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Statistical bulletin: Services Producer Price Indices, Quarter 4 2013 This product is designated as National Statistics

Released: 26 February 2014 Download PDF

Key Points

  • The Services Producer Price Index (SPPI) has been rebased from 2005=100 to 2010=100. This is the first month that the SPPIs have been released on this basis. All of the figures in this Statistical Bulletin reflect this change.
  • The aggregate SPPI rose 1.4% in the year to quarter 4 of 2013, compared with a rise of 0.9% in quarter 3 of 2013.
  • The aggregate SPPI rose 0.8% between quarter 3 and quarter 4 of 2013, compared with a rise of 0.5% last quarter.

What is Services Producer Price Inflation?

The Services Producer Price Index (SPPI), is constructed from a statutory quarterly survey which measures changes in the price received for selected services provided by UK businesses to other UK businesses and Government. Individual SPPIs are available which provide information on price change for a selection of service industries. These individual price indices are also aggregated together to create a service industry SPPI with limited coverage (it does not provide full coverage of the 'service sector').

Coverage of SPPI

ONS does not currently produce an SPPI for every industry in the service sector and so the aggregate SPPI is a partial, best estimate, of the overall inflation to UK businesses in the service sector. As resources allow, ONS will continue to review the existing SPPIs and expand coverage through developing SPPIs for new industries. As such, the aggregate SPPI will change composition from time to time but will always remain ONS' best estimate of inflation in the UK service sector. The fact that coverage may change over time should be considered by users when deciding which indices best meet their needs.

Newly developed SPPIs

A development project to increase the industrial coverage of the SPPI, took place between 2009 and 2012 and has resulted in the development of eight new SPPIs. These are:

• Accountancy services;
• Legal services;
• Architectural services;
• Engineering services;
• Cargo handling services;
• Advertising services;
• Business Management Consultancy;
• Storage and Warehousing.

Since their development, these indices have been published as experimental series in a separate article, available here. These indices will no longer be published separately but instead are included in this release and now make up part of the aggregate SPPI. This will change the composition of the aggregate SPPI, increasing the coverage of the service industry and improving the measure. Further information about the impact of adding these new indices to the aggregate can be found in the section 'Impact of newly developed indices' in this Statistical Bulletin.

All of the statistics contained in this release are official statistics but not all of them can be currently be labelled as National Statistics since these newly developed series have not yet undergone a full assessment against the Code of Practice for Official Statistics by the UK Statistics Authority. All statistics in this Statistical Bulletin that are not currently National Statistics are marked using footnotes in the relevant figures and tables.

Summary

In quarter 4 of 2013, movements in the aggregate Services Producer Price Index (SPPI) were as follows:

  • Annual inflation rose 1.4%, compared with a rise of 0.9% in quarter 3 of 2013. 

  • The main upward contribution to the annual rate came from Professional, Scientific & Technical Activities, which increased by 2.1% in the year to quarter 4 of 2013.

  • Between quarter 3 and quarter 4 of 2013 the aggregate SPPI rose 0.8%, compared with a rise of 0.5% between quarter 2 and quarter 3.

  • The main contribution to the quarterly rate came from Accommodation & Food, Professional, Scientific & Technical Activities and Administrative & Support Services, which rose by 6.1%, 0.8% and 1.4% respectively.

Annual inflation of the aggregate SPPI currently stands at 1.4% and has remained at around 1% since quarter 2 of 2010. Between 2004 and the first half of 2008, prices of the services captured by the aggregate SPPI rose steadily from an annual rate of 1.1% in quarter 1 of 2004, to a peak of 3.6% during quarter 1 to quarter 3 of 2008. Annual inflation dropped off quickly at the end of 2008 with the aggregate SPPI deflating (prices falling below the level of the same quarter a year earlier) at a rate of 1.5% by quarter 3 of 2009. The timing of this fall in service prices corresponds with the economic downturn and subsequent recession experienced in the UK. Service prices recovered, although not to their previous levels, by quarter 2 of 2010.

Table A: Aggregate Services Producer Price Index

United Kingdom

Percentage change (not seasonally adjusted)
    Year   Quarter
2011 Q4 0.8    0.3
 
2012 Q1  1.4   0.6
  Q2 0.9   0.5
  Q3 1.5   0.1
  Q4  1.5    0.3
         
2013 Q1 1.3   0.4
  Q2  0.5   -0.3
  Q3 0.9   0.5
  Q4  1.4   0.8

Table source: Office for National Statistics

Table notes:

  1. The aggregate SPPI is calculated on a gross sector basis

  2. The aggregate SPPI is an aggregate of the individual industry-level SPPIs (excluding Financial Intermediation) published in the SPPI Statistical Bulletin. It does not provide full coverage of the service sector.

  3. Not all of the industry-level SPPIs used to construct the aggregate SPPI are National Statistics.

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Figure A: Aggregate SPPI compared with Consumer Price Inflation for Services

United Kingdom

Figure A: Aggregate SPPI compared with Consumer Price Inflation for Services
Source: Services Producer Price Index (SPPI) - Office for National Statistics

Notes:

  1. The aggregate SPPI is calculated on a gross sector basis
  2. The aggregate SPPI is an aggregate of the individual industry-level SPPIs (excluding Financial Intermediation) published in the SPPI Statistical Bulletin. It does not provide full coverage of the service sector
  3. Not all of the industry-level SPPIs used to construct the aggregate SPPI are National Statistics

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Annual Inflation

The aggregate Services Producer Price Index (SPPI) increased by 1.4% in the year to quarter 4 of 2013, compared with a rise of 0.9% in the year to quarter 3.

All of the section-level indices which feed into the aggregate SPPI showed an increase in prices on the year but the main contribution came from Professional, Scientific & Technical Activities, which increased by 2.1% in the year to quarter 4 of 2013, up from a rise of 1.2% in the year to quarter 3 of 2013 (Table B and Figure B).

Table B: Annual growth rate to quarter 4 2013 (percentage change, latest quarter on corresponding quarter of previous year)

United Kingdom

Percentage Change
Water Supply,Sewerage & Waste Management 0.2
Repair & Maintenance of Motor Vehicles 2.8
Transportation & Storage 0.9
Accommodation & Food 2.7
Information & Communication 0.3
Real Estate Activities 0.5
Professional, Scientific & Technical Activities 2.1
Administrative & Support Services 1.0
Education 2.7
Other Services 1.4
Aggregate SPPI 1.4

Table source: Office for National Statistics

Table notes:

  1. The section-level SPPIs are an aggregate of individual industry-level SPPIs (excluding Financial Intermediation) published in the SPPI Statistical Bulletin. They do not provide full coverage of the sections listed.
  2. Not all of the industry-level SPPIs used to construct the section-level SPPIs are National Statistics.

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Figure B: Contribution to annual growth rate (1.4%), quarter 4 2013

United Kingdom

Figure B: Contribution to annual growth rate (1.4%), quarter 4 2013
Source: Services Producer Price Index (SPPI) - Office for National Statistics

Notes:

  1. The section-level SPPIs are an aggregate of individual industry-level SPPIs (excluding Financial Intermediation) published in the SPPI Statistical Bulletin. They do no provide full coverage of the sections listed.
  2. Not all of the industry-level SPPIs used to construct the section-level SPPIs are National Statistics

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The main contribution to the annual rate of inflation for Professional, Scientific & Technical activities came from an increase in prices for Engineering & Related Services. For Engineering services, prices rose by 2.9% in the year to quarter 4 2013, up from an increase of 2.4% in the year to quarter 3 (Figure C).

Figure C: Services Producer Price Index for Engineering and Related Services, quarter 4 2013

United Kingdom

Figure C: Services Producer Price Index for Engineering and Related Services, quarter 4 2013
Source: Services Producer Price Index (SPPI) - Office for National Statistics

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Quarterly Inflation

The aggregate SPPI increased by 0.8% between quarter 3 and quarter 4 of 2013, up from a rise of 0.5% between quarter 2 and quarter 3 of 2013.

With the exception of Transportation & Storage, all section-level indices that feed into the aggregate SPPI showed price increases. The main contributions to the quarterly rate came from price rises in Accommodation & Food, Professional, Scientific & Technical Activities and Administrative & Support Services, which increased by 6.1%, 0.8% and 1.4% respectively (Table C and Figure D).

Table C: Quarterly growth rate to quarter 4 2013 (percentage change, latest quarter on previous quarter)

United Kingdom

Percentage change
Water Supply,Sewerage & Waste Management 0.3
Repair & Maintenance of Motor Vehicles 0.8
Transportation & Storage -0.3
Accomodation & Food 6.1
Information & Communication 0.1
Real Estate Activities 0.4
Professional, Scientific & Technical Activities 0.8
Administrative & Support Services 1.4
Education 0.0
Other Services 0.0
Aggregate SPPI  0.8

Table source: Office for National Statistics

Table notes:

  1. The section-level SPPIs are an aggregate of the individual industry-level SPPIs (excluding Financial Intermediation) published in the SPPI Statistical Bulletin. They do not provide full coverage of the sections listed.
  2. Not all of the industry-level SPPIs used to construct the section-level SPPIs are National Statistics.

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Figure D: Contribution to quarterly growth rate (0.8%), quarter 4 2013

United Kingdom

Figure D: Contribution to quarterly growth rate (0.8%), quarter 4 2013
Source: Services Producer Price Index (SPPI) - Office for National Statistics

Notes:

  1. The section-level SPPIs are an aggregate of the individual industry-level SPPIs (excluding Financial Intermediation) published in the SPPI Statistical Bulletin. They do not provided full coverage of the sections listed.
  2. Not all of the industry-level SPPIs used to construct the section-level SPPIs are National Statistics.

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Accommodation & Food showed the greatest contribution to the aggregate SPPI quarterly rate and the greatest increase of all sections in the quarter. Accommodation & Food prices increased by 6.1% between quarter 3 and quarter 4, up from a rise of 2.6% between quarter 2 and quarter 3. This was caused mainly by an increase in Hotel prices, which increased by 9.4% between quarter 3 and quarter 4, up from an increase of 4.9% in quarter 3 (Figure E).

Professional, Scientific & Technical Activity prices showed a smaller increase of 0.8% between quarter 3 and quarter 4 of 2013, up from a rise of 0.4% between quarter 2 and quarter 3. However, due to the relatively large weight of Professional, Scientific & Technical Activities in the aggregate SPPI, this resulted in a large contribution to the quarterly rate. The increase in prices in this section was caused mainly by an increase in Advertising Services prices, which increased by 3.9% in quarter 4 of 2013, up from a 1.6% increase in quarter 3 (Figure F).

Administrative & Support prices increased by 1.4% between quarter 3 and quarter 4, compared with an increase of 0.1% last quarter. This was caused mainly by an increase in Employment Agency prices, which increased by 1.8% between quarter 3 and quarter 4, compared with a 0.1% fall in quarter 3 (Figure G).

Figure E: Services Producer Price Index for Hotels, quarter 4 2013

United Kingdom

Figure E: Services Producer Price Index for Hotels, quarter 4 2013
Source: Services Producer Price Index (SPPI) - Office for National Statistics

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Figure F: Services Producer Price Index for Advertising Services, quarter 4 2013

United Kingdom

Figure F: Services Producer Price Index for Advertising Services, quarter 4 2013
Source: Services Producer Price Index (SPPI) - Office for National Statistics

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Figure G: Services Producer Price Index for Employment Agencies, quarter 4 2013

United Kingdom

Figure G: Services Producer Price Index for Employment Agencies, quarter 4 2013
Source: Services Producer Price Index (SPPI) - Office for National Statistics

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Net Sector Aggregate

At the aggregate level, both a net and gross sector Services Producer Price Index is produced. The prices used to construct both of these indices are the same, but different weights are used to construct the net sector index compared with the gross sector (see background note 6 for further information).

Summary of Net Sector movements

In quarter 4 of 2013, movements in the net sector aggregate SPPI were as follows:

  • Annual inflation rose 1.4%, compared with a rise of 0.8% to quarter 3 of 2013.

  • Between quarter 3 and quarter 4 of 2013 the net sector aggregate SPPI rose 0.8%, compared with a rise of 0.4% between quarter 2 of 2013 and quarter 3 of 2013.

Generally, the movements of the net sector aggregate SPPI are similar to those of the gross sector index, with the net sector aggregate tending to inflate at a slightly higher rate than the gross sector index

Figure H: Aggregate SPPI (Net and Gross Sectors)

United Kingdom

Figure H: Aggregate SPPI (Net and Gross Sectors)
Source: Services Producer Price Index (SPPI) - Office for National Statistics

Notes:

  1. The aggregate SPPI is an aggregate of the individual industry-level SPPIs (excluding Financial Intermediation) published in the SPPI Statistical Bulletin. It does not provide full coverage of the service sector
  2. Not all of the industry-level SPPIs used to construct the aggregate SPPI are National Statistics.

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Impact of Newly Developed Indices

This is the first time that the eight newly developed SPPIs have been included in the Services Producer Price Inflation statistical bulletin. They now form part of the aggregate Services Producer Price Index. The impact of the inclusion of these new indices on the gross sector aggregate is shown in Table D and Figure I below.

Table D: Comparison of annual percentage change for the Aggregate SPPI

United Kingdom

Percentage change (not seasonally adjusted)
New Old Diff
 2009  Q4  -0.7    -1.0  0.3
           
2010 Q1 0.3 -0.3 0.6
Q2 1.7 0.8 0.9
Q3 1.2 0.6 0.6
Q4 1.0 0.7 0.3
2011 Q1 0.7 0.5 0.2
Q2 0.6 0.5 0.1
Q3 0.6 0.5 0.1
Q4 0.8 0.7 0.1
2012 Q1 1.4 0.8 0.6
Q2 0.9 0.3 0.6
Q3 1.5 0.6 0.9
Q4 1.5 0.8 0.7
2013 Q1 1.3 1.1 0.2
Q2 0.5 0.3 0.2
Q3 0.9 0.6 0.3
  Q4 1.4   1.1 0.3

Table notes:

  1. The aggregate SPPI is calculated on a gross sector basis
  2. The aggregate SPPI is an aggregate of the individual industry-level SPPIs (excluding Financial Intermediation). It does not provide full coverage of the service sector.

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Figure I: Comparison of the Aggregate SPPI including and excluding the newly developed indices

United Kingdom

Figure I: Comparison of the Aggregate SPPI including and excluding the newly developed indices
Source: Services Producer Price Index (SPPI) - Office for National Statistics

Notes:

  1. The aggregate SPPI is calculated on a gross sector basis.

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The addition of the newly developed SPPIs to the aggregate has resulted in the aggregate tending to inflate at a higher rate. This increase in the rate has been caused mainly by the addition of the new indices for Advertising Services, Business & Management Consultancy and Engineering & Related Services.

Between the end of 2008 and the end of 2010, the Advertising Services index showed a growth of around 11%, and the inclusion of this index in the aggregate SPPI increases the growth rate of the aggregate during this period. This level of growth in the index dropped off from the end of 2010.

From 2010 onwards, the additional growth in the aggregate SPPI is mainly attributable to the Business & Management Consultancy and Engineering & Related Services indices. The combined weight of these two indices into the aggregate is around 14% and their consistently high rates of growth from 2010 onwards increases the rate of growth seen in the aggregate.

Background notes

  1. How are we doing?

    We are constantly seeking to improve this release and welcome feedback from our users to help us achieve this. If you have any comments on the format, layout or content of this release please let us know. We would also be interested in knowing how you make use of these data to inform your work. Please contact us via email sppi@ons.gsi.gov.uk

  2. Re-assessment by the UK Statistics Authority

    SPPI is currently undergoing a routine re-assessment by the UK Statistics Authority against the Code of Practice for Official Statistics. If you have any feedback on SPPI that you would like to be considered as part of this assessment, please contact SPPI or Assessment.

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

    As previously announced, ONS has been taking forward the rebasing of PPI and SPPI onto a 2010=100 basis. This is the first time SPPI has been 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 Services 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 SPPI data, please contact SPPI.     

  4. Quality and Methodology Information  

    A Quality and Methodology Information (QMI) paper for the SPPI describes, in detail, the intended uses of the statistics presented in this Statistical Bulletin, their general quality and the methods used to produce them.

  5. Guidance for users

    The SPPI is calculated on a ‘Business to Business’ basis. This means that only transactions between UK businesses and other UK businesses or government are included. Sales made to customers outside of the UK or to members of the public are excluded.

    Index numbers shown in this Statistical Bulletin are on a gross sector basis unless otherwise stated. This means that they include transactions between UK service sector businesses and all other UK businesses and government.

    Indices relate to average prices per quarter. The full effect of a price change occuring within a quarter will only be reflected in the index for the following quarter. All index numbers exclude VAT and are not seasonally adjusted. Since SPPIs exclude VAT, they are not affected by the increase in the standard rate of VAT to 20% from 4 January 2011.

  6. Gross and Net Sector series

    All figures presented in this statistical bulletin are calculated on a gross sector basis unless otherwise stated.

    Gross Sector Output (GSO) series - calculated using weights based on sales to UK businesses and government from all transactions within the UK. This index reflects the ‘service sector’ inflation experienced by all UK businesses.

    Net Sector Output (NSO) series - calculated using weights based on sales to UK businesses and government outside of the service sector. For example, sales of legal services to a UK manufacturing company would be included, but sales to an accountancy company (another service provider) would be excluded. This index gives a measure of inflation that is specific to non-service sector businesses.

    GSO Weights - For most industries, sales from the Services Turnover Survey (STS) are used to determine their weight into the aggregate SPPI. Where STS data is unavailable, data from the Annual Business Survey is used as a proxy.  In order to make the ABS data more comparable to the STS data, an adjustment factor is applied to remove sales attributed to non-service provision. These sales values are then used to calculate the industry weights.

    NSO Weights - Net Sector weights are calculated by taking the Gross Sector sales data and adjusting them to represent only sales to businesses outside the service sector. This adjustment is made using data from the National Accounts Supply and Use Tables. These tables allow for the calculation of a ratio for each industry that approximates the proportion of sales to non-service sector businesses. This ratio is applied to the Gross Sector sales to give an approximation of the Net Sector sales. The resulting calculated sales are then used to weight the industries into the Net Sector aggregate SPPI.

  7. Data sources

    The SPPI is compiled using the results of a mandatory survey carried out under the Statistics of Trade Act (1947). To keep the burden on respondents to a minimum, alternative data sources are used to compile the indices wherever possible. Currently six SPPIs are compiled using external data sources, these data sources are

    • Property rental payments – Investment Property Databank (IPD).

    • Business telecommunications – Office of Communications (Ofcom).

    • Financial Intermediation (Banks) – Bank of England (BoE).

    • Sewerage services – Office of Water Services (Ofwat).

    • Business rail fares – Office of Rail Regulation (ORR).

    • National post parcels – Parcelforce.

  8. SPPI Coverage

    ONS does not produce an SPPI for every industry in the service sector and so the aggregate SPPI is a partial, best estimate, of the overall inflation to UK businesses from the service sector. Similarly, the indices published at Section level do not provide full coverage and are the best estimate that can be made of those particular service activities using the data available. As resources allow, ONS will continue to review the existing SPPIs and expand coverage through developing SPPIs for new industries. As such, the aggregate SPPI will change composition from time to time, but will always remain ONS’s best estimate of overall inflation to UK businesses from the service sector. The fact that coverage may change over time should be considered by users when deciding which indices best meet their needs.

  9. Revisions

    SPPI follows the ONS policy for revisions and corrections and will show significant revisions but suppress minor changes to avoid unnecessary inconvenience to users. Indices for the most recent two quarters are regarded as provisional and may be revised as later data become available.

    For this Statistical Bulletin, reference table 1R highlights revisions to movements in price indices previously published in last quarter's Statistical Bulletin. Since this is the first time that figures are published on a 2010=100 basis, these revisions not only include changes to the most recent estimates as a result of the inclusion of additional price quotes but also include the effects of rebasing. For more information about rebasing and its effect on the SPPI, please see the article Services Producer Price Index Rebasing (2010=100).

  10. European comparability

    The UK is required to produce a number of the SPPIs included in this statistical bulletin under the Short-Term Statistics Regulation . As a result, all EU countries must publish equivalent series on a comparable basis. Further information about SPPI at an EU level, and access to data for all EU countries is available here

  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. 

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  13. 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

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Kat Pegler +44 (0)1633 456468 Business Prices ppi@ons.gsi.gov.uk
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