1. Main points

  • This release shows that services output increased by 0.2% between November 2016 and December 2016, marking the seventh consecutive month-on-month positive services growth.
  • The biggest contributor to this growth was transport, storage and communication, which increased by 1.8%, the biggest contribution to this growth came from the motion picture industry.
  • Services output increased by 0.8% in Quarter 4 (Oct to Dec) 2016 compared with Quarter 3 (July to Sept) 2016, with a notable contribution in consumer focused industries, despite the decline in retail sales in December.
  • This release gives the first Index of Services figure for 2016 as a whole, which is estimated to have increased by 2.9% compared with 2015; this follows 2.6% growth in 2015 compared with 2014.
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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 78.8% of UK GDP in 2013.

The IoS measures the 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.

Data relating to the retail industry are broadly comparable with Retail sales in Great Britain: December 2016, published on 20 January 2017.

This December 2016 release contains revisions from January 2016. This means that we have incorporated additional data since this period.

Revisions 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

This revisions period is consistent with the National Accounts revisions policy.

The UK Index of Services have 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 Official Statistics.

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3. Index of Services (IoS) main figures and the longer-term trend

Table 1 shows data for Index of Services (IoS) and each of the main components for December 2016.

Figure 1 shows the seasonally adjusted index time series for the IoS over the past decade; this shows continued services growth following the economic downturn. 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 quarter on quarter growth rates.

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4. Month-on-month services growth continued into December 2016

As seen in Figure 2, during December 2016, services output increased by 0.2% following a rise of 0.3% during November 2016, marking the seventh consecutive month-on-month positive services growth.

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 (shown in Figure 2):

  • transport, storage and communication increased by 1.8%
  • government and other services increased by 0.2%

Within the transport, storage and communication component, motion picture activities recorded month-on-month growth of 8.8% contributing 0.09 percentage points. The growth coincided with the 2 highest grossing films of 2016 being screened during December. Further information can be found on the BFI website.

Distribution, hotels and restaurants decreased by 0.3%. Retail sales contributed negative 0.14 percentage points in contrast with the annual performance. Business services and finance was flat although contributed negative 0.01 percentage points.

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5. Services growth between 2015 and 2016

As seen in Figure 3, services output increased by 2.9% between 2015 and 2016 following a rise in output of 2.6% between 2014 and 2015.

All 4 of the main components of the services industries increased between 2015 and 2016. In order of their contribution to growth:

  • business services and finance increased by 2.7%
  • distribution, hotels and restaurants increased by 5.1%
  • transport, storage and communication increased by 3.7%
  • government and other services increased by 1.6%

At a more detailed level a number of industries provided notable contributions:

  • computer programming contributed 0.36 percentage points with growth of 10.5% year on year; this follows six years of consecutive growth
  • retail sales contributed 0.34 percentage points with growth of 4.7% evidenced by the retail sales index reflecting the strength in consumer spending over the year; this marks the fifth consecutive annual increase
  • wholesale and retail trade and repair of motor vehicles and motorcycles has also grown considerably over the year contributing 0.28 percentage points with growth of 10.8% year on year; this growth is also reflected in data from the Society of Motor Manufacture and Traders
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6. Services grew by 2.8% between December 2015 and December 2016

Figure 4 shows services output increased by 2.8% in December 2016 compared with December 2015.

All 4 of the main components of the services industries increased in the most recent month compared with the same month last year. In order of their contribution to growth:

  • business services and finance increased by 2.3%
  • distribution, hotels and restaurants increased by 5.2%
  • transport, storage and communication increased by 4.8%
  • government and other services increased by 1.1%

At a more detailed level:

  • retail trade contributed 0.32 percentage points with growth increasing by 4.5%
  • activities of head offices and management consultancy activities contributed 0.29 percentage points with growth increasing by 17.1%, a joint record high for this industry
  • computer programming contributed 0.23 percentage points with growth increasing by 6.7%
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7. Consumer-focused industries lead quarter on quarter growth

Figure 5 shows services output increased by 0.8% during the most recent quarter compared with the previous quarter along with the contributions of each of the main components. This continues the trend of positive growth in this measure since Quarter 1 (Jan to Mar) 2013.

In the main components:

  • distribution, hotels and restaurants increased by 2.0%
  • business services and finance increased by 0.5%
  • transport, storage and communication increased by 1.0%
  • government and other services increased by 0.4%

At a more detailed level, wholesale trade except motor vehicles and motor cycles increased by 2.9% over this period, contributing 0.12 percentage points to growth. Despite the fall in December, retail trade except motor vehicles and motor cycles, increased by 1.2%, contributing 0.09 percentage points. Travel agency activities increased by 8.4%, contributing 0.08 percentage points to growth.

More detail on individual components can be found in the Index of Services publication tables dataset. The tables also provide information on the growth for the 3 months ending in December 2016 compared with the 3 months ending December 2015.

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8. What is the contribution of services to GDP?

With a weight of 78.8% in 2013, the services industries are the largest industrial grouping in the output approach to measuring gross domestic product (GDP).

Also published today (22 February 2017) is the Second estimate of GDP reporting that GDP in Quarter 4 (Oct to Dec) 2016, was estimated to have increased by 0.7% compared with the previous quarter. The services aggregate was the dominant contributor to the quarter-on-quarter percentage change in GDP, contributing 0.64 percentage points. Production, construction and agriculture contributed 0.05, 0.01 and 0.01 percentage points respectively to the headline figure.

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10. What’s changed in this release

This is the second Index of Services (IoS) bulletin released as part of the new economic theme days. As such this bulletin now follows a more streamlined format and some tables such as response rates and revisions, previously found in the background notes, can now be found in the main datasets.

In response to feedback from our users a new table has been added to the main datasets. This table displays monthly chained volume indices for services and its main components to 4 decimal places.

Monthly economic commentary was published alongside this release, presenting new analysis on the latest economic data.

We welcome your feedback on this new style 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 (GDP(O)), representing about 78.8% of UK gross domestic product (GDP) as of 2013. 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 response rates
  • publication tables
  • revisions triangles
  • lower level time series data

The Index of Services Quality and Methodology Information document contains important information on:

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