Statistical bulletin: Index of Services, April 2012

Key points

• The seasonally adjusted Index of Services increased by 2.0 per cent in April 2012 compared with April 2011 (note that comparisons with April 2011 are affected by special events last year, including the additional bank holiday for the Royal Wedding)
• All of the four service sector components increased in the most recent month compared with the same month a year ago
• Business services & finance rose by 2.1 per cent and transport storage & communication rose by 4.8 per cent. These were the largest contributions to the increase
• Between March 2012 and April 2012, service sector output was flat
• The earliest period open for revision in this release is January 1997

Key figures

Table 1: Index of Services Key Figures

April 2012

Supplementary analysis

The seasonally adjusted Index of Services increased by 2.0 per cent in April 2012 compared with April 2011. Business services & finance increased by 2.1 per cent; transport, storage & communication increased by 4.8 per cent; distribution, hotels & restaurants increased by 0.9 per cent and government & other services increased by 1.3 per cent. Note that comparisons with April 2011 are affected by special events last year, including the additional bank holiday for the Royal Wedding. The index for April 2011 fell by 1.3 per cent compared with March 2011.  Subsequently comparisons with April 2011 will be stronger than usual.

The Index of Services is flat in April 2012, when compared with March 2012. Transport, storage & communication increased by 0.4 per cent; distribution, hotels & restaurants decreased by 0.8 per cent; business, services & finance increased 0.1 per cent; and government & other services increased 0.1 per cent.

More detail on the particular divisions driving these changes can be found in the IOSCOMP tables in the data section of this bulletin. The tables also provide information on the growth for the three months ending in April 2012 compared with the previous three months and compared with the three months ending April 2011.

Services in detail

The Index of Services measures the chained volume index movements of the UK service sector. The services sector now accounts for more than three quarters of total gross domestic product. 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 services statistics is available in the background notes.

Table 2: Growth rates and contributions to the Index of services

April 2012

Table source: Office for National Statistics

Sector analysis

Distribution, hotels & restaurants

The seasonally adjusted index of distribution, hotels & restaurants in April 2012 increased by 0.9 per cent compared with April 2011. In particular:

• Output increased in three of the five components

• The upward movements were in food & beverage service activities, accommodation and wholesale, retail & the repair of motor vehicles & motor cycles, which increased by 6.4 per cent, 4.6 per cent and 1.9 per cent respectively.

Transport, storage & communication

The seasonally adjusted index of transport, storage & communication in April 2012 increased by 4.8 per cent compared with April 2011. In particular:

• Output increased in six of the eight published components

• The main upward movements were in computer programming, consultancy & related activities, which rose by 8.1 per cent, and telecommunications, which rose by 9.9 per cent.

Business services & finance

The seasonally adjusted index of business services & finance in April 2012 increased by 2.1 per cent compared with April 2011. In particular:

• Output increased in three of the five published components

• The main upward movements were in administrative & support service activities, which rose by 6.7 per cent, and other professional service activities, which rose by 6.2 per cent.

Government & other services

The seasonally adjusted index of government & other services in April 2012 increased by 1.3 per cent compared with April 2011. In particular:

• Output increased in four of the six published components

• The main upward movement was in human health & social work activities, which rose by 2.3 per cent.

Revisions

This release conforms to the standard revisions policy for National Accounts. The earliest period open for revision is January 1997.

Background notes

1. What's New?

   Economic Analysis

   Additional supporting economic analysis relating to the Index of Services release can be found at Economic Review. 

   Blue Book 2012

   The estimates in this statistical bulletin are consistent with this year’s Blue Book, to be published on 31 July 2012. An article describing the content of Blue Book 2012 is available on the ONS website. The base year and reference year for chained volume estimates have both moved on from 2008 to 2009.

   The estimates included in this release are also consistent with Quarterly National Accounts published on 28 June 2012.  This article looks at the impact of changes in the National Accounts and economic commentary for 2012 quarter 1.

   Changes to bank holidays in May and June 2012

   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 will count as a statistical special event in line with ONS's policy on Special Events. The event is not regular, so there will not be an adjustment to account for it as part of the seasonal adjustment process. Users are therefore likely to see an effect related to an additional working day in May and two fewer working days in June in the seasonally adjusted series. ONS will include commentary with releases as usual, including commentary specifically to help users with the interpretation of statistics in these two months. Nevertheless, caution should be taken when interpreting the movements in affected outputs involving May and June 2012.

   Treatment of Olympic ticket sales

   An article titled 'Treatment of the Sale of Olympic Tickets' (11.1 Kb Pdf) in the National Accounts is available on the ONS website.

2. Understanding the data

   Short guide to the Index of Services

   The Index of Services shows the monthly movements in the gross value added of the service industries (2007 Standard Industrial Classification (SIC 2007) section G to T). This sector accounts for around 76 per cent of gross domestic product (GDP) in 2008. The index is estimated using the same data sources and national accounts methodology as the quarterly estimate of service industries’ gross value added within the output measure of GDP (GDP(O)). These consist of the distribution, hotels and restaurant industries (SIC 2007 section G and I), transport storage and communication (section H and J), business services and finance (sections K to N) and government and other services (sections O to T).

3. Interpreting the data

   Some monthly data are volatile. When looking at growth rates, the headline Index of Services figures focus on the percentage change between the most recent month on a year earlier and the most recent three months on a year earlier.

   Figures for the most recent months are provisional and subject to revision in light of (a) late responses to surveys and administrative sources, (b) where forecasts are replaced by actual data and (c) revisions to seasonal adjustment factors which are re-estimated every month and reviewed annually (changes from the latest review are included in this release).

   In the first and second months of each quarter the Index of Services statistical bulletin is published on the same days as the Gross Domestic Product Preliminary Estimate statistical bulletin and the Second Estimate of GDP (formerly UK Output, Income and Expenditure) statistical bulletin. In the third month of each quarter the Index of Services statistical bulletin is published on the first working day after the Quarterly National Accounts statistical bulletin.

   As previously stated, data for the Index of Services in this statistical bulletin are consistent with the Quarterly National Accounts published on 28 June 2012. Data for the retail sector are broadly comparable with the Retail Sales Index published on 21 June 2012, although adjustments to the data within the IoS release are sometimes made at the time of the Blue Book to improve the coherence of the three measures of GDP (there can also be timing differences in the updating of the two series). 

4. 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.

   Gross Domestic Product

   The total value of output in the economic territory. It is the balancing item on the production account for the whole economy. Domestic product can be measured gross or net. It is presented in the new accounts at market (or purchaser's) prices. A further distinction is that it can be at current or constant prices.

   Index number

   A measure of the average level of prices, quantities or other measured characteristics relative to their level for a defined base reference period or location. It is usually expressed as a percentage above or below, but relative to, the base index of 100.

5. Use of the data

   The ONS work programme consultation which ended in December 2010 looked at customers' views on how ONS could address customers’ needs within a reducing budget.

6. Methods

   A link is available to view the Index of Services methodology.

7. Composition of the data

   The Index of Services uses a wide variety of different data, from many sources, which are produced on either an annual, quarterly or monthly basis.

   Some of the indicators 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 Services.

   More information on Monthly Business Survey data can be found within the Economic and Labour Market Review release.

   Other sources use direct volume measures that do not need to be deflated, such as Royal Mail Group data regarding postal services and Civil Aviation Authority data for air transport. Other proxies, such as employment numbers, are used also. This occurs with Public Sector Employment, and Work Force Jobs data.

   Where monthly data are not available (for example when data are delivered quarterly or annually), monthly estimates are derived by forecasting data. This is done using the X12 Arima forecasting method and interpolating a monthly path using a cubic spline.

   An X12 Arima forecast is also used where actual data are not available for the latest period (a lower proportion of actual data are available for the latest month).

   When the forecast is replaced by actual data, this may lead to revisions to the published data.

   The IoS output is designated as a national statistic, although a number of components are experimental. The move to SIC 2007 has moved some experimental components into national statistics components and vice versa.

   In the coming months a paper will be released providing an overview of these changes. The experimental components on a SIC 2003 basis were:

   • Water transport,

   • Financial intermediation, 

   • Insurance and pension funding, 

   • Activities auxiliary to financial intermediation, 

   • Real estate activities, 

   • Renting of machinery and equipment, 

   • Computer and related activities, 

   • Research and development, 

   • Health and social work: private sector, 

   • Activities of membership organisations not elsewhere classified, 

   • Recreational, cultural and sporting activities: radio and TV, and betting and gaming, 

   • Private households with employed persons.

8. 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 adjustment.

9. Basic quality information

   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 statements 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.

   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.

10. 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 to derive the volume. These volumes are described as ‘at constant prices’.

    Within the Index of Services, all series, unless otherwise quoted, are measured at constant market prices. Deflators adjust the value series to take out the effect of price changes to give the volume series.

11. Summary quality report

    A summary quality report (146.4 Kb Pdf) for the Index of Services release is provided on the National Statistics website.

12. National Accounts revisions policy

    Key documentation explaining the National Accounts revisions policy (67.8 Kb Pdf)  is available.

13. Revisions triangles

    SIC 2007 revisions triangles are contained in a zip folder. This folder can be found within the data section of this bulletin.

    Revisions to data provide one indication of the reliability of key indicators. A statistical test has been applied to the average revision to find out if it is statistically significantly different from zero. The result of the test is that the average revision is not statistically significantly different from zero.

    The table below presents a summary of the differences published between April 2006 and March 2011 and the estimates published 12 months later.

    Table 3: Revisions between first publication and estimates twelve months later

    	Value in latest period	Revisions between first publication and estimates twelve months later
    		Average over the last 60 months	Average over the last 60 months without regard to sign (average absolute revision)
    Index of Services 3 month on 3 month growth rate	0.0	0.01	0.22
    Index of Services 1 month on 1 month growth rate	0.0	-0.06	0.24

    Table source: Office for National Statistics

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14. Publication policy

    Details of the policy governing the release of new data are available from the press office. Also available is a pre release access list (30.6 Kb Pdf) 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 within the data section of this publication.

15. Accessing data

    The complete run of data in the tables of this statistical bulletin is also available to download from the data section of this publication.

    ONS provides an analysis of past revisions in the IoS and other statistical bulletins which present time series at ONS Policy on Standards for presenting revisions in time series First Releases (244.6 Kb Pdf) .

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