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

Released: 07 August 2012 Download PDF

Key points

  • The seasonally adjusted Index of Production fell by 4.3 per cent in June 2012 compared with June 2011.
  • The seasonally adjusted Index of Manufacturing fell by 4.3 per cent in June 2012 compared with June 2011.
  • Production fell by 2.5 per cent between May 2012 and June 2012, with manufacturing falling by 2.9 per cent.
  • The moving of the late May 2012 bank holiday to June 2012 and the additional bank holiday for the Queen's Diamond Jubilee were likely contributing factors to the month on month decline in the production and manufacturing sectors.
  • This month the revisions period is open from April 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 97.3 -4.3 -2.8 -2.5 -0.9
Manufacturing 102.2 -4.3 -2.6 -2.9 -0.9

Table source: Office for National Statistics

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Supplementary analysis

The seasonally adjusted index of production fell by 0.9 per cent in the second quarter of 2012 compared with the first quarter of 2012, the third consecutive quarter on quarter fall. Manufacturing output fell by 0.9 per cent, mining & quarrying fell by 4.4 per cent and water & waste management fell by 3.2 per cent. In contrast, the energy sector rose by 5.6 per cent on the quarter.

The seasonally adjusted index of production fell by 4.3 per cent in June 2012 compared with June 2011. This is the 15th consecutive monthly fall on the same month a year ago.

The seasonally adjusted index of production fell by 2.5 per cent between May 2012 and June 2012. The manufacturing sector fell by 2.9 per cent, the electricity, gas, steam & air conditioning sector fell by 4.9 per cent and the water & waste management sector fell by 2.3 per cent. These increases were slightly offset by the mining and quarrying sector which rose by 2.0 per cent.

Manufacturing

Manufacturing output fell by 0.9 per cent between the first quarter of 2012 and the second quarter of 2012, the fourth consecutive quarter on quarter decrease. Of the 13 manufacturing sub sectors seven fell with six rising.

The largest downwards contributors to the quarterly fall came from; the manufacture of basic pharmaceutical products & preparations, which fell by 10.1 per cent, the manufacture of wood & paper products, which fell by 5.0 per cent and the other manufacturing sector, which fell by 2.7 per cent. The largest upwards contribution came from the manufacture of machinery & equipment, which rose by 3.4 per cent.

The seasonally adjusted index of manufacturing fell by 4.3 per cent in June 2012 compared with June 2011. Ten manufacturing sub sectors fell and three rose. The largest contributions to the month on same month a year ago fall in manufacturing output came from the manufacture of wood & paper products, which fell by 13.0 per cent, followed by the manufacture of basic metals & metal products, which fell by 6.7 per cent. 

The largest upward contribution came from the manufacture of transport equipment industries, which rose by 8.4 per cent.

Seasonally adjusted manufacturing output fell by 2.9 per cent in June 2012 compared with May 2012. Ten manufacturing sub sectors fell with three rising. The largest contributions to the month on month fall in manufacturing output came from the manufacture of basic metals & metal products, which fell by 5.6 per cent, followed by the manufacture of rubber & plastic products, which fell by 8.0 per cent.

The late May bank holiday moving into June and the additional bank holiday for the Queen’s Diamond Jubilee was a likely contributing factor to the weakness seen in the June 2012 manufacturing index. The event is not regular, so there is not an adjustment to account for it as part of the seasonal adjustment process.

It is not possible to quantify the impact, until data for later periods are available. Users should be cautious when interpreting movements in the index and growth rates involving May and June 2012 due to the change in bank holidays.

Mining and quarrying 

Mining & quarrying output fell by 4.4 per cent in the second quarter of 2012 compared with the first quarter of 2012, the eighth consecutive quarter on quarter decrease. The biggest decrease was in the extraction of oil & gas which fell by 6.4 per cent in the latest quarter.

Output of the mining & quarrying industries fell by 8.1 per cent in June 2012 compared with June 2011. This was the 21st 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 10.3 per cent. Between May 2012 and June 2012 mining and quarrying rose by 2.0 per cent.

Energy supply

Output of the energy sector rose by 5.6 per cent in the second quarter of 2012 compared with the first quarter of 2012. The comparatively cool weather at the start of 2012 Q2 (April 2012 was the coolest since 1989) was a factor in higher energy supply in the second quarter of 2012.

Energy supply output in June 2012 fell by 1.4 per cent compared with June 2011 with electricity supply falling by 0.7 per cent and gas supply falling by 5.0 per cent.  Between May 2012 and June 2012 energy output supply fell by 4.9 per cent, with a fall of 5.3 per cent in electricity supply and 2.4 per cent in gas supply.

Milder weather in June reducing demand for cooling and the two extra bank holidays in June (one moved from late May), were both factors in the fall.

Water & waste management

Water and waste management output fell by 3.2 per cent in the second quarter of 2012 compared with the first quarter of 2012.

Between June 2011 and June 2012 water & waste management output fell by 2.5 per cent.

Between May 2012 and June 2012 water & waste management output fell by 2.3 per cent.

GDP Impact

As outlined in the article Statistical Special Events in Quarter two 2012, the preliminary estimate of quarter two 2012 Gross Domestic Product (GDP) included a forecasted fall of 3.5 per cent between May and June 2012. This forecast combined with estimates for April and May resulted in an estimated fall in production of 1.3 per cent between quarter one and quarter two 2012.

This release of data estimates production falling by 2.5 per cent between May and June 2012 and 0.9 per cent between quarter one and quarter two 2012. The estimated impact on GDP arising from this release of Index of Production data is an upwards revision of approximately 0.07 percentage points.

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 June 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 -4.3 -4.35 -2.5 -2.52
Sector B 15.4 -8.1 -0.99 2.0 0.22
 Division 06 12.6 -10.3 -0.95 3.6 0.29
Sector C 67.0 -4.3 -3.03 -2.9 -2.07
Sector D 9.6 -1.4 -0.14 -4.9 -0.49
Sector E 8.0 -2.5 -0.20 -2.3 -0.18

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 June 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 & tobacco 11.9 -3.9 -0.50 -1.3 -0.17
CB Textiles & leather products 2.0 -5.5 -0.12 -3.8 -0.08
CC Wood, paper & printing 5.5 -13.0 -0.66 -7.1 -0.35
CD Coke & petroleum 0.8 -0.4 0.00 -0.1 0.00
CE Chemical Products 6.1 -7.4 -0.45 -4.7 -0.28
CF Pharmaceutical Products 6.1 -11.3 -0.56 1.5 0.07
CG Rubber & plastic products 4.7 -9.8 -0.45 -8.0 -0.37
CH Metal products 8.6 -6.7 -0.62 -5.6 -0.53
CI Computer, electronic & optical  4.3 -7.0 -0.29 -4.3 -0.17
CJ Electrical equipment 2.1 9.1 0.20 -3.5 -0.09
CK Machinery & equipment 4.8 2.1 0.13 0.6 0.04
CL Transport equipment 5.7 8.4 0.61 -1.8 -0.14
CM Other manufacturing & repair 4.5 -6.5 -0.32 0.2 0.01

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 June 2012 fell by 8.1 per cent compared with June 2011. In particular:

i)  Extraction of crude petroleum & natural gases decreased by 10.3 per cent

ii) the largest contributor to the 8.1 per cent month on same month a year ago fall in overall mining & quarrying was approximately 7.8 percentage points from the extraction of crude petroleum & natural gas

Manufacturing

The seasonally adjusted index of manufacturing in June 2012 fell by 4.3 per cent compared with June 2011. In detail:

i) output decreased in ten of the 13 manufacturing sub-sectors and rose in three

ii) the largest contributions to the decrease in output came from the manufacture of wood, paper products & printing, which fell by 13.0 per cent, and in the manufacture of basic metals & metal products, which fell by 6.7 per cent

iii) within the manufacture of wood, paper products & printing industries, the main falls were in the printing & reproduction of recorded media, which fell by 15.0 per cent, and wood & wood products except furniture, which fell by 19.6 per cent

iv) within the manufacture of basic metals & metal products industries, the main falls were in fabricated metal products, other than weapons, which fell by 7.8 per cent, and basic iron & steel which fell by 13.4 per cent

v) the largest contributors to the 4.3 per cent month on same month a year ago fall in overall manufacturing were approximately 0.9 percentage points from wood, paper products & printing and approximately 0.9 percentage points from basic metals & metal products

Energy supply

The seasonally adjusted index of the electricity, gas, steam & air conditioning supply industries in June 2012 fell by 1.4 per cent compared with June 2011. The main movements were:

i) manufacture of gas & gas distribution, which fell by 5.0 per cent, and contributed 0.8 percentage points to the 1.4 per cent month on same month a year ago fall

ii) electric power generation, transmission & distribution, which fell by 0.7 per cent, and contributed 0.6 percentage points to the 1.4 per cent month on same month a year ago fall

Water supply & waste management

The seasonally adjusted index of the water supply, sewerage & waste management industries in June 2012 fell by 2.5 per cent compared with June 2011. The main movements were:

i) waste collection, treatment & disposal activities, which fell by by 5.8 per cent

ii) water collection, treatment & supply, which fell by 4.3 per cent

iii) the largest contributor to the 2.5 per cent month on same month a year ago fall was 2.4 percentage points from waste collection, treatment & disposal activities

Revisions

This release conforms to the standard revisions policy for National Accounts. (41.7 Kb Pdf) In this release, periods from April 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 the month on month growth rate for the Index of Production for April 2012 is revised down by 0.2 percentage points whilst for May 2012 it remains unchanged.

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?

    In accordance with the National Acounts revision policy, the current revisions period is open back to April 2012.

    Special Events

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

    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. 

    Upcoming changes

    The Index of Production release for July 2012 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 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 July 2012 will have a revisions period back to January 2011. 

    National Accounts revision policy (41.7 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 July 2006 and June 2011 and the estimates published 12 months later.

    Revisions June 2012

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

    Growth rates Value in latest period Average revision   Absolute average revision
    Production - 3 month -0.9 -0.12 0.29
    Manufacturing - 3 month -0.9 -0.11 0.36
    Production - 1 month -2.5 -0.10 * 0.27
    Manufacturing - 1 month -2.9 -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 (3.34 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. (87 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:  Friday 07 September 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.

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