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

Released: 07 February 2013 Download PDF

Key points

  • The seasonally adjusted index of production fell by 1.9% between the third and fourth quarter of 2012. This is the largest quarter on quarter fall since the first quarter of 2009.
  • Production on a seasonally adjusted basis fell by 1.7% in December 2012 compared with December 2011.
  • Manufacturing on a seasonally adjusted basis fell by 1.5% in December 2012 compared with December 2011.
  • Production on a seasonally adjusted basis rose by 1.1% between November 2012 and December 2012, mining & quarrying rose by 1.2% and manufacturing rose by 1.6%.
  • The earliest period open for revision is January 2012. The impact of these revisions on previously published gross domestic product quarterly growth rates is minimal, at around 0.01 percentage points.
  • Users are reminded that all figures contained within this release are estimates.

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 98.5 -1.7 -2.4 1.1 -1.9
Manufacturing 104.1 -1.5 -1.8 1.6 -1.3

Table source: Office for National Statistics

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Supplementary analysis

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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The seasonally adjusted index of production fell by 1.9% between the third and fourth quarter of 2012. This is the largest quarter on quarter fall since the first quarter of 2009. The mining & quarrying sector fell by 11.0% and the manufacturing sector fell by 1.3%. Partially offsetting these falls were rises in energy supply of 2.3% and water & waste management of 1.3%.

The seasonally adjusted index of production fell by 1.7% in December 2012 compared with December 2011. This is the 21st consecutive fall, month on same month, a year ago. The fall in December 2012 reflects falls in mining & quarrying of 9.3% and in manufacturing of 1.5%. Partially offsetting these falls were increases in energy supply of 2.5% and waste & water management of 2.4%.

Between November 2012 and December 2012 this index increased by 1.1%. This reflects rises in manufacturing of 1.6% and mining & quarrying of 1.2%. Partially offsetting this rise were falls in energy supply of 0.9% and water & waste management of 0.2%.

Manufacturing

Manufacturing output fell by 1.3% between the third and fourth quarter of 2012. The largest downward contributions in manufacturing output were: the manufacture of food products, beverages & tobacco, which fell by 2.2%, followed by the manufacture of basic metals & metal products, which fell by 2.7%, and the manufacture of basic pharmaceutical products & pharmaceutical preparations, which fell by 3.6%. In contrast, the most significant increases came from the manufacture of machinery & equipment not elsewhere classified, which rose by 2.1%, followed by the manufacture of transport equipment, which rose by 1.0%, and the manufacture of computer, electronic & optical products, which rose by 1.9%.

The seasonally adjusted index of manufacturing fell by 1.5% in December 2012 when compared with December 2011. The largest downward contributions in manufacturing output were: the manufacture of wood & paper products & printing which fell by 11.0%, followed by the manufacture of food products, beverages & tobacco, which fell by 4.1%, and other manufacturing & repair, which fell by 7.4%. In contrast, the most significant increases came from the manufacture of machinery & equipment not elsewhere classified, which rose by 8.2%, the manufacture of computer, electronic & optical products, which rose by 7.2% and the manufacture of transport equipment which rose by 3.0%.

Seasonally adjusted manufacturing output rose by 1.6% in December 2012 compared with November 2012. The most significant increases came from the manufacture of machinery & equipment not elsewhere classified, which rose by 8.0%, followed by the manufacture of chemicals & chemical products, which rose by 5.6%, and the manufacture of food products, beverages & tobacco, which rose by 1.5%. In contrast, manufacture of wood & paper products and printing, fell by 1.4%, the manufacture of rubber & plastic products and other non-metallic mineral products, fell by 1.2%, and the manufacture of basic pharmaceutical products & pharmaceutical preparations, fell by 0.8%.

Mining & quarrying

Output of the mining & quarrying industries fell by 11.0% between the third and fourth quarter of 2012. The main downward contribution was from the extraction of oil & gas which fell by 14.1%. The decline in mining and quarrying was due, in part, to an extended and later than usual maintenance period at the UK’s largest North Sea oil field, which reduced oil and gas extraction in this quarter. There was also an unplanned shutdown at the Theddlethorpe gas terminal.

Output of the mining & quarrying industries fell by 9.3% in December 2012 compared with December 2011. The main downward contribution was from the extraction of oil & gas which fell by 11.9%. The mining of coal & lignite also fell by 27.6%. Evidence indicates that there has been a decline in coal production across all deep-mine sites between 2011 and 2012 because of production problems.

Between November 2012 and December 2012 the mining & quarrying sector rose 1.2%. The main upward contribution was from the extraction of oil & gas which rose by 3.2%, which reflects production returning to more normal levels following the maintenance at the largest North Sea oil field.

Energy supply

Energy supply output rose by 2.3% between the third and fourth quarter of 2012. Gas supply rose by 15.1% and electrical power generation, transmission & distribution rose by 0.2%. Temperatures have been cooler for this period when compared with the same period last year: October and November were each 2.9 degrees cooler and December was 1.1 degree cooler. This has increased the demand for energy.

Energy supply output rose by 2.5% in December 2012 compared with December 2011. Electrical power generation, transmission & distribution rose by 2.3% and gas supply rose by 3.6%.

Between November 2012 and December 2012 energy output fell by 0.9%. Electrical power generation, transmission & distribution fell by 0.1% and gas supply fell by 4.9%.

Water & waste management

Water & waste management rose by 1.3% between the third and fourth quarter of 2012. The largest contribution to this increase was in waste & recycling which rose by 5.9%.

Water & waste management rose by 2.4% in December 2012 when compared with December 2011. The largest contribution to this rise was in sewerage which rose by 3.6%.

Between November 2012 and December 2012 water & waste management output fell by 0.2%.

GDP Impact

The period open for revision in this release is from January 2012. The impact of these revisions on previously released Gross Domestic product quarterly growth rates is minimal at around 0.01 percentage points.

Production in detail

The Index of Production (IoP) measures the output of the production industries in the UK. 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 December 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 -1.7 -1.7 1.1 1.1
Sector B 15.4 -9.3 -1.10 1.2 0.13
 Division 06 12.6 -11.9 -1.05 3.2 0.25
Sector C 67.0 -1.5 -1.07 1.6 1.11
Sector D 9.6 2.5 0.23 -0.9 -0.09
Sector E 8.0 2.4 0.20 -0.2 -0.02

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 December 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 -4.1 -0.54 1.5 0.19
CB Textiles and leather products 2.0 -7.6 -0.16 -1.2 -0.02
CC Wood, paper and printing 5.5 -11.0 -0.56 -1.4 -0.07
CD Coke and petroleum 0.8 -11.7 -0.09 7.3 0.05
CE Chemical Products 6.1 -1.8 -0.11 5.6 0.33
CF Pharmaceutical Products 6.1 -6.4 -0.31 -0.8 -0.04
CG Rubber and plastic products 4.7 -3.5 -0.16 -1.2 -0.06
CH Metal products 8.6 0.0 0.00 0.2 0.02
CI Computer, electronic & optical  4.3 7.2 0.28 1.6 0.06
CJ Electrical equipment 2.1 7.4 0.16 4.3 0.10
CK Machinery and equipment 4.8 8.2 0.52 8.0 0.52
CL Transport equipment 5.7 3.0 0.25 0.0 0.00
CM Other manufacturing & repair 4.5 -7.4 -0.36 0.6 0.03

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 and quarrying

The seasonally adjusted index of mining & quarrying in December 2012 fell by 9.3% compared with December 2011. Oil & gas extraction decreased by 11.9%, contributing 8.9 percentage points to the fall in mining & quarrying.

Manufacturing

The seasonally adjusted index of manufacturing in December 2012 fell by 1.5% compared with December 2011. In detail:

i) the largest contributions to the decrease in output came from the manufacture of wood, paper products & printing, which fell by 11.0%, and in the manufacture of food, beverages & tobacco products, which fell by 4.1%;

ii) within the manufacture of wood, paper products & printing industries, the main falls were in the printing & reproduction of recorded media, which fell by 16.5% and paper & paper products, which fell by 6.6%;

iii) within the food, beverages & tobacco products industries, the main falls were in alcoholic beverages, which fell by 16.7% and bakery & farinaceous products, which fell by 5.4%;

iv) wood, paper products & printing and food products, beverages & tobacco both contributed approximately 0.8 percentage points to the 1.5% month on same month a year ago fall in overall manufacturing.

Energy supply

The seasonally adjusted index of the electricity, gas, steam & air conditioning supply industries in December 2012 rose by 2.5% compared with December 2011. The main movements were:

i) electric power generation, transmission & distribution which rose by 2.3%, and contributed  2.0 percentage points to the 2.5% month on same month a year ago rise;

ii) manufacture of gas & gas distribution, which rose by 3.6%, and contributed 0.6 percentage points to the 2.5% month on same month a year ago rise.

Water supply and waste management

The seasonally adjusted index of the water supply, sewerage & waste management industries in December 2012 rose by 2.4% compared with December 2011. The main movements were:

i) sewerage, which rose by 3.6%;

ii) water collection, treatment & supply, which rose by 2.9%;

iii) the largest contributor to the 2.4% month on same month a year ago rise was 1.1 percentage points from sewerage.

Revisions

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

Since last month, revisions are mainly from late responses to the Monthly Business Survey and re-estimation of the seasonal-adjustment factors.

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, sharing 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 (32.5 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. Improvements to be introduced next month

    For the release of January 2013 data, ONS plan to stop producing the summary statistics table (32.5 Kb Excel sheet) . If these data are essential to you, please notify ONS at the e-mail address in the 'Contact us' section below and we may reconsider our plans.

    What's new?

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

    Special Events in 2012

    There have been a number of special events in 2012. 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 special events on particular series, only on the basis of information collected in those series. 

    The Diamond Jubilee celebrations saw changes to the normal pattern of bank holidays in May and June, and an additional days holiday in June; all of these changes affected estimates for quarter 2 of 2012, and an article gave more information on how the estimates were compiled over this period. The Olympics took place from 27 July to 12 August 2012 (with a few events starting on 25 July), and the Paralympics from 29 August to 9 September. The direct effect of the Olympics and Paralympics was reflected in the estimates for the months of quarter 3 of 2012. More details of how certain series were expected to be affected were given in an information note. A detailed article (229 Kb Pdf)  describing possible effects on GDP and comparing with earlier Olympic Games was published by ONS on 25 October. Wider effects, for example the presence of the Olympics influencing the number of non-Olympics tourist visits, may of course have affected any of the summer months. 

    The result of these special events in 2012 has been to introduce additional uncertainty in the interpretation of movements between Q2 and Q3 and between Q3 and Q4. Users should therefore consider all the information available when interpreting the statistics.

    Upcoming changes

    The Index of Production release for January 2013 will have a revisions period back to January 2011.

  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 & quarrying (Sector B), manufacturing (Sector C), gas & electric (Sector D), and water supply & 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 Office for National Statistics website.

    The 2005 median annual growth of MPI turnover, their associated standard errors and quality bands can now be found on the Office for 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 January 2013 will have a revisions period back to January 2011. 

    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 following table presents a summary of the differences between the first estimates published between January 2007 and December 2011 and the estimates published 12 months later. 

    Table 4: Revisions December 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 -1.9 -0.15 0.31
    Manufacturing - 3 month -1.3 -0.15 0.37
    Production - 1 month 1.1 -0.10 * 0.26
    Manufacturing - 1 month 1.6 -0.09 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 (3.59 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 Office for 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 Office for National Statistics website.

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

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  9. Next publication:  Tuesday 12 March 2013
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  10. 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

    These National Statistics are produced to high professional standards and released according to the arrangements approved by the UK Statistics Authority.

Statistical contacts

Name Phone Department Email
Alaa Al-Hamad +44 (0)1633 455648 ONS alaa.al-hamad@ons.gsi.gov.uk
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