next publication: 25 March 2014

    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:  Kat Pegler on +44 (0)1633 456468

    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.

Statistical contacts

Name Phone Department Email
Kat Pegler +44 (0)1633 456468 Business Prices, ONS ppi@ons.gsi.gov.uk
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