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Statistical bulletin: Index of Production, February 2014 This product is designated as National Statistics

Released: 08 April 2014 Download PDF

Key Points

  • Production output increased by 2.7% between February 2013 and February 2014. This reflects increases of 3.8% in manufacturing; 8.5% in water supply, sewerage & waste management and 0.2% in mining & quarrying.
  • The only decrease was in electricity, gas, steam & air conditioning output, which decreased by 8.8% between February 2013 and February 2014. This was attributed to the average temperature in February 2014 being warmer than February 2013.
  • The main manufacturing components contributing to the increase between February 2013 and February 2014 were the manufacture of rubber & plastic products & other non-metallic mineral products; the manufacture of transport equipment and the manufacture of machinery & equipment not elsewhere classified.
  • Total production increased by 0.9% between January 2014 and February 2014. There were upward contributions from three of the main sectors, with manufacturing being the largest contributor increasing by 1.0%, its third consecutive monthly rise.
  • The main components contributing to the increase in manufacturing between January 2014 and February 2014 were the manufacture of basic pharmaceutical products & pharmaceutical preparations; the manufacture of transport equipment and the manufacture of food products, beverages & tobacco.
  • In this release the earliest period open for revision was January 2014. There is no impact on previously published GDP estimates from revisions reported in this release.

Key Figures

This bulletin presents the Index of Production (IoP) for the United Kingdom production industries, February 2014. Users are reminded that all figures contained within this release are seasonally adjusted estimates, unless otherwise stated. The reference year for these estimates is 2010=100 and they are mainly based on a monthly business survey (MBS) of approximately 6,000 businesses, covering all the territory of the UK without geographical breakdown. The IoP is one of the earliest indicators of growth and it measures gross value added in the manufacturing (the largest component of production), mining & quarrying, energy supply and water supply & waste management sectors. The total IoP estimate and various breakdowns are widely used in private and public sector institutions. Care should be taken when using the month on month growth rates due to their volatility. For an explanation of the terms used in this bulletin and other information, please see the background notes section. Table 1 shows the key figures for this release. Figure 1 shows the production and manufacturing series from November 2011 to February 2014.

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
  2010=100        
Production 98.1 2.7 2.5 0.9 0.8
Manufacturing 101.9 3.8 2.8 1.0 0.8

Table source: Office for National Statistics

Table notes:

  1. Source: Primarily Monthly Business Survey (Production and Services) - Office for National Statistics

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Figure 1: Seasonally adjusted production and manufacturing

Figure 1: Seasonally adjusted production and manufacturing

Notes:

  1. Source: Primarily Monthly Business Survey (Production and Services) - Office for National Statistics

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Economic Context

As seen in Figure 2, the pace of growth in manufacturing exceeded that of total production between 2003 and 2007. This trend however was temporarily interrupted following the economic downturn in 2008, when manufacturing fell by a greater extent than total production.

Following the 2008 downturn, production output returned to growth for a short period, before falling again in 2011/2012 (this coincided with falling GDP in the Euro area). Total production output was particularly affected, falling below its downturn trough in Q4 2012, while manufacturing fell by a smaller amount. Conditions have clearly improved over 2013; comparing Q4 2013 with Q4 2012, production and manufacturing both increased by 2.2% and 1.8% respectively.

Figure 2: Quarterly seasonally adjusted production and manufacturing

Figure 2: Quarterly seasonally adjusted production and manufacturing

Notes:

  1. Source: Primarily Monthly Business Survey (Production and Services) - Office for National Statistics

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The recent divergence between manufacturing and total production can be attributed to movements within the sub-industry groupings that make up total production, particularly the mining and quarrying industries. The decline of oil & gas extraction over the past 13 years provided downward pressure on production, this can predominantly be attributed to North Sea oil and gas reserves becoming increasingly challenging to extract and ageing extraction equipment requiring extensive repairs and maintenance.

Quarterly National Accounts for Q4 2013 confirmed that UK gross domestic product (GDP) grew by 0.7%. Three out of the four of the main industrial groupings experienced growth in output, with the services and agriculture, forestry & fishing industries growing by 0.8% and 0.2% respectively. The construction industry was estimated to have contracted by 0.2%. The services industries continued to be the main contributor to growth, with output in the latest quarter reaching 1.1% above the pre-downturn peak reached in Q1 2008. By contrast, output in both the production and construction industries remained more than 10% below their respective pre-downturn peaks.

Broader economic conditions do appear to be improving in the UK. The rate of consumer price inflation (as measured by CPI), fell further in February to 1.7%, due to downward contributions from transport (notably motor fuels), clothing & footwear and housing & household services. This was the lowest growth rate in the CPI since October 2009 and was 0.3 percentage points below the Bank of England’s official target. The UK labour market also appears to be steadily improving, with the unemployment rate for November 2013 to January 2014 falling to 7.2%, a 0.2 percentage point fall compared to August to October 2013.

The rate of annual producer input price inflation fell for a fourth consecutive month in February 2014 to -5.7%. This steady slowdown in input prices has been followed by easing in the rate of core output price inflation, which fell to 1.1% over the same period.

Economic conditions in the Euro area (EA18) remain complex. The latest EA18 quarterly GDP figures show that output grew by 0.3% in Q4 2013, a third successive quarterly expansion. However, this follows a period of six consecutive quarterly contractions up until Q1 2013 and remains 2.7% below the pre-downturn peak reached in Q1 2008. The rate of EA18 consumer price inflation slowed further to 0.7% in the twelve months to February 2014, while the unemployment rate fell slightly to 11.9% in February, though these performances vary by country.

Economic conditions remained positive in the US, where GDP grew by 0.7% in the final quarter of 2013, although the pace of growth has eased compared with the previous quarter. The US labour market however worsened slightly, with the unemployment rate rising 0.1 percentage points between January and February 2014 to 6.7%.

On a global level, production output amongst the G7 nations has grown steadily since the trough reached in Q2 2009 and expanded by a further 1.2% in Q4 2013 compared with Q3 2013. Despite the upward trend achieved over the past four years, output remained 5.5% below the pre-downturn peak reached in Q1 2008. This experience does however vary by country; for example production output in Japan, France, the UK and Italy remained more than 10% below their respective pre-downturn peaks.

GDP Impact and Components

In this release periods back to January 2014 are open for revision, in line with National Accounts revisions policy. There was no impact on the previously published GDP estimates.

The estimates for the production industries are generally the first of the main components for the output approach to the measurement of GDP to be published (agriculture, construction and services are the other components). All the components are already available for Q4 2013. Details of the data already published can be found in Table 2.

Output in the construction industry for February 2014 will be published on 11 April 2014 and services output for the same period on 29 April 2014.

Table 2: GDP component tables, February 2014

Percentage change
Publication % of GDP Release date Month / Quarter of GDP Most recent quarter on a year earlier  Most recent quarter on quarter earlier  Most recent month on the same month a year ago Most recent month on the previous month
               
Index of Production 1 15.2 8 Apr Feb .. .. 2.7 0.9
      Jan .. .. 2.8 0.0
      Q4 2.2 0.5 .. ..
               
               
Construction output 6.3 14 Mar Jan .. .. 5.4 1.8
      Q4 3.4 -0.2 .. ..
               
               
Index of Services 77.8 28 Mar Jan .. .. 3.2 0.4
      Q4 2.5 0.8 .. ..
               
               
Retail Sales   27 Mar Feb .. .. 3.7 1.7
      Jan .. .. 3.9 -2.0
      Q4 3.2 0.5 .. ..
             
               
Agriculture 0.7   Q4 -2.4 0.2 .. ..
               

Table source: Office for National Statistics

Table notes:

  1. The data for the index of production reflect the latest revisions published as part of this release.

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Production and Sectors Supplementary Analysis

Table 3: Headline growth rates and contributions to the Index of Production, February 2014

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 2.7 2.7 0.9 0.9
Sector B 15.1 0.2 0.03 3.5 0.40
Division 06 12.4 0.9 0.08 6.7 0.53
Sector C 68.4 3.8 2.66 1.0 0.69
Sector D 8.6 -8.8 -0.76 -2.8 -0.22
Sector E 7.9 8.5 0.76 0.2 0.02

Table notes:

  1. N.B. The data originally published at 9.30 a.m. on April 8th in Table 3: Headline growth rates and contributions were incorrect due to an operational error. This has now been corrected as at 3.30 p.m. on April 8th and the table now includes the data for February 2014. ONS apologises for any inconvenience caused.

  2. 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.

  3. Source: Primarily Monthly Business Survey (Production and Services) - Office for National Statistics

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Figure 3: Contribution to production growth month on same month a year ago

Growth rates can be found in the chart download or in the attached IoP 5 tables

Figure 3: Contribution to production growth month on same month a year ago

Notes:

  1. Source: Primarily Monthly Business Survey (Production and Services) - Office for National Statistics

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Figure 4: Contribution to production growth month on month

Growth rates can be found in the chart download or in the attached IoP 5 tables

Figure 4: Contribution to production growth month on month

Notes:

  1. Source: Primarily Monthly Business Survey (Production and Services) - Office for National Statistics

Download chart

Total production

Total production output in February 2014 increased by 2.7% compared with February 2013. The largest contribution to the increase was from manufacturing, the largest component of production, which increased by 3.8%. This was the largest increase since February 2011 and contributed 2.7 percentage points to total production. Water supply, sewerage & waste management output increased by 8.5% and contributed 0.8 percentage points; and mining & quarrying output increased by 0.2% and had a negligible contribution to total production. These rises were partially offset by a decrease in electricity, gas, steam & air-conditioning output, which decreased by 8.8%, the lowest since March 2012 and contributed 0.8 percentage points.

Between January 2014 and February 2014, total production increased by 0.9% following 0.0% growth in January, revised down from the previously published growth of 0.1%. This revision was mainly attributed to revisions to electricity, gas, steam & air-conditioning outputs. The increase in total production reflects increases in three of its main sectors. Manufacturing increased by 1.0%; mining & quarrying by 3.5%; and water supply, sewerage & waste management increased by 0.2%. The largest contributor to the increase in total production amongst these main sectors was manufacturing, which contributed 0.7 percentage points to the increase. The only decrease was in the electricity, gas, steam & air conditioning sector which fell by 2.8% and contributed 0.2 percentage points.

Manufacturing

Manufacturing output increased by 3.8% between February 2013 and February 2014, with outputs increasing in 11 of the 13 manufacturing subsectors. The largest upward contributions to manufacturing were from; the manufacture of rubber & plastic products & other non-metallic mineral products, which increased by 13.9% and contributed 1.1 percentage points to the increase. The majority of this contribution came from the rubber & plastic products industries, which increased by 10.4%, after a record growth the month before and contributed 0.5 percentage points. Anecdotal evidence suggested that strong sales and exports were factors contributing to this growth. The second largest contributor to the increase in manufacturing was the manufacture of transport equipment, which increased by 5.8% and contributed 0.8 percentage points. The majority of this increase was attributed to the motor vehicles, trailers & semi trailers industry which increased by 7.3% compared to a year ago and contributed 0.6 percentage points. Anecdotal evidence suggests export and production of new models were factors contributing to this increase. This was followed by the manufacture of machinery & equipment not elsewhere classified, which increased by 9.2% and contributed 0.7 percentage points.

In contrast, the downward contributions to manufacturing came from the manufacture of coke & refined petroleum products, which decreased by 13.1% and contributed 0.3 percentage points; and the manufacture of electrical equipment, which decreased by 3.0% and contributed 0.1 percentage points.

Manufacturing output increased by 1.0% between January 2014 and February 2014 following 0.3% growth in January. There were increases in seven of the 13 manufacturing subsectors. The largest contributor to the increase in manufacturing was the manufacture of basic pharmaceutical products & pharmaceutical preparations, which increased by 9.3% and contributed 0.6 percentage points, following a decrease the month before. The manufacture of transport equipment increased by 2.8% and contributed 0.4 percentage points. The majority of this came from the manufacture of motor vehicles, trailers & semi trailers, which increased by 2.9% and contributed 0.3 percentage points to the growth; and the manufacture of food, beverages & tobacco, which increased by 1.4% and contributed 0.2 percentage points.

In contrast to the above increases, the largest downward contribution to the month on month manufacturing growth came from the manufacture of chemicals & chemical products, which decreased by 3.6% and contributed 0.2 percentage points, having had an equivalent increase the previous month. This was followed by other manufacturing & repair, which decreased by 1.1% and contributed 0.1 percentage points; and the manufacture of coke & refined petroleum products, which decreased by 4.0% and contributed 0.1 percentage points. Anecdotal evidence suggests that planned maintenance work carried out at a number of refineries was a contributing factor.

Mining & quarrying

Mining & quarrying output increased by 0.2% between February 2013 and February 2014. The largest contribution to this increase came from the extraction of crude petroleum & natural gas, which increased by 0.9% and contributed 0.7 percentage points. The increase was slightly offset by downward contributions from the mining of coal & lignite, which decreased by 28.6% and contributed 0.3 percentage points and by other mining & quarrying, which decreased by 0.3% and contributed 0.1 percentage points.

Mining & quarrying output increased by 3.5% in February 2014 compared with January 2014, having had a similar decrease in growth in the previous month. The largest contribution to the increase came from the extraction of crude petroleum & natural gas, which increased by 6.7% and contributed 4.6 percentage points to the increase in this sector. This increase was partially offset by decreases in other mining & quarrying of 3.9%, which contributed 1.2 percentage points and in the mining of coal & lignite of 2.6%, with negligible contribution.

Electricity, gas, steam & air conditioning

Electricity, gas, steam & air conditioning output decreased by 8.8% in February 2014 compared with February 2013, with decreases in both of its subsectors. The manufacture of gas & distribution of gaseous fuels through mains decreased by 14.9% and contributed 4.0 percentage points and electric power generation, transmission & distribution decreased by 6.5% and contributed 4.8 percentage points to the decrease in the main sector. Feedback suggests the warmer weather compared to a year ago was a main factor in the reduction in demand.

Electricity, gas, steam & air conditioning output decreased by 2.8% in February 2014 compared with January 2014. This reflects a decrease of 3.1% in electric power generation, transmission & distribution, which contributed 2.3 percentage points; and a decrease of 1.8% in the manufacture of gas & distribution of gaseous fuels through mains, which contributed 0.5 percentage points.

Water & waste management

Water supply, sewerage & waste management output increased by 8.5% between February 2013 and February 2014, with increases in all of its sectors. The largest contributor to the growth in this sector was sewerage output, which increased by 15.1% and contributed 4.4 percentage points. The next largest growth was waste collection, treatment & disposal activities, which increased by 5.8% and contributed 2.6 percentage points; this was followed by water collection, treatment & supply, which increased by 5.9% and contributed 1.5 percentage points; and remediation activities & other waste management services, which increased by 5.5% and had a negligible contribution to the growth in this sector.

Water supply, sewerage & waste management output increased by 0.2% between January 2014 and February 2014, with increases in two of its four subsectors. Sewerage increased by 2.4% and contributed 0.7 percentage points; water collection, treatment & supply increased by 1.0% and contributed 0.2 percentage points. Largely offsetting these increases were decreases in waste collection, treatment & disposal activities, which decreased by 1.7% and contributed 0.8 percentage points; and in remediation activities & other waste management services, which decreased by 0.6% with negligible contribution.

Background notes

  1. What's new?

    This release conforms to the standard revisions policy for National Accounts (27.8 Kb Pdf) . In accordance with the policy, the current revisions period is open back to January 2014.

    A report titled GDP Output Improvement Report November 2013 (73.9 Kb Pdf) was published on 22 November 2013. This report provides a detailed update of the work on industry reviews and wider improvements to IoP, IoS, GDPO and outlines the greater scope of the project as part of the GDP Continuous Improvement Programme.

    Upcoming changes

    The index of production release for March 2014, to be published on 09 May 2014, will have a revisions period back to January 2014.

  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 2014.

  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 2010=100 and are classified to the 2007 Standard Industrial Classification (SIC). The production industries, which accounted for 15.2% of gross domestic product in 2010, cover mining & quarrying (Section B), manufacturing (Section C), gas & electric (Section D), and water supply & sewerage (Section 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, Her Majesty’s Treasury and the Office for Budget Responsibility, 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 Office for 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 of various industries in 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 chained volume measures. 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 ONS 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 March 2014 will have a revisions period back to January 2014.

    National Accounts revision policy (27.8 Kb Pdf) can be found on the ONS 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 March 2008 and February 2013 and the estimates published 12 months later. 

    Table 4: Revisions February 2014

    Growth rates Value in latest period Average   Absolute average
    Production - 3 month 0.8 -0.22 * 0.33
    Manufacturing - 3 month 0.8 -0.24 0.37
    Production - 1 month 0.9 -0.12 * 0.26
    Manufacturing - 1 month 1.0 -0.11 * 0.30

    Table source: Office for National Statistics

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    Spreadsheets give revisions triangles (3.94 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 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.
    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 0845 601 3034 
    or email Customer Contact Centre.

  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) 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:  Friday 09 May 2014
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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

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