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Statistical bulletin: Index of Production, August 2012 This product is designated as National Statistics

Released: 09 October 2012 Download PDF

Key points

  • The seasonally adjusted Index of Production fell by 1.2 per cent in August 2012 compared with August 2011
  • The seasonally adjusted Index of Manufacturing fell by 1.2 per cent in August 2012 compared with August 2011
  • Production fell by 0.5 per cent between July 2012 and August 2012, with manufacturing falling by 1.1 per cent
  • The earliest period open for revision is July 2012

Key figures

Table 1: Percentage changes

Index number Month on the same month a year ago 3 months on the same 3 months a year ago Month on previous month 3 months on previous 3 months
  2009=100        
Production 100.2 -1.2 -1.9 -0.5 -0.1
Manufacturing 104.6 -1.2 -1.9 -1.1 -0.7

Table source: Office for National Statistics

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Supplementary analysis

The seasonally adjusted index of production fell by 1.2 per cent in August 2012 compared with August 2011. This is the 17th consecutive monthly fall on the same month a year ago.

Between July and August 2012 this index fell by 0.5 per cent, following a rise of 2.8 per cent between June and July 2012. The main contributions to the decrease between the latest two months were in the manufacturing sector, which fell by 1.1 per cent and the energy supply sector, which fell by 0.6 per cent.  These falls were partially offset by the mining and quarrying sector, which rose by 1.4 per cent, and an increase of 2.1 per cent in the water & waste management sector.

Users should be cautious when interpreting monthly growth rates as in addition to the usual volatility, one off special events such as the moving bank holidays due to the Diamond Jubilee, and the Olympics, may have impacted the series (see background note 1 and figure 1).

Manufacturing

The seasonally adjusted index of manufacturing fell by 1.2 per cent in August 2012 when compared with August 2011. Nine manufacturing sub sectors fell and four rose. For this period the largest negative contributions in manufacturing output were: the manufacture of chemicals & chemical products, which fell by 9.0 per cent, followed by the manufacture of food, beverages & tobacco, falling 3.0 per cent. Conversely, the largest increase came from the manufacture of transport equipment, which rose by 11.0 per cent.

Seasonally adjusted manufacturing output fell by 1.1 per cent in August 2012 compared with July 2012, following a rise of 3.1 per cent between June and July 2012. Ten manufacturing sub sectors fell, two rose and one remained unchanged. 

The largest contributions to the month on month fall came from the manufacture of transport equipment, which fell by 4.5 per cent, followed by the manufacture of machinery & equipment which fell by 2.5 per cent.

There is some anecdotal evidence to suggest that some businesses had longer summer closures in August 2012, or that closures were held later than in previous years so that they affected August exclusively instead of being spread across July and August. In particular this affected month on month movements in the manufacture of transport equipment industries.

Mining and quarrying  

Output of the mining & quarrying industries fell by 1.8 per cent in August 2012 compared with August 2011. This was the 23rd consecutive monthly fall on the same month a year ago. The biggest contributor to the decrease was from the extraction of oil & gas, which fell by 2.3 per cent.

Between July 2012 and August 2012 the mining and quarrying sector rose by 1.4 per cent.

Energy supply 

Energy supply output in August 2012 fell by 1.7 per cent compared with August 2011. In particular gas supply fell by 20.6 per cent over the same period. This fall was partially offset by electricity supply rising by 2.2 per cent.

Between July 2012 and August 2012 energy output supply fell by 0.6 per cent. This was a result of gas supply falling by 9.4 per cent, which was only partially offset by a 1.0 per cent rise in electricity supply.

Water & waste management

Water & waste management rose by 0.9 per cent in August 2012 when compared with August 2011.

Between July 2012 and August 2012 water & waste management output rose by 2.1 per cent. 

GDP Impact

In this release of Index of Production data the period open for revision is from July 2012. There is therefore no impact on previously released Gross Domestic Product quarterly growth rates.

Figure 1: Seasonally-adjusted production and manufacturing

Timeseries graph for Index of Production and Index of Manufacturing
Source: Office for National Statistics

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Production in detail

The Index of Production (IoP) measures the output of the production industries in the United Kingdom. Figures are adjusted for seasonal variations unless otherwise stated and the reference year is 2009 = 100. For an explanation of the terms used in this bulletin, please see the Background Notes section. Care should be taken when using the month on month growth rates due to their volatility. An assessment of the quality of the production statistics is available in the background notes. 

Table 2: Headline growth rates and contributions to the Index of Production, August 2012

Description % of production Month on same month a year ago growth (%)  Contribution to production (% points) Month on previous month growth (%) Contribution to production (% points)
IoP 100.0 -1.2 -1.18 -0.5 -0.50
Sector B 15.4 -1.8 -0.22 1.4 0.17
 Division 06 12.6 -2.3 -0.22 2.1 0.19
Sector C 67.0 -1.2 -0.87 -1.1 -0.78
Sector D 9.6 -1.7 -0.16 -0.6 -0.06
Sector E 8.0 0.9 0.08 2.1 0.17

Table source: Office for National Statistics

Table notes:

  1. Headline figures for the Index of Production are:

    Total Index of Production; Sector B Mining & quarrying; and within this Division 06 Oil & gas extraction; Sector C Manufacturing; Sector D Electricity, gas, steam & air conditioning; and Sector E Water supply, sewerage & waste management.

  2. Individual contributions may not sum to the total due to rounding.

  3. The Index of Production is made up of four sectors: Mining & quarrying; Manufacturing; Electricity, gas, steam & air conditioning; and Water supply, sewerage & waste management. The larger the percentage contribution, the more likely the impact on the overall manufacturing growth rate will be significant.

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Table 3: Manufacturing growth rates and contributions to the Index of Production, August 2012

Sub-sector Summary Description % of production Month on same month a year ago growth (%)  Contribution to production (% points) Month on previous month growth (%) Contribution to production (% points)
CA Food, beverages and tobacco 11.9 -3.0 -0.39 -0.5 -0.06
CB Textiles and leather products 2.0 -1.2 -0.02 0.6 0.01
CC Wood, paper and printing 5.5 -5.4 -0.27 -0.4 -0.02
CD Coke and petroleum 0.8 -2.8 -0.02 -2.0 -0.01
CE Chemical Products 6.1 -9.0 -0.56 -1.3 -0.07
CF Pharmaceutical Products 6.1 -7.3 -0.36 0.1 0.00
CG Rubber and plastic products 4.7 -6.8 -0.32 0.0 0.00
CH Metal products 8.6 2.0 0.18 -0.3 -0.02
CI Computer, electronic & optical  4.3 -0.1 0.00 -0.7 -0.03
CJ Electrical equipment 2.1 14.1 0.30 -0.3 -0.01
CK Machinery and equipment 4.8 0.1 0.01 -2.5 -0.16
CL Transport equipment 5.7 11.0 0.80 -4.5 -0.38
CM Other manufacturing & repair 4.5 -4.6 -0.22 -0.5 -0.02

Table source: Office for National Statistics

Table notes:

  1. Individual contributions may not sum to the total due to rounding.
  2. Manufacturing consists of 13 sub-sectors listed above with the percentage of the total they account for. The larger the percentage contribution, the more likely the impact on the overall manufacturing growth rate will be significant.

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Sector Analysis

Mining & quarrying

The seasonally adjusted index of mining & quarrying in August 2012 fell by 1.8 per cent compared with August 2011. In particular:

i) extraction of crude petroleum & natural gases decreased by 2.3 per cent

ii) the largest contributor to the 1.8 per cent month on same month a year ago fall in mining & quarrying was approximately 1.8 percentage points from the extraction of crude petroleum & natural gas. A fall in mining of coal & lignite was offset by an increase in other mining & quarrying

Manufacturing

The seasonally adjusted index of manufacturing in August 2012 fell by 1.2 per cent compared with August 2011. In detail:

i) output decreased in nine of the 13 manufacturing sub-sectors and rose in four

ii) the largest contributions to the decrease in output came from the manufacture of chemicals & chemical products, which fell by 9.0 per cent, and in the manufacture of food products, beverages & tobacco, which fell by 3.0 per cent

iii) within the manufacture of chemicals & chemical products industries, the main falls were in petrochemicals, which fell by 21.4 per cent, and other chemical products which fell by 10.4 per cent

iv) within the manufacture of food products, beverages & tobacco, the main falls were in the manufacture of alcoholic beverages, which fell by 9.3 per cent, and bakery and farinaceous products, which fell by 3.4 per cent

v) the largest contributors to the 1.2 per cent month on the same month a year ago fall in manufacturing were approximately 0.8 percentage points from chemicals & chemical products and approximately 0.6 percentage points from food products, beverages & tobacco

Energy supply

The seasonally adjusted index of the electricity, gas, steam & air conditioning supply industries in August 2012 decreased by 1.7 per cent compared with August 2011. The main movements were in:

i) manufacture of gas & gas distribution, which fell by 20.6 per cent, and contributed 3.5 percentage points to the 1.7 per cent month on the same month a year ago decrease for energy supply

ii) electric power generation, transmission & distribution, which rose by 2.2 per cent, partially offsetting the fall in manufacture of gas & gas distribution

Water supply & waste management

The seasonally adjusted index of the water supply, sewerage & waste management industries in August 2012 rose by 0.9 per cent compared with August 2011. The main movements were in:

i) waste collection, treatment & disposal activities, which increased by 4.0 per cent

ii) remediation activities and other waste management services, which increased by 2.1 per cent

iii) the largest contributor to the 0.9 per cent month on the same month a year ago increase was 1.6 percentage points from waste collection, treatment & disposal activities

Revisions

This release conforms to the standard revisions policy for National Accounts (27.8 Kb Pdf) . In this release, periods from July 2012 are open for revision.
Since last month, a number of late responses have been received to the Monthly Business Survey.  The combined impact of these late data and seasonal adjustment factors being re-estimated is that the month on month growth rate for the Index of Production for July 2012 is revised down by 0.1 percentage points.

Summary statistics

The monthly United Kingdom (UK) Index of Production (IoP) provides a timely indicator of growth in the output of production industries at constant prices. The IoP is a key economic indicator and one of the earliest short-term measures of economic activity and shares exactly the same industry coverage as the corresponding quarterly series within UK Gross Domestic Product (GDP).
The main output is a seasonally adjusted estimate of total production and broad sector groupings of mining & quarrying, manufacturing, energy and water supply & sewerage. In general, seasonally adjusted output estimates are available down to the National Accounts Supply Use Table (SUT) level.
Output estimates are calculated by taking value estimates and adjusting them to remove the impact of price changes, or by using direct volume estimates. The total IoP estimate and various breakdowns are widely used in private and public sector institutions, particularly the Bank of England and Her Majesty’s Treasury, to assist in informed policy and decision making. 
Summary statistic tables (29.5 Kb Excel sheet) showing current growth rates compared with historical information for the IoP and the Index of Manufacturing (IoM) are available as part of this release.

Background notes

  1. What's new?

    This release conforms to the standard revisions policy for National Accounts. In this release, periods from July 2012 are open for revision.

    Special Events

    An article outlining the ONS policy on special events is available.

    Queens Diamond Jubilee

    As part of the celebrations for the Queen's Diamond Jubilee there were changes to bank holidays in May and June 2012. The late May bank holiday moved into June, and there was an additional day's holiday. The change to the holidays counts as a statistical special event in line with ONS's policy on Special Events. Caution should be taken when interpreting the movements in affected outputs that involve May and June 2012.

    Olympics and Paralympics

    The Olympics took place from 27 July to 12 August 2012 (with a few events starting on 25 July). The Paralympics began on 29 August and continued to 9 September. Some estimates may be affected. 

    This commentary is intended to help users to interpret the statistics in the light of events. As explained in ONS’s Special Events policy, it is not possible to make an estimate of the effect of the Olympics and Paralympics on particular series only on the basis of information collected in those series. More details of how certain series are affected are in an Information Note, and an article explaining how various elements are reflected in the National Accounts was published in July 2012. 

    Upcoming changes

    The Index of Production release for September 2012 will have a revisions period back to July 2012. 

  2. Code of Practice for Official Statistics

    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. © Crown copyright 2012.

  3. Understanding the data

    Short guide to the Index of Production
    This Statistical Bulletin gives details of the index of output of the production industries in the United Kingdom. Index numbers of output in this Statistical Bulletin are on the base 2009=100 and are classified to the 2007 Standard Industrial Classification (SIC). The production industries, which accounted for 15.6 per cent of gross domestic product in 2009, cover mining and quarrying (Sector B), manufacturing (Sector C), gas and electric (Sector D), and water supply and sewerage (Sector E).

    Interpreting the data
    The non-seasonally adjusted series contain elements relating to the impact of the standard reporting period, moving holidays and trading day activity. When making comparisons it is recommended that users focus on seasonally adjusted estimates as these have the seasonal effects and systematic calendar related components removed. 
    Figures for the most recent months are provisional and subject to revision in light of (a) late responses to surveys and administrative sources and (b) revisions to seasonal adjustment factors which are re-estimated every month and reviewed annually (changes from the latest review are included in this release).

    Definitions and explanations
    Definitions found within the main statistical bulletin are listed here:

    • Chained volume measure
      An index number from a chain index of quantity. The index number for the reference period of the index may be set equal to 100 or to the estimated monetary value of the item in the reference period.

    • Index Number
      A measure of the average level of prices, quantities or other measured characteristics relative to their level for a defined reference period or location. It is usually expressed as a percentage.

    • 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.


    Use of the data

    The IoP is a key economic indicator and one of the earliest short-term measures of economic activity.  The main output is a seasonally adjusted estimate of total production and broad sector groupings of mining & quarrying, manufacturing, energy and water supply & sewerage. The total IoP estimate and various breakdowns are widely used in private and public sector institutions, particularly the Bank of England and Her Majesty’s Treasury, to assist in informed policy and decision making. 

  4. Methods

    An article about the Index of Production methodology (78.4 Kb Pdf)  is available on the National Statistics website.

    Composition of the data
    The Index of Production uses a variety of different data from sources which are produced on either a quarterly or monthly basis.

    Most of the series are derived using current price turnover deflated by a suitable price index. This includes the Monthly Business Survey (MBS) data; an ONS short term survey on different sectors of the economy. It is one of the main data sources used in the compilation of the Index of Production.

    Seasonal adjustment
    The index numbers in this Statistical Bulletin are all seasonally adjusted. This aids interpretation by removing annually recurring fluctuations, for example, due to holidays or other regular seasonal patterns. Unadjusted data are also available.

    Seasonal adjustment removes regular variation from a time series. Regular variation includes effects due to month lengths, different activity near particular events such as shopping activity before Christmas, and regular holidays such as the May bank holiday. Some features of the calendar are not regular each year, but are predictable if we have enough data - for example the number of certain days of the week in a month may have an effect, or the impact of the timing of Easter. As Easter changes between March and April we can estimate its effect on time series and allocate it between March and April depending on where Easter falls. Estimates of the effects of day of the week and Easter are used respectively to make trading day and Easter adjustments prior to seasonal adjustments.

    Although leap years only happen every four years, they are predictable and regular and their impact can be estimated. Hence, if there is a leap year effect, it is removed as part of regular seasonal adjustment. 

    Deflation
    It is common for the value of a group of financial transactions to be measured in several time periods. The values measured will include both the change in the volume sold and the effect of the change of prices over that year. Deflation is the process whereby the effect of price change is removed from a set of values.

    All series, unless otherwise quoted, are measured at constant basic prices. Deflators adjust the value series to take out the effect of price change to give the volume series.

  5. Quality

    Basic quality information
    A common pitfall in interpreting data is that expectations of accuracy and reliability in early estimates are often too high. Revisions are an inevitable consequence of the trade off between timeliness and accuracy. Early estimates are based on incomplete data.

    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 inherent 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 do occur.

    Summary quality report
    A summary quality report (130.1 Kb Pdf) for this Statistical Bulletin can now be found on the National Statistics website.

    The 2005 median annual growth of MPI turnover, their associated standard errors and quality bands can now be found on the National Statistics website.

    National Accounts revisions policy
    Figures for the most recent months are provisional and subject to revision in light of (a) late responses to the Monthly Business Survey MBS and (b) revisions to seasonal adjustment factors which are re-estimated every period.

    The index of production release for September 2012 will have a revisions period back to July 2012. 

    National Accounts revision policy (27.8 Kb Pdf) can be found on the National Statistics website.

    Revision triangles
    One indication of the reliability of the key indicators in this bulletin can be obtained by monitoring the size of revisions. The table below is based on the revisions which have occurred over the last five years. Please note that these indicators only report summary measures for revisions. The revised data may, themselves, be subject to sampling or other sources of error.
    The table below presents a summary of the differences between the first estimates published between September 2006 and August 2011 and the estimates published 12 months later.

    Table 4, Revisions August 2012

    Revisions between first publication and estimates produced 12 months later (percentage points)

    Growth rates Value in latest period Average   Absolute average
    Production - 3 month -0.1 -0.12 0.30
    Manufacturing - 3 month -0.7 -0.12 0.36
    Production - 1 month -0.5 -0.10 * 0.27
    Manufacturing - 1 month -1.1 -0.08 0.29

    Table source: Office for National Statistics

    Table notes:

    1. Averages shown are over the most recent five years. The absolute average is the average over the most recent five years without regard to sign.

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    Spreadsheets give revisions triangles (3.42 Mb ZIP) of estimates for all months from March 1998 through to the current month.

    A statistical test has been applied to the average revisions to find out if they are statistically significantly different from zero. An asterisk (*) indicates if a figure has been found to be statistically significant from zero.

    The table uses historical data for the most recent 60 months, comparing the estimate at first publication with the estimate as published 12 months later. The numbers which underpin these averages will include normal changes due to late data and re-seasonal adjustment, but also significant methodological changes, the most recent being the introduction of the 2007 Standard Industrial Classification in October 2011.

  6. Publication policy

    Details of the policy governing the release of new data are available from the press office. Also available is a list of those given pre-publication access to the contents of this release (74 Kb Pdf) .
    A complete set of series in the Statistical Bulletin are available to download free of charge on the Data section of the National Statistics website. Alternatively, for low-cost tailored data, call Online Services on 02075335675 or email tailored@statistics.gov.uk.

  7. Accessing data

    The complete run of data in the tables of this Statistical Bulletin is also available to view and download in electronic format free of charge using the ONS Time Series Data service. Users can download the complete bulletin in a choice of zipped formats, or view and download their own selections of individual series.

    ONS provides an analysis of past revisions in the IoP and other Statistical Bulletins (244.6 Kb Pdf) (previously known as First Release) which present time series. Details can be found on the National Statistics website.

    ONS publishes revisions triangles (65.8 Kb Pdf) for all the main published key indicators on the National Statistics website.

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  9. Next publication:  Tuesday 06 November 2012
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    These National Statistics are produced to high professional standards and released according to the arrangements approved by the UK Statistics Authority.

Statistical contacts

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Robert Doody +44 (0)1633 455803 ONS robert.doody@ons.gsi.gov.uk
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