The Producer Price Index (PPI) is a monthly survey that measures the price changes of goods bought and sold by UK manufacturers and provides a key measure of inflation, alongside other indicators such as the Consumer Prices Index (CPI) and Services Producer Prices Index (SPPI). This statistical bulletin contains a comprehensive selection of data on input and output index series. It contains producer price indices of materials and fuels purchased and output of manufacturing industry by broad sector.
The output price indices measure change in the prices of goods produced by UK manufacturers (these are often called 'factory gate prices').
The input price indices measure change in the prices of materials and fuels bought by UK manufacturers for processing. These are not limited to just those materials used in the final product, but also include what is required by the company in its normal day to day running.
Imported Price Indices (IPIs) are a series of economic indicators that measure change in the prices of goods and raw materials imported into the UK. IPIs are a key component of input price indices.
Exported Price Indices (EPIs) are a series of economic indicators that measure change in the prices of goods manufactured in the UK but destined for export markets.
The factory gate price (the output price) is the price of goods sold by UK manufacturers, and is the actual cost of manufacturing goods before any additional charges are added which would give a profit. It includes costs such as labour, raw materials and energy, as well as costs such as interest on loans, site/building maintenance or rent.
Core factory gate inflation excludes price movements from food, beverages, petroleum and tobacco & alcohol products, which tend to have volatile price movements. It should give a better indication of the underlyng output inflation rates.
The input price is the cost of goods bought by UK manufacturers for the use in the manufacturing, such as the actual cost of materials and fuels bought for processing.
Core input inflation strips out purchases from the more volatile food, beverage, tobacco and petroleum industries to give an indication of the underlying input inflation pressures facing the UK manufacturing sector.
The factory gate inflation rate slowed steadily from autumn 2011 until summer 2012, where it remained around 2% until this month where it dropped to just over 1%; the lowest rate since September 2009 (Figure A). The core factory gate inflation, stripping out the more volatile food, beverages, tobacco & petroleum products, showed a similar pattern, running at a lower rate, although the decline was slower because petrol prices were pushing up inflation in autumn 2011, and they have a lesser effect on core inflation. Core factory gate inflation was last at this level in September 2005 and last lower at the beginning of 2005.
In the Budget on 20 March 2013, there were some changes to the duty rates for alcohol and tobacco products. From 20 March 2013, duty rates on tobacco products increased by 2% above the RPI. A similar rise for alcohol duty rates took effect from 25 March with the exception of beer prices, where duty rates were cut by 2%. We estimate that the affect of these changes would have less than a 0.1% increase to the headline factory gate inflation rate.
Looking at the more recent estimates (Table A), movements in factory gate prices over the 12 months to April were as follows:
Factory gate prices rose 1.1%, down from a rise of 1.9% last month. This is the lowest rate since September 2009.
Core factory gate prices rose 0.8%, down from a rise of 1.3% last month.
Factory gate inflation excluding excise duty stood at 1.1%, compared with a rise 1.7% in the year to March.
Between March and April:
Factory gate prices fell 0.1%, compared with a rise of 0.2% between February and March. The main upward contributions were from food products, tobacco & alcohol products. These were partially offset by a fall in the price of petroleum, and chemcials & pharmaceutical products (see Table C).
Core factory gate prices rose 0.1%, the same movement as last month.
|All manufactured products||Excluding food, beverages, tobacco & petroleum||All manufactured products excluding duty|
|1 month||12 months||1 month||12 months||1 month||12 months|
Table B shows the annual percentage change in price across all product groups and Figure B shows their contribution to the annual factory gate inflation rate. Table C and Figure C show the same information but for the monthly factory gate inflation rate.
|Product group||Percentage change|
|Tobacco & alcohol||3.7|
|Clothing, textiles & leather||1.3|
|Paper & printing||-1.0|
|Chemicals & pharmaceuticals||-0.5|
|Metal, machinery & equipment||0.4|
|Computer, electrical & optical||1.6|
|Other manufactured products||1.1|
|Product group||Percentage change|
|Tobacco & alcohol||0.9|
|Clothing, textiles & leather||0.2|
|Paper & printing||0.0|
|Chemicals & pharmaceuticals||-0.5|
|Metal, machinery & equipment||0.1|
|Computer, electrical & optical||0.6|
|Other manufactured products||0.0|
Factory gate prices rose 1.1% in the year to April, compared with a rise of 1.9% in the year to March. This is the lowest rate since September 2009. The price index fell 0.1% between March and April, compared with a rise of 0.2% between February and March. The main downward contribution to the monthly fall was a 2.7% decrease in petroleum products, partially offset by a 0.7% increase in the price of food products and a 0.9% rise in the price of tobacco & alcohol products (Table C).
Petroleum product prices fell 2.7% between March and April, and fell 4.1% in the year to April.
Food product prices rose 0.7% between March and April, and rose 4.6% in the year to April as shown in Tables B and C. The monthly rise was due to meat and fish products.
Tobacco and alcohol product prices rose 0.9% between March and April, and rose 3.7% in the year to April. Tobacco prices rose 2.8% between March and April, and rose 7.9% in the year to April. Alcohol prices fell 0.3% between March and April, and rose 1.4% in the year to April.
Core factory gate prices, which exclude the more volatile food, beverages, tobacco and petroleum product prices, giving a measure of the underlying factory gate inflation, rose 0.8% in the year to April. Core inflation was last at this level in September 2005, and last lower in January 2005 (0.6%). Between March and April, core factory gate inflation rose 0.1%. This index is not affected by changes in excise duty.
Since autumn 2011 the price of materials and fuels purchased by UK manufacturing industry (input prices), fell quite rapidly from an annual inflation of around 18% to deflation (prices lower than they were in the same month of the previous year) of around 2% in the middle of 2012 (Figure D). Since then input inflation gradually increased to around 2% in February 2013, declining slightly over the last couple of months. Over this period core input inflation (purchases by manufacturing industries other than the more volatile food, beverages, tobacco and petroleum industries) shows a similar but smoother trend.
Looking at the more recent data (Table D), the key movements were as follows:
The total input price index fell 0.1%, compared with a rise of 0.8% in the year to March.
The core input price index saw a rise of 1.1%, compared with a rise of 1.9% in the year to March.
Between March and April:
In seasonally adjusted terms, (see Table D) the input price index for the manufacturing industry excluding the food, beverages, tobacco & petroleum industries fell 0.6% between March and April down from a fall of 0.5% between February and March.
The total input price index fell 2.3%, compared with a rise of 0.1% between February and March. The total input price index saw falls in most of the indices with the biggest decreases from crude oil (6.3%) imported metals (3.0%) and fuels (2.1%). These were partially offset with a rise of 1.4% in the price of home produced foods and a 0.4% increase in the price of other home produced materials (see Table F).
|Materials & fuels purchased||Excluding food, beverages, tobacco & petroleum industries|
|1 month||12 months||1 month||12 month||1 month|
NSA: Not seasonally adjusted
Table E and Figure E show the percentage change in the price of the main commodities groups over the year and their contributions to the total input index. Table F and Figure F show the same for the monthly input prices.
|Product group||Percentage change|
|Fuel incl. CCL||6.9|
|Home food materials||18.0|
|Imported food materials||4.6|
|Other home-prod. materials||-1.2|
|Imported parts & equipment||2.5|
|Other imported materials||2.2|
|Product group||Percentage change|
|Fuel incl. CCL||-2.1|
|Home food materials||1.4|
|Imported food materials||-0.1|
|Other home-prod. materials||0.4|
|Imported parts & equipment||-1.3|
|Other imported materials||-0.6|
The overall input index for all manufacturing, that is the price of materials and fuels purchased by manufacturers, fell 0.1% in the year to April, compared with a rise of 0.8% in the year to March.
The input index fell 2.3% between March and April, compared with a rise of 0.1% between February and March. The main downward contributions to the monthly fall in the price index were from crude oil, imported metals and fuels. The main upward contributions came from home produced food products and other home produced materials (see Table F and Figure F).
The index for crude oil fell 6.3% between March and April, and fell 10.4% in the year to April.
The index for imported metals fell 3.0% between March and April, and fell 5.0% in the year to April. (see Tables E and F).
The index for fuels fell 2.1% between March and April, and rose 6.9% in the year to April. Fuel prices fell 3.1% between February and March 2012 causing a large increase in the annual price movement. Gas and electricity prices have been above all previous years except for January 2013. Gas prices fell due to the unseasonally low temperature in March 2013 but finally moved towards more average temperatures for April.
The index for home produced food rose 1.4% between March and April, and rose 18.0% in the year to April.
The index for other home produced materials rose 0.4% between March and April and fell 1.2% in the year to April (Tables E and F).
The core input price index in seasonally adjusted terms fell 0.6% between March and April. The unadjusted index fell 1.2% between March and April, and rose 1.1% rise in the year to April.
For this bulletin reference tables 8R and 9R (232.5 Kb Excel sheet) highlight revisions to movements in price indices previously published in last month’s statistical bulletin . These are mainly caused by changes to the most recent estimates, as more price quotes are received, and revisions to seasonal adjustment factors, which are re-estimated every month. The headline figures for input prices for October and November have upwards revisions and there are no revisions for headline output prices. These revisions were mainly caused by quality adjustments due to late data.
|Revisions between first publication and estimates twelve months later|
|Value in last period||Average over the last 5 years||Average over the last 5 years without regard to sign (average absolute revision)|
|Total output: 12 months||1.1||-0.11||0.18|
|Total output: 1 month||-0.1||0.03||0.10|
|Total input: 12 months||-0.1||0.41*||0.70*|
|Total input: 1 month||-2.3||0.15*||0.41*|
Revisions to data provide one indication of the reliability of key indicators. The above table shows summary information on the size and direction of the revisions which have been made to the data covering a five year period. A statistical test has been applied to the average revision to find out if it is statistically significantly different from zero. An asterisk (*) shows that the test is significant.
The table presents a summary of the differences between the first estimates published between November 2006 and October 2011 and the estimates published 12 months later. These numbers include the effect of the reclassification onto SIC 2007.
Spreadsheets giving revisions triangles of estimates for all months from January 1998 through to January 2013 and the calculations behind the averages in the table are available in the reference table area of the ONS website;
From March 2013, ONS stopped producing the PPI records within the monthly statistical bulletins. These data are available separately on the ONS website. (79.5 Kb Excel sheet)
Article about rebasing the PPI and SPPI onto 2010=100
An article outlining plans to rebase the producer prices index and services producer price index, at the end of 2013, can be found on the ONS website.
Quality and Methodology Information
A Quality and Methodology Information (QMI) (95.6 Kb Pdf) paper for the PPI describes in detail the intended uses of the statistics presented in this publication, their general quality and the methods used to produce them.
Producer Price Index and Services Producer Prices: implementation of SIC 2007
Producer Prices has implemented the change to the Standard Industrial Classification 2007 (SIC 2007). The most significant change to PPI output prices involves the reclassification of ‘recovered secondary raw materials’ and ‘publishing’. These are no longer classified in the manufacturing sector, but are classified under services. In addition to this, a new SIC division, ‘repair, installation and maintenance of machinery and equipment’ has been created. Under SIC 2003 these activities were classified within the output of manufacturing, but as part of the specific industries where this activity took place.
Fundamental changes have been made to the classification of the PPI Trade surveys, Import Price indices (IPI) and Export Price Indices (EPI). As part of the reclassification project the classification of these trade surveys have become compliant with Eurostat’s Short Term Statistics Regulation. The collection of IPI and EPI will now be on an SIC basis, a switch from the Standard International Trade Classification (SITC) and Combined Nomenclature (CN) previously used. PPI input prices are heavily dependent on IPI.
For further information on the changes and impact of the SIC 2007 on prices please see the Economic and Labour Market Review for December 2010 (84.1 Kb Pdf) .
Any comments about this work and its impact on PPI please contact Producer Price Index Operations on +44 (0)1633 45 6628 or email PPI.
Relevance to users
Index numbers shown in the main text of this bulletin are on a net sector basis. The index for any sector relates only to transactions between that sector and other sectors, sales and purchases within sectors are excluded. However, the more detailed figures shown in reference tables 4 and 6 (232.5 Kb Excel sheet) are on a gross basis; that is, intra industry sales and purchases are included in each of these indices.
Indices relate to average prices for a month. The full effect of a price change occurring part way through any month will only be reflected in the following month’s index.
All index numbers exclude VAT. Excise duty (on cigarettes, manufactured tobacco, alcoholic liquor and petroleum products) are included, except where labelled otherwise. Since PPIs exclude VAT, they are not affected by the increase in the standard rate of VAT to 20% from 4 January 2011.
The detailed input indices of prices of materials and fuels purchased by industry (reference table 6) (232.5 Kb Excel sheet) do not include the climate change levy (CCL). This is because each industry can, in practice, pay its own rate for the various forms of energy, depending on the various negotiated discounts and exemptions that apply.
Common pitfalls in interpreting series
Expectations of accuracy and reliability in sample surveys are often too high. Revisions and sampling variability are inevitable consequences of the trade off between timeliness, accuracy and the burden on respondents. Details of sampling variability are included elsewhere in this bulletin.
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 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 are discovered and corrected.
Definitions and explanations
Definitions found within the main statistical bulletin are listed here:
A measure of the average level of prices, quantities or other measured characteristics, relative to their level for a defined reference period of location. It is expressed as a percentage above or below, but relative to, the base index of 100.
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. Seasonal adjustment removes regular variation from a time series. Regular variation includes effects due to month lengths, different activity near particular events, such as bank holidays and leap years.
All characteristics that determine the price of the products - including quantity of units sold, transport provided, rebates, service conditions, guarantee conditions and destination - are taken into account.
The appropriate price is the basic price, which excludes VAT and similar deductible taxes directly linked to turnover, as well as all duties and taxes on the goods and services invoiced by the unit, whereas any subsidies on products received by the producer are added.
Transport costs are included but only as part of the product specification.
An actual transaction price and not a list price is given to show the true development of price movements.
The output price index takes into account the quality changes in products.
The price collected in period t refers to orders booked during period t (time of the order), not when the commodities leave the factory gates.
For output prices on the non-domestic market, the price is calculated at national frontiers, FOB (free on board). This means that the seller pays for transportation of the goods to the port of shipment, plus loading costs, and the buyer pays freight, insurance, unloading costs and transportation from the port of destination to the factory.
Figures for the latest two months are provisional and the latest five months are subject to revisions in light of (a) late and revised respondent data and (b), for the seasonally adjusted series; revisions to seasonal adjustment factors are re-estimated every month. A routine seasonal adjustment review is normally conducted in the autumn each year.
Every five years, producer price indices are rebased, and their weights updated to reflect changes in the industry. The article (51.5 Kb Pdf) referred to in background note 1, informs users about work underway to rebase PPIs from a 2005=100 basis to a 2010=100 basis, and update the weights. PPIs will move to a 2010=100 basis from autumn 2013. More information about the impact of rebasing will be published as the project progresses and will be drawn to users attention in the regular statistical bulletin.
The complete run of data in the tables of this bulletin are also available to view and download in other electronic formats free of charge using the Office for National Statistics Datasets and Reference Table service (if you want the data associated with this bulletin click into Download data in this release option). Users can download the complete release in a choice of zipped formats or view and download their own selections of individual series.
Details of the policy governing the release of new data are available from the Media Relations Office. A list of the names of those given pre-publication access to the contents of this bulletin is available on the Producer Price Index: Pre-Release Access List.
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|Liam Murray||+44 (0)1633 455811||Business Price Statistics, ONSfirstname.lastname@example.org|