Index of Services, UK: April 2018

Monthly movements in output for the services industries: distribution, hotels and restaurants; transport, storage and communication; business services and finance; and government and other services.

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Corrections

6 July 2018 10:43

ONS identified that the index values and growth rates for the Business Services and Finance sector within the Index of Services publication were incorrect. These have now been amended. This correction affects the IoS components to four decimal places, Index of Services industry sections and components and time series datasets along with the statistical bulletin.

The error did not impact any top-level data, so there is no impact on either GDP or Index of Services.

ONS apologises for any inconvenience this may have caused.

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Notices

29 June 2018

ONS has identified that the index values and growth rates for the Business Services and Finance sector within the Index of Services publication are incorrect.

The error does not impact any top-level data, so there is no impact on the Index of Services. We are working to resolve the error and will re-publish updated index values and growth rates as soon as possible.

ONS apologises for any inconvenience this may have caused.

This is an accredited national statistic.

Contact:
Email Mark Stephens

Release date:
29 June 2018

Next release:
10 July 2018

1. Main points

  • In the three months to April 2018, services output increased by 0.2% compared with the three months ending January 2018; this is the lowest rate of growth since the three months to November 2017.

  • Government and other services made the largest contribution to the three-month on three-month growth, contributing 0.11 percentage points.

  • The Index of Services increased by 0.3% between March 2018 and April 2018; this is the highest month-on-month growth since November 2017.

  • Retail trade was the main contributor to the month-on-month increase, contributing 0.11 percentage points.

  • In the three months to April 2018, services output increased by 1.3% compared with the three months ending April 2017.

  • In this release of data, the earliest period open to revision is January 1997 as this dataset contains the annual updates that will be included in the Blue Book 2018 due to be published on 31 July 2018 (the reference year and last base year for the index have been moved to 2016).

  • The updates for the Blue Book 2018 include incorporating new Value Added Tax (VAT) data for five new services industries.

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2. Things you need to know about this release

The monthly Index of Services (IoS) provides a timely indicator of growth in the output of the services industries and is the largest contributor to the output approach to the measurement of gross domestic product (GDP), accounting for 79.6% of UK GDP in 2016. Also published today (29 June 2018) is the Quarterly national accounts: January to March 2018.

The IoS measures UK output in: distribution, hotels and restaurants; transport, storage and communication; business services and finance; and government and other services. These data are used to produce seasonally adjusted estimates of output at chained volume measures (removing the effect of inflation). Unless otherwise stated, all estimates included in this release are based on seasonally adjusted data.

The IoS is an important economic indicator and one of the earliest short-term measures of economic activity. It is used in the compilation of the national accounts and widely used by private and public sector institutions, particularly by the Bank of England and Her Majesty’s Treasury to assist in informed decision and policymaking.

Data for the latest period are primarily based upon the Monthly Business Survey (MBS) of approximately 26,000 businesses as detailed in MBS turnover in services industries.

In addition, from the October 2017 bulletin published in December 2017, we have also included VAT data across 40 services industries for small- and medium-sized businesses. These have been used to supplement data from the MBS from January 2016 to December 2017. Further information on the use of VAT data was published in the VAT turnover data in National Accounts: background and methodology update.

Further data is received from a wide variety of data sources as described in the GDP(O) sources catalogue.

Data relating to the retail industry are broadly comparable with Retail sales, Great Britain: May 2018, published on 14 June 2018.

This April 2018 release contains revisions from January 1997 due to the Blue Book 2018 updates and is consistent with the National Accounts Revisions Policy.

Sources of these revisions include but are not limited to:

  • updates to the annual gross value added (GVA) weights

  • improved statistical methods

  • alignment to gross domestic product (GDP) annual growths

  • 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

The UK Index of Services has been designated by the UK Statistics Authority as National Statistics, in accordance with the Statistics and Registration Service Act 2007 and signifying compliance with the Code of Practice for Statistics.

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3. Index of Services (IoS) main figures

Table 1 shows data for the Index of Services (IoS) and each of the main components for April 2018.

Figure 1 shows the seasonally adjusted index time series for the IoS since January 2008. The monthly IoS series can be volatile and therefore we recommend that monthly growths are viewed in the context of the longer-term trend and three-month on three-month growth rates.

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4. Three-month on three-month services growth

In the three months to April 2018, services output increased by 0.2% compared with the three months ending January 2018.

Two of the four main components of the services industries increased during April 2018 (Figure 2). In order of their contribution to growth:

  • government and other services increased by 0.4%, contributing 0.11 percentage points

  • business services and finance increased by 0.2%, contributing 0.08 percentage points

  • distribution, hotels and restaurants fell by 0.1%, contributing negative 0.01 percentage points

  • transport, storage and communication fell by 0.1%, contributing negative 0.02 percentage points

Government and other services made the largest contribution to the Index of Services in April 2018. Within this component, activities of households, other personal service activities and human health activities made the largest contribution, increasing by 6.8%, 2.0% and 0.4% respectively; each contributing 0.03 percentage points.

Legal activities and imputed rent were the industries contributing most to the growth in business services and finance. They increased by 2.2% and 0.3% respectively and each contributed 0.04 percentage points. Partially offsetting these were activities of head offices and travel agency services, which fell by 2.0% and 3.9% respectively; each contributing negative 0.03 percentage points.

In the distribution hotels and catering component, food and beverage service activities and motor trades were the biggest negative contributors. They both fell by 1.6% and contributed negative 0.05 and 0.04 percentage points respectively.

Decreases in land transport activities and postal and courier activities were the main cause of the fall in transport storage and communication. They fell by 1.9% and 2.7% respectively and contributed negative 0.03 and 0.02 percentage points respectively.

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5. Month-on-month services growth

Services output increased by 0.3% in April 2018, following a growth of 0.2% in March 2018. This was the highest month-on-month growth since November 2017.

Figure 3 shows the Index of Services (IoS) month-on-month growth rates since January 2015 and Figure 4 shows the month-on-month contributions of each of the main IoS components for April 2018.

All four of the main components of the services industries increased during April 2018. In order of their contribution to growth:

  • distribution, hotels and restaurants increased by 0.8%, contributing 0.13 percentage points

  • business services and finance increased by 0.3%, contributing 0.13 percentage points

  • government and other services increased by 0.2%, contributing 0.04 percentage points

  • transport, storage and communication increased by 0.2%, contributing 0.02 percentage points

The industries contributing most to the increase of 0.3% in April 2018 were:

  • retail trade, which increased by 1.8%, contributing 0.11 percentage points; please see Retail sales, Great Britain: May 2018 for more information

  • land transport, which increased by 2.3%, contributing 0.04 percentage points

  • rental and leasing activities, which increased by 2.8%, contributing 0.04 percentage points

In April 2018, there were negative contributions to growth from 11 out of the 51 industries compared with positive contributions to growth from 20 industries. The industry that made the largest negative contribution to growth was architectural and engineering activites, which fell by 1.7% and contributed negative 0.03 percentage points.

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6. Three-month on a year ago services growth

Figure 5 shows the three-month on a year ago Index of Services (IoS) growth rates along with the growths for distribution, hotels and restaurants, and business services and finance sectors since January 2012.

In the three months to April 2018, services output increased by 1.3% compared with the three months ending April 2017.

The Index of Services (IoS) has seen a slowdown since early 2017 and reached a low of 1.2% in the three months to March 2018. Distribution, hotels and restaurants is the main reason for this slowdown with its growth weakening over the same period. Business services and finance on the other hand has remained consistent and outperformed total services since September 2017. The movement of these two IoS components indicates that the industries dominated by domestic consumption are falling whereas industries with larger export components display more stable growths.

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7. New industries selected for VAT

We introduced Value Added Tax (VAT) data in the October 2017 bulletin published in December 2017. This included VAT data across 35 services industries for small- and medium-sized businesses. Further information on the use of VAT data was published in the VAT turnover data in National Accounts: background and methodology update.

The April 2018 release now includes VAT data for Quarter 4 (Oct to Dec) 2017 and means we use VAT to supplement data from the Monthly Business Survey (MBS) from January 2016 to December 2017. The annual updates that will be included in the Blue Book 2018 also include new VAT data for approximately 120,000 businesses across five newly selected services industries. Further data has also been incorporated in this release for those industries that were previously selected with the inclusion of more businesses and revised data.

Table 2 shows the newly selected industries to include VAT data as part of this release.

The inclusion of new VAT data and revisions to previously selected VAT returns have overall had minimal impact on the Index of Services. The exception to this was the selection of other professional, scientific and technical services as a new industry for VAT, which caused the large revision up in this industry for Quarter 1 (Jan to Mar) 2017. However, VAT offers a far higher coverage for this industry and also greater data quality. The only other industry with a notable revision due to VAT was computer programming in Quarter 4 2017. This industry had no new businesses selected as part of this release but as for all industries including VAT, incorporated data for the first time for Quarter 4 2017. However, this revision was not purely driven by VAT and was also partly caused by late survey returns.

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9. Upcoming changes

We published a response to the consultation on proposed changes to the gross domestic product (GDP) release schedule on 19 October 2017. Further details on this response are available on our Consultation Hub. In summary, an estimate of monthly GDP will be published on 10 July 2018 (for the reference period of May 2018) and there will be two quarterly estimates of GDP per quarter rather than the current three. The preliminary estimate of GDP will be deferred by around two weeks and the second estimate of GDP will be brought forward by two weeks to form the new first estimate, meaning the income and expenditure approaches to GDP will be made available earlier than presently. The first estimate of quarterly GDP (for Quarter 2 (Apr to June) 2018) under this new model will be published in August 2018.

This change will mean that the Index of Services (IoS) publication is brought forward from July to align with the other short-term indicators, the Index of Production and output in the construction industry. Services publish as normal today, 29 June 2018 (for the reference period of April 2018), but will switch to this new publication model next month and will publish again on 10 July 2018 (for the reference period of May 2018).

The IoS May bulletin will also cease presenting data on the four main services components, distribution, hotels and restaurants; transport, storage and communication; business services and finance; and government and other services. Instead, it will break these down into 14 more detailed sector levels. Table 3 shows the current four main components and the sector levels we plan to move to from July 2018.

We will also increase the detail of the datasets published alongside the IoS bulletin, including more industry series along with the new sector levels. These changes will only be additional content as we will continue to publish all our previous data series. We will also continue to publish the four main components in the Index of Services industry components to four decimal places.

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10. Feedback on this bulletin

We welcome your feedback on this bulletin via our short survey.

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11. Quality and methodology

The monthly Index of Services (IoS) was developed to provide a timely indicator of growth in the output of services industries, at constant prices for the UK. The IoS is an important component of monthly output (gross domestic product output approach (GDP(O)), representing about 79.6% of UK gross domestic product (GDP) as of 2016. The IoS shares the exact same industry coverage as the corresponding quarterly series within GDP(O).

The Index of Services datasets contain additional material, including:

  • Monthly Business Survey (MBS) response rates (current and historic)

  • IoS and main component indices to four decimal places

  • publication tables

  • revisions triangles

  • lower-level time series data

  • Monthly Business Survey (MBS) turnover of services industries

The Index of Services 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

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