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

Released: 15 July 2014 Download PDF

Key points

  • The annual rate of output producer price inflation remained low in June, while input prices continued to fall.
  • The output price index for goods produced by UK manufacturers (factory gate prices) rose 0.2% in the year to June, compared with a rise of 0.5% in the year to May.
  • Factory gate prices fell 0.2% between May and June, compared with a fall of 0.1% between April and May.
  • Core factory gate prices, which exclude the more volatile food, beverages, tobacco & petroleum products, rose 1.0% in the year to June, unchanged from the year to May.
  • The overall price of materials and fuels bought by UK manufacturers for processing (total input prices) fell 4.4% in the year to June, compared with a fall of 3.8% in the year to May.
  • Total input prices fell 0.8% between May and June, compared with a rise of 0.3% between April and May.

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 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 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 & alcohol, and petroleum industries to give an indication of the underlying input inflation pressures facing the UK manufacturing sector.

Output prices: summary

Factory gate inflation remained low in June. The annual rate of inflation currently stands at 0.2%, down from last month when it stood at 0.5%. Output inflation has generally been reducing since July 2013 and has remained below 1% for all of 2014 to date. Core factory gate inflation showed a similar pattern, running at a lower rate and showing a smaller degree of volatility. However, since November 2013 core output price inflation has been running at a slightly higher rate (Figure A). 

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

  • Factory gate prices rose 0.2%, compared with a rise of 0.5% last month.

  • Core factory gate prices rose 1.0%, unchanged from last month.

  • Factory gate inflation excluding excise duty stood at 0.3%, compared with 0.6% last month.

Between May and June:

  • Factory gate prices fell 0.2%, compared with a fall of 0.1% between April and May.

  • Core factory gate prices saw no movement, unchanged from last month.

Table A: Output prices (home sales)

Percentage change
      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
2014   Jan 0.3 0.9 0.5 1.2 0.3 1.0
    Feb 0.1 0.6 0.2 1.1 0.1 0.6
    Mar 0.1 0.4 0.2 1.1 0.3 0.6
    Apr 0.1 0.6 0.0 1.0 0.0 0.6
    May -0.1 0.5 0.0 1.0 -0.1 0.6
    Jun -0.2 0.2 0.0 1.0 -0.2 0.3

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 June 2014

Product group Percentage change
Food products -1.0
Tobacco & alcohol 2.3
Clothing, textiles & leather 2.3
Paper & printing 1.0
Petroleum products -3.7
Chemicals & pharmaceuticals -0.4
Metal, machinery & equipment 0.5
Computer, electrical & optical 0.2
Transport equipment 0.5
Other manufactured products 0.5
   
All manufacturing 0.2

Table source: Office for National Statistics

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Figure B: Contribution to 12 months growth rate (0.2%), June 2014

Figure B: Contribution to 12 months growth rate (0.2%), June 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 June 2014

Product group Percentage change
Food products -0.5
Tobacco & alcohol -0.3
Clothing, textiles & leather 0.5
Paper & printing 0.0
Petroleum products -0.3
Chemicals & pharmaceuticals -0.4
Metal, machinery & equipment 0.0
Computer, electrical & optical -0.1
Transport equipment -0.2
Other manufactured products -0.1
   
All manufacturing -0.2

Table source: Office for National Statistics

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Figure C: Contribution to 1 month growth rate (-0.2%), June 2014

Figure C: Contribution to 1 month growth rate (-0.2%), June 2014
Source: Index Numbers of Producer Prices (PPI): Provision of Price Information - Office for National Statistics

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Output prices: detailed commentary

Factory gate prices rose 0.2% in the year to June, down from a rise of 0.5% in the year to May (Table A and Figure A). The main positive contributions to the annual rate came from clothing, textiles & leather products and tobacco & alcohol products. These increases were largely offset by a decrease in the price of petroleum products (Figure B).

The price index fell 0.2% between May and June, compared with a fall of 0.1% between April and May (Table A and Figure A). The main downward contribution in the month came from food products with clothing, textiles & leather products providing the main upward contribution (Figure C).

Petroleum product prices fell 3.7% in the year to June, compared with a fall of 3.1% in the year to May. This is the tenth consecutive month to show a fall in the annual rate. Between May and June petroleum products prices fell 0.3%, compared with a fall of 0.2% between April and May. The annual and monthly decrease was caused by a fall in the price of diesel & gas oil.

Clothing, textiles & leather product prices rose 2.3% in the year to June, compared with a rise of 1.8% in the year to May. The main contribution came from a rise in prices for wearing apparel, which rose 3.6%. The clothing, textile & leather index rose 0.5% between May and June, compared with a fall of 0.2% last month. The monthly increase was caused by a rise in prices for workwear.

Tobacco & alcohol product prices rose 2.3% in the year to June, compared with a rise of 2.6% in the year to May. The main upward contribution came from tobacco products, which rose 7.2%.

Food product prices fell 0.5% between May and June, compared with no movement between April and May. The main downward contribution to the monthly rate came from processed and preserved potatoes, which fell by 12.3%, down significantly from an increase of 13.2% last month. These large price changes are the result of companies offering promotional discounts.

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 1.0% in the year to June, and saw no movement between May and June.

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). 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 4.4%, the eighth consecutive month to show a fall in prices. 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 (Figure D).

Looking at the latest data (Table D), the key movements in the year to June were as follows:

Between May and June:

  • The total input price index fell 0.8%, compared with a rise of 0.3% from last month (Table D).
  • In seasonally adjusted terms (see Table D), the input price index for the manufacturing industry excluding the food, beverages, tobacco and petroleum industries rose 0.1%, compared with a rise of 0.2% 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
2014   Jan -0.9 -2.9 -0.4 -2.8 -0.7
    Feb -0.5 -5.8 -0.4 -5.1 -1.0
    Mar -0.4 -6.3 0.2 -5.4 -0.3
    Apr -0.9 -5.3 -1.0 -5.0 -0.3
    May 0.3 -3.8 -0.5 -3.9 0.2
    Jun -0.8 -4.4 -0.4 -3.5 0.1
       

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 June 2014

Product group Percentage change
Fuel incl. CCL -2.7
Crude oil  -1.5
Home food materials -11.9
Imported food materials -3.6
Other home-prod. materials 7.4
Imported metals -6.2
Imported chemicals -4.5
Imported parts & equipment -3.1
Other imported materials -5.3
   
All manufacturing -4.4

Table source: Office for National Statistics

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Figure E: Contribution to 12 months growth rate (-4.4%), June 2014

Figure E: Contribution to 12 months growth rate (-4.4%), June 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 June 2014

Product group Percentage change
Fuel incl. CCL -2.7
Crude oil  0.9
Home food materials -4.9
Imported food materials -1.0
Other home-prod. materials 0.1
Imported metals 0.1
Imported chemicals -0.7
Imported parts & equipment 0.7
Other imported materials -0.3
 
All manufacturing -0.8

Table source: Office for National Statistics

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Figure F: Contribution to 1 month growth rate (-0.8%), June 2014

Figure F: Contribution to 1 month growth rate (-0.8%), June 2014
Source: Index Numbers of Producer Prices (PPI): Provision of Price Information - Office for National Statistics

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Input prices: detailed commentary

The overall input index for all manufacturing (the price of materials and fuels purchased by manufacturers fell 4.4% in the year to June, compared with a fall of 3.8% in the year to May (Table D and Figure D). All indices decreased except for other home produced materials, which rose 7.4%, but the main downward contributions to the index came from home produced food (down 11.9% in the year to June) and imported chemicals (down 4.5% in the year to June - see Table E and Figure E).

The input index fell 0.8% between May and June, compared with a rise of 0.3% last month. This was caused mainly by a fall in the price of home produced food (see Table F and Figure F).

Home-produced food prices fell by 11.9% in the year to June, down from a fall of 3.8% last month. This is the biggest annual fall since June 2009 when it fell 12.4%. The index fell 4.9% between May and June, compared with a rise of 4.1% between April and May. The decrease in both annual and monthly prices was a result of a reduction in the price of home-produced root crops, such as potatoes. The index for home produced potatoes fell substantially between May and June due to a fall in new potato prices, down from the high new season price observed in May.

Imported chemical prices fell 4.5% in the year to June, down slightly from a fall of 4.2% in the year to May. Between May and June the monthly index fell 0.7%, unchanged from last month. The annual and monthly decrease was caused by the fall in imported other organic basic chemicals.

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

The core input price index, in seasonally adjusted terms, rose 0.1% between May and June. The unadjusted index fell 0.4% between May and June, up slightly from last month which fell 0.5%.

Revisions

For this bulletin reference tables 8R and 9R (242 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 measures of output price inflation (for all manufacturing and core industries only) show no revisions, but a substantial revision has been made to the total input index provisional value for May 2014. This revision is caused mainly by the inclusion of late prices for potatoes, which were higher than expected due to the introduction of the new season prices for new potatoes. Late data for gas and imported crude oil also had an impact. For more information about the ONS revisions policy see the ONS website.

Table G: Revisions between first publication and estimates 12 months later

Percentages
     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 0.2 -0.16 0.22
Total output: 1 month -0.2 0.00 0.08
Total input: 12 months -4.4 0.21 0.52
Total input: 1 month -0.8 0.09 0.36

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 May 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 May 2014, 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) (2.13 Mb Excel sheet)

Revision triangle for total output (1 month) (2.1 Mb Excel sheet)

Revision triangle for total input (12 months) (2.14 Mb Excel sheet)

Revision triangle for total input (1 month) (2.11 Mb Excel sheet)

Background notes

  1. 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.

  2. 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.

  3. 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.

  4. 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 (242 Kb Excel sheet)   or can be downloaded from the Time Series Dataset for PPI. There are PPI records (100.5 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.

  5. 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.

  6. European Comparability

    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. 

  7. 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 (242 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) (242 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.

  8. 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.

  9. 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 and 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. 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

    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. 

  10. 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.

  11. 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.

  12. Following ONS

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  13. 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 e-mail: media.relations@ons.gsi.gov.uk.

    Next publication: 19 August 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

  14. 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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