Index of Production, UK: January 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:
12 March 2019

Next release:
10 April 2019

1. Main points

  • Production output fell by 0.8% in the three months to January 2019, compared with the three months to October 2018, due to falls in three main sectors.

  • The three-monthly decrease of 0.7% in manufacturing is due mainly to large falls of 4.0% from basic metals and metal products and 2.0% from transport equipment.

  • Production output rose by 0.6% between December 2018 and January 2019; the manufacturing sector provided the largest upward contribution, rising by 0.8%, its first monthly rise since June 2018.

  • In January 2019, the monthly increase in manufacturing output was due to rises in 8 of the 13 subsectors and follows a 0.7% fall in December 2018; the largest upward contribution came from pharmaceuticals, which rose by 5.7%.

  • In the three months to January 2019, production output decreased by 1.0% compared with the same three months to January 2018; driven by a fall of 1.5% from manufacturing.

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2. Things you need to know about this release

This January 2019 release contains no revisions and is consistent with the National Accounts Revisions Policy. Further to this release, the Quarterly national accounts published on 29 March 2019 will include revised production data from January 2018 to December 2018. These revised data will also include Value Added Tax (VAT) data for the first time in Quarter 3 (July to Sept) 2018.

This release includes VAT data for Quarter 2 (April to June) 2018.

The Index of Production (IoP) is an important economic indicator and one of the short-term measures of economic activity in the UK. It is used in the compilation of gross domestic product (GDP); the production industries’ weight accounts for 13.8% of the output approach to the measurement of GDP.

The current price non-seasonally adjusted estimates of industries collected by the Monthly Business Survey (MBS) can be found in the Monthly Business Survey turnover in production industries dataset, which was published alongside this release. Note that the MBS turnover in production industries dataset does not contain data from VAT returns, which have been included in the IoP.

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

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3. Production in detail

Figures 1 and 2 show that growth for the Index of Production (IoP) and Index of Manufacturing (IoM) was more pronounced from the beginning of 2010, as the economy recovered, before a downturn during 2012. Production and manufacturing output have risen since then but remain 6.8% and 2.7% lower respectively for the three months to January 2019 than the pre-downturn gross domestic product (GDP) peak in Quarter 1 (Jan to Mar) 2008.

Table 1 shows the growth rates and contributions for the IoP and sectors for January 2019.

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4. What is contributing to the three-monthly decrease?

Total production output for the three months to January 2019, compared with the three months to October 2018, decreased by 0.8% (Figure 3), driven by falls in three of the four main sectors.

Providing the largest downward contribution to total production output was a decline of 0.7% in manufacturing output (Figure 3). This was the fourth consecutive three-monthly fall, with 7 of the 13 subsectors displaying downward contributions. The fall in manufacturing is due primarily to strong decreases from basic metals and metal products, which fell by 4.0% and transport equipment, which fell by 2.0%.

Within basic metals, fabricated metal products fell by 4.5%, continuing the recent three-monthly weakness in this sub-industry from November 2018, due mainly to widespread falls from large businesses (with employment greater than 150 persons on average) across the industry.

Within transport equipment, weakness is driven by a 4.0% fall in the motor vehicles, trailers and semi-trailers sub-industry. The weakness is attributed to the impact of shutdowns within this industry during November and December 2018. Users are also directed to the December 2018 Index of Production bulletin, which highlights a number of factors behind a weakening in demand for new cars in the UK since the end of 2016. Additionally, data provided by the Society of Motor Manufacturers and Traders (SMMT) indicates that car manufacturing has fallen for January 2019 compared with January 2018.

Other manufacturing and repair fell by 1.5%, with decreases in three of the five sub-industries.

The fall of 1.7% within electricity and gas supply was due mainly to a decrease of 2.3% from electricity generation and distribution, due to less demand. The temperatures in November and December 2018 were above the long-term average by 1.1 degrees Celsius and 1.9 degrees Celsius respectively.

Mining and quarrying fell by 1.7%, driven by a decrease of 1.7% in oil and gas extraction. This was due mainly to increased output during the three months to October 2018, where notable strength in the monthly index in August 2018 was due to less maintenance taking place than in August 2017. In addition, there was maintenance in November 2018, further reducing output during the most recent three months.

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5. What is contributing to the month on previous month increase?

Monthly total production output increased for the first time since July 2018, rising by 0.6% in January 2019, following a fall of 0.5% during December 2018.

The strength is due primarily to manufacturing increasing by 0.8% and is supported by rises from mining and quarrying of 0.8% and electricity and gas of 0.3%.

Within manufacturing, there is widespread strength this month, with 8 of the 13 subsectors rising, with two sub-sectors remaining flat. Of these, pharmaceuticals, which can be highly volatile, provided the largest positive contribution, with an increase of 5.7%.

There was also a rise of 1.3% from food, beverages and tobacco, following a weaker December 2018, driven by widespread growth in 8 of the 11 sub-industries. This is the strongest growth since a rise of 1.3% in December 2016.

Providing notable strength within basic metals and metal products was a 17.4% rise for weapons and ammunition, the strongest rise since March 2017, when it rose by 25.7%. However, this sub-industry can be highly erratic, with strength this month due mainly to high-value orders from large businesses.

Partially offsetting overall growth in manufacturing was a fall of 1.4% from transport equipment. Within this sector, motor vehicles, trailers and semi-trailers fell by 2.3%.

The mining and quarrying sector rose by 0.8%, led by a rise of 3.4% in other mining and quarrying, due mainly to the cumulative impact of strength from large businesses.

Totally offsetting the upward contribution from mining and quarrying is the largest downward contribution from the water and waste sector, which decreased by 0.9%. Within this sector, waste collection fell by 2.5%, due mainly to strength in December 2018, when output rose by 2.1%, caused by large businesses (with employment greater than 150 persons on average) experiencing less of a decrease in turnover than expected into December 2018.

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6. What is contributing to the three months on same three months a year ago decrease?

Total production output for the three months to January 2019 has decreased by 1.0%, compared with the same three months to January 2018. This was driven by a fall in output from three of the four main sectors.

The electricity and gas sector fell by 2.2%, due primarily to reduced demand following warmer than average temperatures during November and December 2018.

Providing the largest downward contribution was manufacturing, which fell by 1.5%.

The fall in manufacturing was driven by notable decreases from:

  • basic metals and metal products, at 7.6%, due primarily to a fall of 6.8% within fabricated metals; this was caused by cumulative weakness from a number of large businesses, underpinned by a fall in export turnover of 18.3%
  • transport equipment, at 3.8%, due mainly to the impact of shutdowns and reduced production within motor vehicles, trailers and semi-trailers, which fell by 5.3%
  • machinery and equipment not elsewhere classified, at 7.6%, due mainly to export-driven strength displayed during the three months to January 2018

Partially offsetting the decline in overall manufacturing growth was a rise of 6.3% within computer, electronic and optical products. This continued the recent strength within this subsector and was driven by large businesses manufacturing instruments for measuring, testing and navigation.

The food, beverages and tobacco subsector rose by 2.1%, underpinned by strong nominal export growth of 21.9% within alcoholic beverages and tobacco products, as reported in our Monthly Business Survey. Anecdotal evidence suggests that the value of Scotch Whiskey exports were up by 7.8% for 2018 compared with 2017.

Manufacturing output fell for the third consecutive period for the latest three months compared with the same three months a year ago. It is helpful to understand the longer-term trend, which shows that since growth peaked in November 2017 at 3.9%, manufacturing output has slowed, effectively supporting a similar decline in total production output (Figure 4).

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7. Upcoming releases

An article titled, Manufacturing sector performance, UK: 2008 to 2018, will be published on 26 March 2019.

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9. Quality and methodology

The Index of Production (IoP) measures the UK output in the mining and quarrying; manufacturing; energy supply; and water supply and waste management industries. The IoP estimates are based mainly on data from the Monthly Business Survey (MBS).

In addition, from the Index of Production, UK: November 2017 bulletin published in January 2018, Value Added Tax (VAT) data have been included across 64 production industries for small- and medium-sized businesses. For further information as to the use of VAT turnover within the national accounts, please see VAT turnover data in National Accounts: background and methodology (published on 19 March 2018).

On 11 October 2018, we published an article on the future use of VAT as part of the economic review, which considers the strategic collection model for administrative and survey data for short-term indicators, including the Index of Production.

For the mining and quarrying, and energy supply sectors, and two manufacturing industries, namely coke and refined petroleum, and basic iron and steel, we receive volume data from the Department for Business, Energy and Industrial Strategy (BEIS) and the International Steel Statistics Bureau (ISSB) respectively. Unless otherwise stated, all estimates included in this release are based on seasonally adjusted data.

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 (£ millions). However, this is not always comparable with UK trade statistics, for many reasons. These include, but are not limited to:

  • different data sources – MBS are based on a survey of businesses; UK trade in goods uses administrative data collected by HM Revenue and Customs (HMRC)
  • different concepts being measured – MBS reports the value of exports as a proportion of the industry's turnover; the UK trade in goods data report the change in ownership between the UK and other countries
  • time lag – there can be time lags between the sale of a product reported in MBS and the movements of that product reported by UK trade

Further information on UK trade and how data on it are compiled can be found in the Things you need to know about this release section of the UK trade release.

The data collected on the MBS are turnover excluding VAT and exports for some applicable industries. The data collected on the VAT returns are also turnover excluding VAT. These data are then deflated using Producer Price Indices (PPI). Within the manufacturing sector we also receive direct volume data from BEIS for fuel industries and from the International Steel Statistics Bureau for steel industries.

The mining and quarrying sector is comprised mainly of data from BEIS, including volume of oil and gas extraction and coal extraction. The data used to produce the energy sector are also from BEIS and include energy and gas supply output. A comprehensive list of the IoP source data can be found in the Gross domestic product (GDP(O)) source catalogue (XLS, 715KB).

Revisions to the Index of Production can be made for a variety of reasons. The most common include:

  • late responses to surveys and administrative sources
  • forecasts being replaced by actual data
  • revisions to seasonal adjustment factors, which are re-estimated every month and reviewed annually
  • HMRC VAT returns replacing MBS data for small and medium-sized businesses when VAT estimates become available every quarter

Within the suite of datasets published monthly alongside this release, you will find:

The Index of Production Quality and Methodology Information report contains important information on:

  • the strengths and limitations of the data and how it compares with related data
  • uses and users of the data
  • how the output was created
  • the quality of the output including the accuracy of the data

Summary information can be found in the Index of Production Quality and Methodology Information report.

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Contact details for this Statistical bulletin

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