The Index of Services is estimated to have increased by 2.8% in March 2015 compared with March 2014. All of the 4 main components of the services industries increased in the most recent month compared with the same month a year ago
The largest contributions came from: business services and finance, which contributed 1.2 percentage points to total growth; and distribution, hotels and restaurants, which contributed 0.7 percentage points to total growth
The latest Index of Services estimates show that output increased by 0.1% between February 2015 and March 2015, following an increase of 0.3% between January 2015 and February 2015
The Index of Services increased by 0.4% in Quarter 1 (Jan to Mar) 2015 compared with Quarter 4 (Oct to Dec) 2014. This figure was revised down 0.1 percentage points from the estimate of 0.5% used in the Gross Domestic Product Preliminary Estimate (GDP), published on 28 April 2015. This figure is consistent with the Second Estimate of GDP, published on 28 May 2015
The figures within this release are estimates and are on a seasonally adjusted basis. The earliest period open for revision in this release is January 2015
About the IoS
The monthly IoS provides a timely indicator of growth in the output of the services industries. The IoS is an important economic indicator and shares exactly the same industry coverage as the corresponding quarterly series within UK gross domestic product (GDP). The primary purpose of the IoS is to produce a short-term measure of the output of the services industries within the UK economy and show the monthly movements in the gross value added (GVA) of the service industries (2007 Standard Industrial Classification (SIC 2007) sections G to T).
The 4 main components of the services industries are:
distribution, hotels and restaurants
transport, storage and communication
business services and finance
government and other services
The IoS is the largest contributor to the output approach to the measurement of GDP, accounting for 78.4% of UK GDP as at 2011.
All data in this bulletin are seasonally adjusted estimates and have had the effect of price changes removed (in other words, the data are deflated). Further information on some of the main concepts (including seasonal adjustment and deflation) underlying the estimates can be found in background note 11.
The quality of the IoS
The IoS is published around 8 weeks after the end of the reference month. There is no simple way of measuring the accuracy of the IoS, that is, the extent to which the estimate measures the underlying “true” value of the output growth (of the services industries) in the UK for a particular period. All estimates, by definition, are subject to statistical uncertainty and for many well-established statistics the Office for National Statistics (ONS) measures and publishes the sampling error associated with the estimate, using this as an indicator of accuracy. However, as IoS is constructed from a wide variety of data sources, some of which are not based on random samples, we don’t publish a measure of the sampling error associated with the IoS.
Reliability is one dimension of measuring accuracy, using evidence from analyses of revisions to assess the closeness of early estimates to subsequent estimated values. Revisions are an inevitable consequence of the trade-off between timeliness and accuracy. Figures for the most recent months are provisional and subject to revision in light of:
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
Revisions to the IoS are typically small (around 0.1 to 0.2 percentage points), with the frequency of upward and downward revisions broadly equal. More information on the most recent revisions analysis can be found in the component analysis section and in background note 16.
It should be noted that care should be taken when using the month-on-month growth rates, due to their volatility (background note 10).
Further information on the quality of the IoS is available in the Quality of the IoS (29 Kb Pdf) report on the Index of Services Methods web page on our website. It should be noted that as part of the IoS industry review process, we are continually working on methodological changes to improve the accuracy of the IoS.Back to table of contents
Table 1: Index of Services main information, March 2015
|Index number (2011=100)||Most recent month on a year earlier||Most recent 3 months on a year earlier||Most recent month on previous month||Most recent 3 months on previous 3 months|
|Index of Services||109.1||2.8||3.0||0.1||0.4|
|Source: Office for National Statistics|
Download this table Table 1: Index of Services main information, March 2015.xls (26.1 kB)
The Index of Services (IoS) measures the quantity of output from all UK services industries, which account for more than three-quarters of the output approach to the measurement of gross domestic product. Index values are presently referenced to 2011 so that the average for 2011 is equal to 100. Therefore, an index value of 110 would indicate that output is 10% higher than the average for 2011.
As seen in Figure 1, the IoS increased by 2.8% in March 2015 compared with March 2014. In order of their contribution to growth (see reference table IOS1): business services and finance increased by 3.1%; distribution, hotels and restaurants increased by 3.9%; transport, storage and communication increased by 4.4%; and government and other services increased by 0.9%.
Further detail on these movements can be found in the component analysis section.
Between February 2015 and March 2015, as seen in Figure 2, the IoS increased by 0.1%. Out of the 4 main components of the services industries 2 increased in the most recent month compared with the previous month. In order of their contribution to growth (see reference table IOS1): business services and finance increased by 0.5%; and distribution, hotels and restaurants increased by 0.1%. Government and other services remained flat at 0.0% but made a slight upwards contribution, due to unrounded data being slightly positive. In contrast, transport, storage and communication decreased by 0.9%.
More detail on individual components can be found in the IOSCOMP tables in the data section of this bulletin. The tables also provide information on the growth for the 3 months ending in March 2015 compared with the previous 3 months and compared with the 3 months ending March 2014.
Back to table of contents
Total services grew by 3.0% between Quarter 1 (Jan to Mar) 2014 and Quarter 1 2015, and by 0.4% between Quarter 4 (Oct to Dec) 2014 and Quarter 1 2015. This is compared with growth rates of 2.4% and 0.3% for the economy as a whole.
Historically, the services industries have grown at a faster rate than all other headline industries. While GDP has grown at an average compound annual rate of 2.0% since 1997, services has grown at an average compound annual rate of 2.8% (more information can be found in Quarterly National Accounts, Quarter 4 2014). This has led to a continuing re-orientation of the economy towards services, despite productivity in the services industries rising more slowly than in the production industries (and manufacturing in particular) since 1997 (more information can be found in Labour Productivity, Quarter 4 2014). The higher output growth, therefore, reflects the increasing share of the labour force employed in services, which has grown from 73% to 79% between 1997 and 2014 (Labour Market Statistics, May 2015, reference table EMP13).
Figure 3 shows the share of gross value added accounted for by services in the UK and in other G7 economies (more information on data for France, Germany, Italy Japan and the USA can be found on the Organisation for Economic Co-operation and Development (OECD) website). In 1997 the share of gross value added accounted for by services in the UK was just under 70%, around the middle of the range relative to the other G7 economies. By 2013 its share had risen to almost 80%, therefore the UK economy has become the most reliant on services among the G7 countries considered.
In addition to strong long-run growth, the services industries were also less affected by the downturn in 2008 than other industries such as production and construction, and subsequently recovered more quickly. The services industries are mainly responsible for the recovery of the economy as a whole, being the only industry grouping to have surpassed its pre-downturn peak.
We have looked at the growth rates of the different industry groupings since 1997 in previous releases of the Index of Services.Back to table of contents
With a weight of 78.4%, the services industries are the largest industrial grouping in the output approach to measuring GDP. The releases for the short-term economic indicators that feed directly into the output approach to measuring GDP include a table detailing growth in the 4 main industrial groupings (Table 2). This will aid understanding of the relationship between the individual short-term releases and GDP output.
In Quarter 1 (Jan to Mar) 2015 GDP was estimated to have increased by 0.3% compared with the previous quarter. The contribution an industry grouping makes to the GDP quarterly growth is dependent on the quarterly change in that industry grouping and its weight within the output approach to measuring GDP.
Monthly estimates are produced for each industrial grouping except agriculture. The March 2015 estimates for index of production and output in the construction industry were published on 12 May 2015 and 15 May 2015 respectively. The Second Estimate of GDP for Quarter 1 (Jan to Mar) 2015 was published on 28 May 2015, alongside this bulletin.
Table 2: GDP output component table Quarter 1 (Jan to Mar) 2015, chained volume measure, seasonally adjusted
|Publication||% of GDP||Release date||Period of GDP||Most recent quarter on a year earlier||Most recent quarter on previous quarter|
|Index of Production||14.6||12 May||Q12 2015||0.6||0.1|
|Construction output||6.4||15 May||Q1 2015||-0.3||-1.1|
|Index of Services||78.4||28 May||Q1 2015||3.0||0.4|
|Retail Sales1||23 Apr||Q1 2015||5.2||0.9|
|Source: Office for National Statistics|
|1. Data are presented as at 23 April 2015 due to timing of the availability of data|
|2. Q1 is Quarter 1 (Jan to Mar)|
|3. Q4 is Quarter 4 (Oct to Dec)|
Download this table Table 2: GDP output component table Quarter 1 (Jan to Mar) 2015, chained volume measure, seasonally adjusted.xls (56.3 kB)
Table 3: Growth rates and contributions (1) to the Index of Services, March 2015
|Description||% of Services||Month on a year earlier Volume (SA2) (%)||Contribution to services (% points)||Month-on-month growth Volume (SA) (%)||Contribution to services (% points)|
|Total services industries||100||2.8||2.8||0.1||0.1|
|Distribution, hotels and restaurants||18||3.9||0.7||0.1||0.0|
|Transport, storage and communication||13||4.4||0.6||-0.9||-0.1|
|Business services and finance||39||3.1||1.2||0.5||0.2|
|Government and other services||30||0.9||0.3||0.0||0.0|
|Source: Office for National Statistics|
|1. Individual contributions may not sum to the total due to rounding|
|2. SA = seasonally adjusted|
Download this table Table 3: Growth rates and contributions (1) to the Index of Services, March 2015.xls (26.6 kB)
Distribution, hotels and restaurants
The index of distribution, hotels and restaurants increased by 3.9% in March 2015 compared with March 2014, following an increase of 4.9% in February 2015 compared with the same month a year earlier. The main contributors to the increase were: retail trade, except of motor vehicles and motorcycles, which rose by 4.1%; wholesale and retail trade and repair of motor vehicles and motorcycles, which rose by 6.4%; and accomodation, which rose by 16.0%.
Transport, storage and communication
The index of transport, storage and communication increased by 4.4% in March 2015 compared with March 2014, following an increase of 5.5% in February 2015 compared with the same month a year earlier. The main contributors to the increase were: computer programming, consultancy and related activities, which rose by 6.6%; land transport, which rose by 6.1%; and publishing audiovisual and broadcasting activities, which rose by 5.5%.
Business services and finance
The index of business services and finance increased by 3.1% in March 2015 compared with March 2014, following an increase of 3.2% in February 2015 compared with the same month a year earlier. The main contributors to the increase were: other professional service activities, which rose by 5.6%; administrative and support services activities, which rose by 6.0%; and real estate activities, which rose by 1.8%.
Government and other services
The index of government and other services increased by 0.9% in March 2015 compared with March 2014, following an increase of 1.0% in February 2015 compared with the same month a year earlier. The main contributors to the increase were: human health and social work activities, which rose by 2.1%; and other service activities, which rose by 5.0%.
The Index of Services (IoS) follows the National Accounts Revisions policy (43.3 Kb Pdf). Revisions are caused by a number of factors including, but not limited to:
revisions to source data due to late responses
actual data replacing forecast data
revisions to seasonal factors that are re-estimated every period
More information on IoS revisions is available on the Index of Services Methods page.
We produce revisions triangles of services growth to provide users with one indication of the reliability of this main indicator. Statistical tests are performed on the average revision to test if it is statistically significantly different to 0. Further information can be found in background note 16.
In this release of data, the earliest period open to revision is January 2015. The growth rate for February 2015 compared with the same month a year earlier was unrevised from the previous estimate of 3.2%, and the month-on-month growth rate for February 2015 compared with January 2015 (0.3%) was also unrevised.
Further detail on the revisions to the IoS components can be found in the RIOS1 tables in the data section of this publication.Back to table of contents
According to the UK Standard Industrial Classification 2007 (SIC2007), accommodation services (industry 55) primarily covers firms providing short stay accommodation, such as hotels or holiday homes. Together, these services accounted for 76% of the industry’s output in 2014. The industry also captures some longer-term accommodation, such as student halls or workers’ hostels, but these constitute a smaller part of the industry.
Accommodation services activities are included under the distribution, hotels and restaurants industry grouping within services, along with the food and beverage service activities industry, which was examined in last month’s IoS release. Along with food and beverage services, the accommodation services industry has seen lower growth, in volume terms, relative to the entire services industry since 1990, but has retained its share of total services output of 1.1% in current price terms, due to higher inflation.
However, in recent years performance has improved; while the entire services industries have grown by approximately 12% between Quarter 1 (Jan to Mar) 2010 and Quarter 1 2015, the accommodation services industry has grown by approximately 21% over the same period. This is perhaps surprising given the economic climate over this period and the discretionary nature of spending on hotels and vacations.
One possible reason for this growth is that this industry has benefitted more from overseas visits over this period. Following 2008 there was a large depreciation of sterling, which, all else being equal, would have made visits to the UK relatively cheaper for overseas visitors. Figure 5 shows the relationship between the two series (more information can be found in Overseas Travel and Tourism).
Figure 6 also shows that output in the industry is highly seasonal, as people are more likely to travel and book holidays in the summer period. This seasonal pattern closely matches that of expenditure by overseas visitors in the UK.Back to table of contents
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