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.
Factory gate inflation stands at 0.8% and has continued to fall from the levels witnessed earlier in the summer so that it now stands at its lowest level since October 2009. 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 October were as follows:
Factory gate prices rose 0.8%, down from a rise of 1.2% last month.
Core factory gate prices rose 0.9%, up from a rise of 0.8% last month.
Factory gate inflation excluding excise duty stood at 1.1%, compared with a rise of 1.4% in the year to September.
Between September and October:
Factory gate prices fell 0.3%, compared with no change betweeen August and September. The main downward contribution to the monthly price fall was from petroleum products. (See Table C and Figure C).
Core factory gate prices increased 0.1%, with no movement last month.
|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||2.3|
|Clothing, textiles & leather||0.5|
|Paper & printing||0.5|
|Chemicals & pharmaceuticals||-1.0|
|Metal, machinery & equipment||1.3|
|Computer, electrical & optical||0.9|
|Other manufactured products||1.2|
|Product group||Percentage change|
|Tobacco & alcohol||0.5|
|Clothing, textiles & leather||0.0|
|Paper & printing||-0.2|
|Chemicals & pharmaceuticals||0.2|
|Metal, machinery & equipment||0.1|
|Computer, electrical & optical||-0.1|
|Other manufactured products||0.0|
Factory gate prices rose 0.8% in the year to October, compared with a rise of 1.2% in the year to September. The main contributions to the annual rate came from an increase in the prices of food products which increased by 3.5% in the year to October (although this was down from an increase of 3.8% in the year to September). This was partially offset by a 4.4% decrease in the price of petroleum products.
Output prices fell 0.3% between September and October, compared with no change between August and September. The main downward contribution in the month was a 2.9% decrease in petroleum products (Table C).
Petroleum product prices fell 2.9% between September and October, compared with a fall of 0.2% between August and September. In the year to October prices fell 4.4%, down from a fall of 1.8% in the year to September. These falls were caused by a reduction in the prices of motor spirit (unleaded petrol) and diesel and gas oil. Unleaded petrol showed a 4.4% fall in the year to October and a 4.1% fall on the month, the largest price reductions since August 2009 and November 2008, respectively.
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 October. Between September and October core factory gate inflation increased 0.1%.
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 October were as follows:
The total input price index fell 0.3%, compared with a rise of 0.9% in the year to September.
The core input price index saw a fall of 0.4%, compared with a rise of 0.3% in the year to September.
The price of imported materials as a whole (including crude oil) fell 0.5%, down from a rise of 0.4% last month. (Table 7 Input prices: detailed by commodity (not seasonally adjusted) - SIC 2007). (247.5 Kb Excel sheet)
Between September and October:
In seasonally adjusted terms, (see Table D) the input price index for the manufacturing industry excluding the food, beverages, tobacco and petroleum industries fell 0.3% between September and October compared with a fall of 0.8% between August and September.
The total input price index fell 0.6% compared with a fall of 1.0% between August and September. The main downward pressure came from crude oil which fell 3.6% over the month, down from a fall of 0.8% last month (Table F).
|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||4.1|
|Home food materials||-2.0|
|Imported food materials||7.8|
|Other home-prod. materials||1.4|
|Imported parts & equipment||-1.6|
|Other imported materials||0.3|
|Product group||Percentage change|
|Fuel incl. CCL||2.4|
|Home food materials||-0.3|
|Imported food materials||2.4|
|Other home-prod. materials||0.1|
|Imported parts & equipment||0.0|
|Other imported materials||-0.1|
The overall input index for all manufacturing, that is the price of materials and fuels purchased by manufacturers, fell 0.3% in the year to October, compared with a rise of 0.9% in the year to September. This fall was caused mainly by a reduction in crude oil prices (which fell 2.1% in the year to October) and imported metal prices (which fell 7.1% over the last year). However, these falls were partially offset by increases in the price of fuels and imported food (which increased by 4.1% and 7.8% respectively).
The input index fell 0.6% between September and October, compared with a fall of 1.0% between August and September. The largest contribution to this fall came from a 3.6% reduction in the price of crude oil (see Table F and Figure F).
The index for crude oil fell 2.1% in the year to October, down from a 0.9% increase in the year to September. The index fell 3.6% between September and October, down from a fall of 0.8% between August and September (Tables E and F).
The index for imported metals fell 7.1% in the year to October, down from a fall of 5.8% in the year to September. This decrease was caused mainly by a fall in the price of imported platinum.
Fuel prices rose 4.1% in the year to October, down from a rise of 4.7% in the year to September. The main contributor to this annual increase was electricity prices, which increased by 4.9% in the year to October, up from 2.2% last month.
Prices for imported food increased by 7.8% in the year to October, compared with an increase of 5.1% in the year to September. The main contributor to this increase was imported products of agriculture and hunting (which showed a 13.8% annual increase compared with an increase of 6.4% last month) driven mainly by an increase in the price of imported grapes due to their seasonal nature.
The core input price index in seasonally adjusted terms fell 0.3% between September and October. The unadjusted index rose 0.1% between September and October but fell 0.4% in the year to October.
For this bulletin reference tables 8R and 9R 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. However, since this is the first month that figures are published on a 2010=100 basis, these revisions also include the effects of rebasing. Only revisions to the 1 month and 12 month percentage changes are shown in tables 8R and 9R, with revisions to the actual index number suppressed. This is because the index values have been re-referenced so that the index averages 100 over 2010, rather than in 2005. This causes a revision to the index value which will not relect genuine price change. For more information about rebasing and its effect on the PPI, please see the article Producer Price Index Rebasing (2010=100).
|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||0.8||-0.10||0.17|
|Total output: 1 month||-0.3||0.02||0.09|
|Total input: 12 months||-0.3||0.42*||0.67*|
|Total input: 1 month||-0.6||0.15*||0.39*|
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 October 2007 and September 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 September 2013 and the calculations behind the averages in the table are available in the reference table area of the ONS website;
From March 2013, ONS stopped producing the PPI records within the monthly statistical bulletins. These data are available separately on the ONS website (71 Kb Excel sheet) .
Article about rebasing the PPI and SPPI onto 2010=100
As previously announced, ONS has been taking forward the rebasing of the PPI onto a 2010=100 basis. This is the first month that PPI is being published on a 2010=100 basis. A parallel run has been conducted to compare 2010=100 index values with 2005=100, analysing trends in the process. This parallel run will form an assessment of the impact of rebasing. An article Producer Price Index Rebasing (2010=100) describing the results of this assessment is published alongside this release. If you have any questions or queries regarding the impact of rebasing on PPI data, please contact PPI operations.
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.
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.
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 (247.5 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) (247.5 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, 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, 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.
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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|Kat Pegler||+44 (0)1633 456468||Business Prices, ONSemail@example.com|