Index of Production, UK: June 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.

This is not the latest release. View latest release

9 August 2019 12:34

A correction has been made to bullet point 3 in the main points section. This was due to a small error. You can see the original content in the superseded version.

We apologise for any inconvenience.

View superseded version
This is an accredited national statistic.

Contact:
Email Mark Stephens

Release date:
9 August 2019

Next release:
9 September 2019

1. Main points

  • Production output fell by 1.4% for Quarter 2 (Apr to Jun) 2019, compared with Quarter 1 (Jan to Mar) 2019 reversing the 1.1% increase in Quarter 1 2019.

  • To add further context to the volatility in growth during Quarter 1 2019 and Quarter 2 2019, the six months to June 2019 compared to the six months to December 2018 results in 0.0% growth in both the Index of Production and Index of Manufacturing.

  • The quarterly fall in manufacturing of 2.3% is the strongest fall since Quarter 1 2009, due mainly to widespread weakness with 10 of the 13 subsectors decreasing; led by strong decreases from transport equipment (5.2%), chemicals and chemical products (6.2%) and basic metals (2.4%).

  • Production output fell by 0.1% between May 2019 and June 2019 despite rises from three of the four main sectors; the manufacturing sector provided the only downward contribution, falling by 0.2%.

  • Monthly manufacturing output highlights a mixed picture with only 7 of the 13 subsectors falling, so overall growth is due mainly to falls in basic metals (2.8%) and computer, electronic and optical products (3.5%).

  • For Quarter 2 (Apr to Jun) 2019 compared with Quarter 2 2018, production output decreased by 0.5%, with falls in manufacturing (0.9%) and electricity and gas (0.3%); partially offset by rises in mining and quarrying (1.9%) and water and waste of (0.9%).

Back to table of contents

2. Things you need to know about this release

This June 2019 release contains revisions from April 2019 onwards, and is consistent with the national accounts revisions policy.

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 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.

Blue Book 2019

Each year we produce an annual update to the UK National Accounts in the Blue Book and Pink Book and the associated releases. As already announced, the Blue Book and Pink Book 2019-consistent datasets will be published on 30 September 2019.

Details have already been provided on the scope in the article Latest developments and changes to be implemented in Blue Book and Pink Book 2019. Indicative impacts on headline gross domestic product (GDP) components for the years 1997 to 2016 were published on 27 June 2019 in the article Blue Book 2019 indicative impacts on GDP current price and chained volume measure estimates: 1997 to 2016.

This year, due to the very demanding set of changes being put through in the annual update, we are exceptionally not going to fully reconcile 2017 annual data, instead producing an indicative balance to allow further time for final quality assurance of the data.

Consequently, the reference year and last base year for all chained volume measure series will remain as 2016.

Back to table of contents

3. Production in detail

Figure 1 shows 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 7.1% and 3.4% lower respectively for June 2019 than the pre-downturn peak in February 2008.

For further detail on the longer-term trend within manufacturing, please see an article titled Manufacturing sector performance, UK: 2008 to 2018, which was published on 2 April 2019. This 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.

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

Back to table of contents

4. What is contributing to the quarterly decrease?

Total production output for Quarter 2 (Apr to Jun) 2019 decreased by 1.4%, following a rise of 1.1% in Quarter 1 (Jan to Mar) 2019. The fall during Quarter 2 2019 is the strongest since Quarter 4 (Oct to Dec) 2012, when output fell by 2.3%. To add further context to the volatility in growth during Quarter 1 2019 and Quarter 2 2019, the six months to June 2019 compared to the six months to December 2018 results in 0.0% growth in both the index of production and index of manufacturing.

Providing the largest downward contribution and notable weakness is total manufacturing output, which fell by 2.3%, the strongest quarterly fall since Quarter 1 2009, when it fell by 5.4%. The negative growth in Quarter 2 2019 is consistent with the widespread early completion of orders that took place during Quarter 1 2019, in advance of the proposed departure date from the European Union at the end of March 2019. However, we are unable to quantify the effect of this and subsequently how much of the decline during Quarter 2 2019 is due to genuine weakness.

10 of the 13 subsectors display downward contributions to manufacturing growth (Figure 2), led by:

  • Transport equipment (5.2%), see below for further commentary

  • Chemicals and chemical products (6.2%) due to widespread weakness, resulting in the strongest quarterly fall since Quarter 1 2016

  • Basic metals (2.4%) due to widespread weakness

The decline of 5.2% in transport equipment is led by a continuation of longer-term weakness within motor vehicles, trailers and semi-trailers, which fell by 9.5%. This is the largest quarterly fall within this sub-industry since Quarter 1 2009, when it fell by 23.3%. The most recent quarterly weakness was due mainly to the impact of planned shutdowns within this industry in April 2019.

In addition, weak domestic sales and a gradual decline in export sales within motor vehicles, trailers and semi-trailers, since a peak in October 2017 (see our Monthly Business Survey turnover in production industries dataset for more information), have also contributed to the recent decline in the index level, with anecdotal evidence from respondents confirming weakening domestic and global demand.

Mining and quarrying output decreased by 0.4%. This was due mainly to notable strength during Quarter 1 2019, with strong growth in the monthly index (1.7%) during March 2019, due to newer oil fields increasing production.

The increase of 2.5% within electricity and gas supply was driven by an increase of 2.2% from electricity generation and distribution, supported by gas distribution, which increased by 3.2%.

Back to table of contents

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

Despite rises from three of the four main sectors, monthly total production output fell by 0.1% in June 2019, due to a decrease in manufacturing of 0.2%.

Growth within manufacturing during June 2019 highlights a mixed picture, with only 7 of the 13 subsectors displaying negative output. Therefore, it is the largest downward contributions that drive overall weakness, led by:

  • Basic metals (2.8%), driven by a strong fallback in weapons and ammunition (19.9%), following notable strength during May 2019; this sub-industry can be volatile due to the completion of high value contracts

  • Computer, electronic and optical products (3.5%), the strongest fall since July 2017 due mainly to cumulative weakness from large businesses

  • Food, beverages and tobacco (1.1%) due mainly to weakness from meat products, alcoholic beverages and soft drinks

  • Other manufacturing and repair (1.9%) due to a strong decline from the manufacture of furniture (4.2%), the strongest fall since August 2015

Partially offsetting overall weakness within manufacturing and providing the largest upward contributions, were pharmaceutical products (3.8%) and transport equipment (2.2%).

Within transport equipment, motor vehicles, trailers and semi-trailers rose by 5.1%. Despite the recent fluctuations in the monthly index for this subindustry, during April 2019 and May 2019, nominal total turnover during June 2019 has returned to normal levels compared with the previous five years (see Figure 3).

There were minimal upward contributions from the remaining three main sectors.

Back to table of contents

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

Total production output for Quarter 2 (Apr to June) 2019 decreased by 0.5%, compared with Quarter 2 (2018.

Providing the largest downward contribution was manufacturing, which fell by 0.9%, with 7 of the 13 subsectors decreasing. Weaker output is largely due to the significant decline in the monthly index during April 2019. Also underpinning overall weakness is a further decline in nominal total export turnover, which has fallen by 2.8% during Quarter 2 2019 compared with Quarter 2 2018. In contrast nominal total domestic turnover remains stagnant at 0.1% (Figure 4).

Within manufacturing, transport equipment fell by 7.7%, due to the ongoing decline in the index of motor vehicles, trailers and semi-trailers, which fell by 14.1%. Underpinning much of the weakness within this subindustry, is a decrease in nominal total turnover of 9.6% for Quarter 2 2019 compared with Quarter 2 2018, which was heavily influenced by significant weakness from both export and domestic turnover during April 2019 (see our Monthly Business Survey turnover in production industries dataset).

Also providing a notable downwards contribution was machinery and equipment, which fell by 5.9%, a continuation of ongoing weakness since August 2018.

Providing the largest upward contribution was mining and quarrying, which rose by 1.9%, due mainly to widespread strength within other mining and quarrying, which increased by 4.8% and supported by a rise of 0.8% from oil and gas extraction, a continuation of strength where an expansion in oil and gas fields coming online at the end of 2017, has steadily increased production from that point.

Back to table of contents

8. 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 the 11 April 2019, we published the Quality assurance of administrative data (QAAD) report for Value Added Tax turnover. This looks at how we compile and use VAT data in the short-term economic output indicators.

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.

Back to table of contents

Contact details for this Statistical bulletin

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