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 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) reflects the total price received by the manufacturer for a particular product. It includes costs such as labour, raw materials and energy, as well as interest on loans, site/building maintenance or rent.
Core factory gate inflation excludes price movements from food, beverages, tobacco & alcohol, and petroleum 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 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 & alcohol, and petroleum industries to give an indication of the underlying input inflation pressures facing the UK manufacturing sector.
Factory gate inflation fell 0.1% in the year to July, down from a rise of 0.3% last month. This is the first fall in annual output inflation since October 2009 when it fell 0.1%.
The rate of both total output and core inflation has generally been reducing since Autumn 2011 when output inflation reached its post economic downturn high of 5.3% in September 2011. During this period, core factory gate inflation has tended to run at a lower rate and show a smaller degree of volatility than total output. However, since November 2013 core output price inflation has been running at a slightly higher rate, a result of the downward pressures from petroleum which is excluded from the core measure of inflation (Figure A).
Looking at the latest estimates (Table A), movements in factory gate prices over the 12 months to July were as follows:
Factory gate prices fell 0.1%, compared with a rise of 0.3% last month.
Core factory gate prices rose 0.9%, compared with a rise of 1.0% month.
Factory gate inflation excluding excise duty stood at 0.2%, compared with 0.3% last month.
Between June and July:
Factory gate prices fell 0.1%, unchanged since May.
Core factory gate prices saw no movement, unchanged since April.
|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|
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.
|Product group||Percentage change|
|Tobacco & alcohol||3.4|
|Clothing, textiles & leather||2.5|
|Paper & printing||0.8|
|Chemicals & pharmaceuticals||-0.2|
|Metal, machinery & equipment||0.3|
|Computer, electrical & optical||0.2|
|Other manufactured products||0.5|
|Product group||Percentage change|
|Tobacco & alcohol||0.7|
|Clothing, textiles & leather||0.1|
|Paper & printing||-0.1|
|Chemicals & pharmaceuticals||-0.1|
|Metal, machinery & equipment||0.0|
|Computer, electrical & optical||0.1|
|Other manufactured products||0.0|
Factory gate prices fell 0.1% in the year to July, compared with a rise of 0.3% in the year to June. The main positive contributions to the annual rate came from tobacco & alcohol products and clothing, textiles & leather products. However, these increases were offset by a decrease in the prices of petroleum and food products (Figure B).
The price index fell 0.1% between June and July, unchanged since May. The main downward contributions in the month came from food and petroleum products, with tobacco & alcohol products providing the main upward contribution (Figure C).
Petroleum product prices fell 6.1% in the year to July, compared with a fall of 3.5% in the year to June. Between June and July petroleum product prices fell 0.4%, compared with a fall of 0.1% between May and June. The annual and monthly decrease was caused by a fall in the price of diesel and gas oil.
Tobacco & alcohol product prices rose 3.4% in the year to July, compared with a rise of 2.6% in the year to June. The index rose 0.7% between June and July, compared with no movement between May and June. The main upward contribution came from tobacco products, which rose 8.9% in the year to July and 1.5% between June and July.
Clothing, textiles & leather product prices rose 2.5% in the year to July, compared with a rise of 2.4% in the year to June. The annual contribution came from a rise in prices for wearing apparel, which rose 3.8%.
Food product prices fell 1.5% in the year to July, down from a fall of 1.0% in the year to June. This was mainly due to a fall in the price of prepared animal feeds which fell by 5.1% in the year to July. Food prices fell 0.3% between June and July, up from a fall of 0.5% between May and June. The main downward contribution to the monthly rate came from meat of bovine animals, fresh or chilled, which fell 3.6%.
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 0.9% in the year to July, but saw no movement between June and July.
Since autumn 2011 the inflation price of materials and fuels purchased by UK manufacturing industry (input prices), fell quite rapidly from 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). Input price inflation showed a steady but fairly slow increase from July 2012 to July 2013, when it reached 4.7%. From July 2013 the rate of inflation started to fall with prices deflating by 6.3% in March 2014. Currently, input prices are falling by 7.3%, the highest rate of deflation since September 2009 when prices were falling by 8.9%. Over this period core input inflation (purchases by manufacturing industries other than the more volatile food, beverage, tobacco and petroleum industries) fell at similar levels.
Looking at the latest data (Table D), the key movements in the year to July were as follows:
The total input price index fell 7.3%, compared with a fall of 4.5% in the year to June.
The core input price index saw a fall of 5.2%, compared with a fall of 3.5% in the year to June.
The price of imported materials as a whole (including crude oil) fell 7.3%, down from a fall of 3.7% last month. (Table 7 Input prices: detailed by commodity (not seasonally adjusted) - SIC 2007) (241.5 Kb Excel sheet)
Between June and July:
|Materials & fuels purchased||Excluding food, beverages, tobacco & petroleum industries|
|1 month||12 months||1 month||12 month||1 month|
NSA: Not Seasonally Adjusted
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.
|Product group||Percentage change|
|Fuel incl. CCL||-5.7|
|Home food materials||-8.2|
|Imported food materials||-7.4|
|Other home-prod. materials||6.0|
|Imported parts & equipment||-4.4|
|Other imported materials||-7.5|
|Product group||Percentage change|
|Fuel incl. CCL||-1.1|
|Home food materials||-0.7|
|Imported food materials||-0.2|
|Other home-prod. materials||0.1|
|Imported parts & equipment||-0.5|
|Other imported materials||-1.5|
The overall input index for all manufacturing (the price of materials and fuels purchased by manufacturers) fell 7.3% in the year to July, compared with a fall of 4.5% in the year to June. All indices decreased except for other home produced materials, which rose 6.0%, but the main downward contributions to the index came from crude oil (down 12.6% in the year to July) and home produced food (down 8.2% in the year to July).
The input index fell 1.6% between June and July, down from a fall of 0.9% from last month. This was caused mainly by a fall in the price of crude oil, which fell by 5.5% between June and July (see Table F and Figure F).
Crude oil prices fell sharply by 12.6% in the year to July, compared with a fall of 1.3% in the year to June. The monthly index fell 5.5% between June and July, compared with a rise of 1.2% between May and June. The annual and monthly downward contribution came from imported crude petroleum. Crude oil prices fell in July as a result of an increase in supply, mainly due to the restored supply from Libya.
Home produced food prices fell 8.2% in the year to July, up from a fall of 13.1% last month. The decrease for the annual prices was a result of a reduction in the price of home produced root crops, a result of a continued fall in the price of new potatoes as the season progresses.
Home produced materials was the only index to show a rise in prices in the year to July increasing by 6.0%, compared with a rise of 7.1% in the year to June. The main upward contribution came from gravel, sands, clays and kaolin.
The core input price index, in seasonally adjusted terms, fell 0.3% between June and July. The unadjusted index fell 0.8% between June and July, down from last month when it fell 0.4%.
For this bulletin reference tables 8R and 9R (241.5 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. For more information about the ONS revisions policy see the ONS website.
|Revisions between first publication and estimates 12 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||-0.1||-0.16||0.22|
|Total output: 1 month||-0.1||0.00||0.08|
|Total input: 12 months||-7.3||0.12||0.48|
|Total input: 1 month||-1.6||0.05||0.34|
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 June 2013, 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 June 2014, and the calculations behind the averages in the table, are available in the reference table area of the ONS website:
Changing the way we publish Producer Price datasets
Currently ONS publish two Producer Price datasets called Aerospace and Electronic Cost Indices (MM19) (142.5 Kb Excel sheet) and Producer Price Indices (MM22). (707.5 Kb Excel sheet) These are usually found on separate webpages. To make access easier ONS will be moving all related PPI datasets to the Producer Price Index webpage, which holds the statistical bulletin reference tables. This will take effect with the next publication due to be released on 16 September 2014.
Analysis of Producer Price Indices using Standard Errors
We have published an article on the analysis of Producer Price Indices (PPI) using standard errors on 17 June 2014. The article presented the calculated standard errors of the PPI during the period February 2013 to January 2014, for both month-on-month and 12-month growth.
How are we doing?
We are constantly aiming to improve this release and its associated commentary. We welcome any feedback and are particularly interested in knowing how you use these data to inform your work. Please email us: firstname.lastname@example.org.
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.
Finding PPI data
All of the data included in this Statistical Bulletin, alongside data for the full range of PPIs, is available in the associated Reference Tables (241.5 Kb Excel sheet) or can be downloaded from the Time Series Dataset for PPI. There are PPI records (102 Kb Excel sheet) available which gives the higher, lower and equal to movements for each index. Each PPI has two unique identifiers: a 10 digit index number, which relates to the Standard Industrial Classification code appropriate to the index; and a 4-character alpha-numeric code, which can be used to find series when using the Time Series Dataset for PPI.
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.
The UK is required to compile and deliver the output PPI to Eurostat under the Short-Term Statistics Regulation. As a result, all EU countries must produce equivalent series on a comparable basis. Eurostat produce European aggregates for total domestic and export PPI on a gross sector basis and publish a monthly press release. Detailed PPI figures for the UK and the rest of the EU are also published on Eurostat's website.
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 (241.5 Kb Excel sheet) are on a gross basis; 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) (241.5 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.
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.
Definitions and Explanations
Definitions found within the main statistical bulletin are listed here:
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.
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 and different activity near particular events, such as bank holidays and leap years.
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. 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.
Standard errors are used to show the difference between an estimated value and the true population value, and are one way of measuring the quality of a price index.
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.
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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Code of Practice
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|Kat Pegler||+44 (0)1633 456468||Business Prices, ONSemail@example.com|