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

Released: 06 November 2012 Download PDF

Key points

  • The seasonally adjusted Index of Production fell by 2.6 per cent in September 2012 compared with September 2011.
  • The seasonally adjusted Index of Manufacturing fell by 1.0 per cent in September 2012 compared with September 2011.
  • Production fell by 1.7 per cent between August 2012 and September 2012, with mining & quarrying falling by 15.3 per cent, and a rise of 0.1 per cent in manufacturing.
  • 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 98.6 -2.6 -1.4 -1.7 0.9
Manufacturing 104.8 -1.0 -0.9 0.1 0.9

Table source: Office for National Statistics

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Supplementary analysis

The seasonally adjusted index of production rose by 0.9 per cent in the third quarter of 2012 compared with the second quarter of 2012, following a fall of 0.7 per cent between quarter one and quarter two.

Manufacturing output rose by 0.9 per cent, mining & quarrying rose by 2.9 per cent and water & waste management rose by 2.3 per cent. In contrast, the energy sector fell by 2.8 per cent on the quarter.

The seasonally adjusted index of production fell by 2.6 per cent in September 2012 compared with September 2011. This is the 18th consecutive monthly fall on the same month a year ago.

Between August and September 2012 this index fell by 1.7 per cent, following a fall of 0.5 per cent between July and August 2012. The main downward contribution came from the mining & quarrying sector, which fell by 15.3 per cent, contributing 1.9 percentage points to the fall.

There was a further downward contribution from water & waste management which fell by 0.1 per cent.  These falls were partially offset by the manufacturing sector, which rose by 0.1 per cent, and an increase of 0.5 per cent in the energy supply sector.

Manufacturing

Manufacturing output rose by 0.9 per cent between the second quarter of 2012 and the third quarter of 2012; the first rise in quarter on quarter growth since the second quarter of 2011. Of the 13 manufacturing sub sectors eight rose with five falling. Growth in the latest quarter was affected by the changes to bank holidays in the second quarter of 2012 due to the Diamond Jubilee.

The end of May bank holiday moved to June and there was an additional day's holiday in June. Over the second quarter, this resulted in one fewer working days. The largest upward contributions to the rise between quarter two and quarter three came from the manufacture of basic metal & metal products, which rose by 3.1 per cent; the manufacture of basic pharmaceutical products & preparations, which rose by 5.7 per cent, and the transport equipment sector, which rose by 2.4 per cent. The largest downward contribution came from the manufacture of chemical products, which fell by 3.5 per cent.

The seasonally adjusted index of manufacturing fell by 1.0 per cent in September 2012 when compared with September 2011. Nine manufacturing sub sectors fell and four rose. For this period the largest downward contributions to manufacturing output were: the manufacture of chemicals & chemical products, which fell by 9.6 per cent, followed by the manufacture of wood & paper products, which fell by 7.8 per cent. In contrast, the largest upward contribution came from the manufacture of transport equipment, which rose by 8.2 per cent.

Seasonally adjusted manufacturing output rose by 0.1 per cent in September 2012 compared with August 2012, following a fall of 1.2 per cent between July and August 2012. Seven manufacturing sub sectors rose and six fell. The largest contributions to the month on month rise came from the manufacture of pharmaceutical products, which rose by 2.6 per cent, followed by the manufacture of transport equipment which rose by 1.4 per cent.

Mining and quarrying

Mining & quarrying output rose by 2.9 per cent between the second quarter of 2012 and the third quarter of 2012. Users are, however, advised to look at the quarterly figure in context, as this rise follows eight consecutive quarter on quarter falls and is the first quarter on quarter rise since the second quarter of 2010.

Output of the mining & quarrying industries fell by 15.0 per cent in September 2012 compared with September 2011. This was the 24th 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 20.2 per cent.

Between August 2012 and September 2012 the mining and quarrying sector fell by 15.3 per cent. The main contributor to the fall was oil & gas extraction, which fell by 20.9 per cent and contributed 15.6 percentage points to the fall.

Maintenance at a number of sites caused non-seasonally adjusted output to drop in September 2012. Although the ‘summer’ maintenance period for oil & gas extraction tends to be reasonably seasonal the exact timing does vary from year to year.

In the last five years the months most commonly affected have been July and August but maintenance can also impact on June and September (see Figure 1). The slightly unpredictable nature of the timing can sometimes give rise to volatility in the seasonally adjusted series and this is one reason users are advised to take caution when interpreting monthly movements.

Figure 1, Non Seasonally adjusted Oil & Gas Extraction Index

Timeseries graph for Non Seasonally adjusted Oil & Gas Extraction Index
Source: Office for National Statistics

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Energy supply

Energy supply output fell by 2.8 per cent between the second quarter of 2012 and the third quarter of 2012, following a rise of 5.1 per cent between the first and second quarter of 2012. Quarter two 2012 was comparatively cold; April 2012 was reported to be the coldest since 1989 and, as such, this was a factor in increased energy supply at the start of the second quarter of 2012.

Energy supply output in September 2012 fell by 0.5 per cent compared with September 2011. In particular gas supply fell by 17.3 per cent over the same period. This fall was partially offset by electricity supply rising by 3.0 per cent.

Between August 2012 and September 2012 energy supply output rose by 0.5 per cent. This was a result of rises in both gas and electricity supply of 2.3 and 0.2 per cent respectively.

Water & waste management

Water & waste management output rose by 2.3 per cent in the third quarter of 2012 compared with the second quarter of 2012.

Water & waste management rose by 0.2 per cent in September 2012 when compared with September 2011.

Between August 2012 and September 2012 water & waste management output fell by 0.1 per cent.

GDP Impact

The preliminary estimate of quarter three 2012 Gross Domestic Product (GDP), published on 25 October 2012, included a forecasted rise of 1.1 per cent for Index of Production between quarter two and quarter three 2012. This release of data estimates production rising by 0.9 per cent between quarter two and quarter three 2012. The estimated impact on GDP arising from this release of Index of Production data is minimal (less than 0.05 percentage points).

Figure 2, 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 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 September 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 -2.6 -2.58 -1.7 -1.75
Sector B 15.4 -15.0 -1.83 -15.3 -1.88
 Division 06 12.6 -20.2 -1.84 -20.9 -1.93
Sector C 67.0 -1.0 -0.72 0.1 0.09
Sector D 9.6 -0.5 -0.04 0.5 0.05
Sector E 8.0 0.2 0.02 -0.1 -0.01

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 September 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 -0.7 -0.09 0.3 0.04
CB Textiles and leather products 2.0 -1.8 -0.04 -0.2 0.00
CC Wood, paper and printing 5.5 -7.8 -0.39 -1.0 -0.05
CD Coke and petroleum 0.8 -5.2 -0.04 -3.0 -0.02
CE Chemical Products 6.1 -9.6 -0.59 -1.1 -0.06
CF Pharmaceutical Products 6.1 -0.5 -0.02 2.6 0.12
CG Rubber and plastic products 4.7 -7.0 -0.33 0.7 0.03
CH Metal products 8.6 1.2 0.11 -0.1 -0.01
CI Computer, electronic & optical  4.3 4.5 0.17 1.4 0.06
CJ Electrical equipment 2.1 18.0 0.38 1.8 0.05
CK Machinery and equipment 4.8 -5.6 -0.36 -3.0 -0.19
CL Transport equipment 5.7 8.2 0.63 1.4 0.11
CM Other manufacturing & repair 4.5 -3.2 -0.15 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 September 2012 fell by 15.0 per cent compared with September 2011. In particular:

i) oil & gas extraction decreased by 20.2 per cent

ii) the largest contributor to the 15.0 per cent month on same month a year ago fall in overall mining & quarrying was approximately 15.1 percentage points from oil & gas extraction

Manufacturing

The seasonally adjusted index of manufacturing in September 2012 fell by 1.0 per cent compared with September 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 9.6 per cent, and in the manufacture of wood, paper products & printing, which fell by 7.8 per cent

iii) within the manufacture of chemicals & chemical products industries, the main falls were in petrochemicals, which fell by 23.8 per cent and paints, varnishes & similar coatings, which fell by 8.7 per cent

iv) within the manufacture of wood, paper products & printing industries, the main falls were in the printing & reproduction of recorded media, which fell by 11.0 per cent and wood & wood products except furniture, which fell by 6.4 per cent

v) the largest contributors to the 1.0 per cent month on same month a year ago fall in overall manufacturing were approximately 0.8 percentage points from chemicals & chemical products and approximately 0.6 percentage points from wood, paper products & printing

Energy supply

The seasonally adjusted index of the electricity, gas, steam & air conditioning supply industries in September 2012 fell by 0.5 per cent compared with September 2011. The main movements were:

i) manufacture of gas & gas distribution which fell by 17.3 per cent, and contributed 2.9 percentage points to the 0.5 per cent month on same month a year ago fall

ii) electric power generation, transmission & distribution, which rose by 3.0 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 September 2012 rose by 0.2 per cent compared with September 2011. The main movements were:

i) waste collection, treatment & disposal activities, which rose by 2.4 per cent

ii) remediation activities & other waste management services, which rose by 3.8 per cent

iii) the largest contributor to the 0.2 per cent month on same month a year ago rise was 1.0 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 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 has been revised up by 0.2 percentage points and August 2012 has remained 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?

    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.

    Queen's 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), and the Paralympics from 29 August to 9 September. For most economic statistics, any direct effect of the Olympics was mainly reflected in the August estimate, although some of the Paralympics-associated activity took place in September. Wider effects, for example if the presence of the Olympics has influenced the number of non-Olympics tourist visits, may of course affect any of the summer months. 

    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 October 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 October 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 following table presents a summary of the differences between the first estimates published between October 2006 and September 2011 and the estimates published 12 months later.

    Table 4, Revisions September 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 0.9 -0.13 0.31
    Manufacturing - 3 month 0.9 -0.13 0.37
    Production - 1 month -1.7 -0.11 * 0.26
    Manufacturing - 1 month 0.1 -0.09 0.30

    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 (3.45 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:  Friday 07 December 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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