Index of Production, UK: December 2019

Movements in the volume of production for the UK production industries: manufacturing, mining and quarrying, energy supply, and water and waste management. Figures are seasonally adjusted.

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This is an accredited national statistic.

Contact:
Email Mark Stephens

Release date:
11 February 2020

Next release:
11 March 2020

1. Main points

  • Total production output decreased by 0.8% for Quarter 4 (Oct to Dec) 2019, compared with Quarter 3 (July to Sept) 2019; this was led by manufacturing output, which fell by 1.1%.

  • The quarterly fall in manufacturing is because of widespread weakness, with 11 of the 13 subsectors providing downward contributions; this was led by transport equipment, which fell by 1.9%.

  • Production output rose by 0.1% between November 2019 and December 2019, with manufacturing providing the largest upward contribution, rising by 0.3%.

  • The monthly increase of 0.3% in manufacturing output was because of transport equipment, which rose by 3.2%; only 4 of the 13 subsectors displayed upward contributions.

  • For Quarter 4 2019, production output decreased by 2.0%, compared with Quarter 4 2018; this was led by a fall in manufacturing of 2.5%.

  • Production output fell by 1.3% in the 12 months to December 2019, compared with the 12 months to December 2018; this is the largest annual fall since 2012 and was led by manufacturing output, which fell by 1.5%.

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2. Production

Total production output for Quarter 4 (Oct to Dec) 2019 fell by 0.8%, compared with Quarter 3 (July to Sept) 2019.

Manufacturing output provided by far the largest downward contribution (Figure 1), falling by 1.1%; this was led by widespread weakness throughout the sector, with negative contributions from 11 of the 13 subsectors. The downward contribution from mining and quarrying, which fell by 2.8%, was offset by positive contributions from electricity and gas, which rose by 1.8%, and water and waste, which rose by 0.5%.

Growth for the Index of Production (IoP) was more pronounced from the beginning of 2010, as the economy recovered from the 2008 economic downturn, before a downturn during 2012. Production output in the UK was 6.6% lower for Quarter 4 2019 than the pre-downturn peak for Quarter 1 (Jan to Mar) 2008. Additionally, the current three-monthly rolling index level is the lowest since November 2016.

Total production output for the 12 months to December 2019 compared with the 12 months to December 2018 fell by 1.3%; this is the largest annual fall since 2012. Figure 3 shows that manufacturing drives the weakness year on year, led by notable falls from transport equipment and machinery and equipment not elsewhere classified of 6.2% and 7.7% respectively (Figure 5).

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3. Manufacturing

Growth for the Index of Manufacturing (IoM) was more pronounced from the beginning of 2010, as the economy recovered from the 2008 economic downturn, before a downturn during 2012. Manufacturing output in the UK remained 4.5% lower in Quarter 4 (Oct to Dec) 2019 than the pre-downturn peak in Quarter 1 (Jan to Mar) 2008. Additionally, the current three-monthly rolling index level is the lowest since November 2016.

For further detail on the longer-term trend within manufacturing, please see the article, Manufacturing sector performance, UK: 2008 to 2018, published on 2 April 2019. The article provides an overview of the changes in the manufacturing sector between 2008 and 2018, focusing on the industries that have grown or shrunk the most.

Total manufacturing output for Quarter 4 2019 fell by 1.1%, compared with Quarter 3 (July to Sept) 2019, which fell by 0.2%. During Quarter 4 2019, of the 13 subsectors, 11 displayed negative contributions; these were led by:

  • transport equipment, which fell by 1.9%, caused by weakness from motor vehicles, trailers and semi-trailers, which fell by 4.2% because of the additional impact of shutdowns during November 2019; this industry is still showing a longer-term decline, as highlighted by the three months on same three months a year ago indicator, which fell by 6.2%, and the fall in annual output of 9.1%

  • machinery and equipment, which fell by 2.4% owing to widespread weakness during November and December 2019

  • basic pharmaceutical products, which fell by 2.4%, mainly because of export-driven monthly weakness during December 2019

The largest upward contribution came from computer, electronic and optical products, which rose by 1.2%, mainly because of monthly export-driven strength during October 2019.

Monthly total manufacturing output in December 2019, compared with November 2019, rose by 0.3%, despite only 4 of the 13 subsectors displaying upward contributions; these were most notably from:

  • transport equipment (3.2%), where the motor vehicles, trailers and semi-trailers industry (5.0%) displayed a partial bounceback following the strong impact from factory shutdowns during November 2019

  • widespread strength from chemicals and chemical products (3.2%), which is a bounceback following a fall of 4.0% during November 2019 impacted by shutdowns

  • basic metals and metal products (1.6%) because of widespread strength, led by a 0.8% increase from fabricated metal products

Without the strength from motor vehicles, trailers and semi-trailers, total manufacturing monthly output would have declined.

For Quarter 4 2019, compared with Quarter 4 2018, total manufacturing output declined by 2.5%; this is the third consecutive quarter on same quarter a year ago decline, further highlighting weakness throughout 2019 compared with 2018. There was widespread weakness, with 8 of the 13 subsectors providing downward contributions; these were led by:

  • machinery and equipment, which fell by 8.9%

  • widespread weakness from chemicals and chemical products, which fell by 7.9%

  • transport equipment, which fell by 3.4%, a continuation of ongoing weakness since June 2018

  • long-term weakness from other manufacturing and repair, which fell by 4.8%

Partially offsetting overall weakness was strength from basic metals and metal products (2.6%) owing to a 5.2% increase from fabricated metals.

The longer-term decline in total manufacturing output is supported by the annual fall of 1.5%; this is the largest fall since 2009, when annual output fell by 8.6%. The most notable fallers this year were:

  • transport equipment, which fell by 6.2%

  • machinery and equipment not elsewhere classified, which fell by 7.7% because of a steady decline during 2019

  • other manufacturing and repair, which fell by 3.0% because of a steady decline over the second half of 2019

  • rubber and plastic products, which fell by 3.5%, a continuation of longer-term weakness since 2017

Providing the largest upward contribution was a strong rise of 6.5% from basic pharmaceutical products, partially offsetting the overall decline in annual output (Figure 5).

The weakness within transport equipment has been led by a longer-term decline in output since the beginning of 2018 from the motor vehicles, trailers and semi-trailers industry, which fell by 9.1% during 2019. The factors behind the decline for this industry have been documented in previous releases, but the impact of shutdowns in 2019, especially during April and November 2019, have also contributed to the significant annual weakness.

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4. Mining and quarrying

Because of notable weakness from the oil and gas extraction industry during October 2019, quarter on same quarter a year ago and quarterly sector level growth fell by 3.7% and 2.8% respectively.

The annual indicator displays a marginal fall of 0.5%, mainly because of the impact of oil field closures during October 2019, when monthly oil and gas extraction output fell by 8.2%.

Mining and quarrying output, led by oil and gas extraction, has suffered a steady longer-term decline since the annual index peaked in 1999 at 232.0. Figure 5 shows a sharp decline in annual output between 2007 and 2013, mainly resulted from weak demand during the global downturn. Additionally, the continuing closure of older oil fields, in part because of higher costs and volatility in oil prices, has also been a drag on growth. Consecutive periods of steady growth during 2017 and 2018 were mainly because of increased output from newer fields coming online.

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5. Electricity and gas

The quarterly growth of 1.8% was driven by electricity supply, which increased by 1.8%, supported by gas supply, which rose by 1.6%.

In contrast, monthly output fell by 1.2% in December 2019 because of decreased demand for both electricity and gas supply, resulting in falls of 1.2% and 1.5% respectively. The Met Office reported that the provisional UK mean temperature was 5.1 degrees Celsius, which is 1.3 degrees Celsius above the 1981 to 2010 long-term average.

The quarter on same quarter a year ago indicator fell by 0.8%, mainly because of gas supply, which fell by 7.1%, but partially offset by a rise of 1.2% from electricity supply.

The annual indicator fell by 2.9% driven by falls in both industries, with electricity supply falling by 2.6% and gas supply falling by 4.0%.

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6. Water and waste

Sector-level growth for the longer-term indicators is driven by work carried out on waste treatment projects, which is the underlying factor behind strength across waste collection. This is highlighted by the current quarter on same quarter a year ago growth of 2.9% and the annual growth of 5.9% for this industry.

Despite strength in the longer-term indicators within waste collection, quarterly output declined by 0.7% for this industry; this was led by weakness from large businesses during October and November 2019. However, this was offset by rises from water supply (1.0%) and sewerage (1.1%), driving the overall sector level rise of 0.5%.

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7. Index of Production data

Index of Production time series
Dataset DIOP | Released 11 February 2020
Movements in the volume of production for the UK production industries: manufacturing, mining and quarrying, energy supply, and water and waste management. Figures are seasonally adjusted.

Output of the production industries
Dataset | Released 11 February 2020
Index values and growth rates for production, manufacturing and the main industrial groupings in the UK.

Index of Production and industry sectors to four decimal places
Dataset | Released 11 February 2020
Monthly index values for production and the main Index of Production (IoP) sectors in the UK to four decimal places.

Monthly Business Survey turnover in production industries
Dataset | Released 11 February 2020
Monthly Business Survey (MBS) production industries’ total turnover, domestic sales and exports in the UK. Figures are in current price and non-seasonally adjusted.

Export proportions for manufacturing industries
Dataset | Released 11 February 2020
Monthly, quarterly and annual export data for the manufacturing industries, collected by the MBS at industry level in the UK.

All data related to the IoP are available on the Related data page.

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8. Glossary

Index number

The index number is a measure of the average level of prices, quantities or other measurable characteristics relative to their level for a defined time period or location.

Industrial classification or breakdown

The industrial classification or breakdown is the internationally standardised method for classifying the wide range of industrial sectors in an economy. We use the Standard Industrial Classification 2007 (SIC 2007) for industrial breakdowns.

Manufacturing

The manufacturing sector includes the output of manufacturing industries and is broken down into 13 subsectors.

Monthly Business Survey

The Monthly Business Survey (MBS) collects information on the monthly turnover of UK businesses within the production and services sectors from various industrial sectors and regions in the UK.

Production

The production sector includes the output in the manufacturing (the largest component of production), mining and quarrying, energy supply, and water supply and waste management industries.

Turnover

The turnover of a company is the value of the goods or services sold during a particular time period. It includes total takings or invoiced sales and receipts. Interest and similar income, other operating income, and extra ordinary income is excluded. Value Added Tax (VAT) invoiced to the customer is excluded.

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9. Measuring the data

After EU withdrawal

As the UK leaves the EU, it is important that our statistics continue to be of high quality and are internationally comparable. During the transition period, those UK statistics that align with EU practice and rules will continue to do so in the same way as before 31 January 2020.

After the transition period, we will continue to produce our national accounts statistics in line with the UK Statistics Authority’s (UKSA’s) Code of Practice for Statistics and in accordance with internationally agreed statistical guidance and standards.

The Withdrawal Agreement outlines a need for UK Gross National Income (a fundamental component of the national accounts, which includes gross domestic product (GDP)) statistics to remain in line with those of other EU countries until the EU budgets are finalised for the years in which we were a member. To ensure comparability during this cycle, the national accounts will continue to be produced according to European System of Accounts (ESA) 2010 definitions and standards.

The Index of Production (IoP) uses data from a variety of sources and is calculated by taking turnover and removing the impact of price changes or by using direct volume estimates.

The majority of data are collected as “turnover values” through the Monthly Business Survey (MBS). In addition, direct volume series are collected by the Department for Business, Energy and Industrial Strategy (BEIS) and the International Steel Statistics Bureau (ISSB) for steel industries.

From January 2018, Value Added Tax (VAT) data have also been included across 64 production industries for small- and medium-sized businesses. For more information, see VAT turnover data in national accounts: background and methodology.

A comprehensive list of the IoP source data can be found in the Gross domestic product (GDP(O)) source catalogue (XLS, 715KB).

More quality and methodology information on strengths, limitations, appropriate uses, and how the data were created is available in the UK Index of Production QMI.

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10. Strengths and limitations

Seasonal adjustment

The data published in the Index of Production (IoP) release are all seasonally adjusted (although non-seasonally adjusted estimates are also available). This aids interpretation by removing annually recurring fluctuations, for example, those caused by holidays or other seasonal patterns.

Data volatility

Care should be taken when using the month-on-month growth rates as data can be volatile. Longer-term growth rates and examination of the time series allow for better interpretation of the statistics.

Comparability with UK trade statistics

The Monthly Business Survey (MBS) turnover in production industries dataset produces the proportion of turnover from exports by industry and level of turnover and exports (British Pound, millions). However, this is not always comparable with UK trade statistics. Further information on UK trade and how data on it are compiled can be found in the UK trade release.

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Contact details for this Statistical bulletin

Mark Stephens
indexofproduction@ons.gov.uk
Telephone: +44 (0)1633 456387