Index of Services, UK: June 2018

Monthly movements in output for the services industries.

This is not the latest release. View latest release

This is an accredited national statistic.

Contact:
Email Mark Stephens

Release date:
10 August 2018

Next release:
10 September 2018

1. Main points

  • The growth in Quarter 2 (Apr to June) 2018 compared with Quarter 1 (Jan to Mar) 2018 was 0.5%; following growth of 0.3% between Quarter 4 (Oct to Dec) 2017 and Quarter 1 2018.

  • This is the largest quarterly services growth since Quarter 4 2016.

  • The wholesale, retail and motor trade sector made the largest contribution to the quarterly growth, contributing 0.20 percentage points.

  • The Index of Services was flat between May 2018 and June 2018.

  • Increases in the information and communication sector in June 2018 were offset by falls in the professional, scientific and technical activities, and wholesale, retail and motor trades sectors.

  • In the three months to June 2018, services output increased by 1.5% compared with the three months ending June 2017.

Back to table of contents

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. It 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 (10 August 2018) is GDP: first quarterly estimate.

These data are used to produce seasonally adjusted estimates of output at chained volume measures (removing the effect of price changes). Unless otherwise stated, all estimates included in this release are based on seasonally adjusted data.

The IoS is compiled using data from several different sources (Table 1), this is detailed further in the GDP(O) source catalogue. In addition, we include Value Added Tax (VAT) data across 40 services industries for small- and medium-sized businesses. These have been used to supplement data from the Monthly Business Survey (MBS) for the period 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.

As a result of the move to our new monthly GDP model, data for June are sourced from a lower number of survey replies. However, the response for June is higher than the previous GDP model where the preliminary estimate included a forecast for the last month in a calendar quarter. The impact has been mitigated by ensuring important contributors have responded. Current MBS response rates and historic MBS response rates are published alongside this release.

This June 2018 release contains revisions from April 2018 and is consistent with the National Accounts Revisions Policy. 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

  • Her Majesty’s Revenue and Customs (HMRC) VAT returns replacing MBS data for small- and medium-sized businesses when VAT estimates become available every quarter

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 policy-making.

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.

Back to table of contents

3. Quarter-on-quarter services

During Quarter 2 (Apr to June) 2018, services output increased by 0.5%, following growth of 0.3% in Quarter 1 (Jan to Mar) 2018.

Figure 1 shows the quarter-on-quarter contributions of each of the Index of Services (IoS) sectors for June 2018.

There was widespread growth in the latest quarter, with 11 of the 14 sectors increasing.

The wholesale, retail and motor trade sector made the largest contribution to quarterly growth. It increased by 1.6% and contributed 0.20 percentage points. Within this sector, retail trade contributed the most and was also the largest contributing industry to IoS. It increased by 2.1% and contributed 0.13 percentage points. The retail industry saw a bounce back in April 2018 from the snowfall, while good weather in May 2018 was suggested by retailers as the reason for increased spending in food and household goods.

Wholesale trade was also responsible for the rise in this sector in Quarter 2 2018, increasing by 1.5% and contributing 0.07 percentage points. Similar to retail trade, it also saw increases in April and May 2018, which were behind the quarterly growth. Rises in wholesale of food and household goods were behind the increase for May 2018. Businesses suggested that the rise in oil prices was also a factor and caused large survey returns for the wholesale of fuel component of this industry. Total turnover for each industry is published alongside this release in the Monthly Business Survey turnover of services industries.

Services growth of 0.5% in Quarter 2 2018 is the largest quarterly services growth since Quarter 4 (Oct to Dec) 2016, which grew by 0.8%. Figure 2 shows the contribution the wholesale, retail and motor trade sector has made to IoS since Quarter 2 2016.

The growth in the wholesale, retail and motor trade sector in Quarter 2 2018 contributed to the largest IoS quarterly growth since Quarter 4 2016. This was also the last time the wholesale, retail and motor trade sector was stronger, increasing by 1.8% and contributing 0.24 percentage points. This highlights the significance of this sector to quarterly IoS movements, as in the interim period from Quarter 1 (Jan to Mar) 2017 to Quarter 1 2018 it hadn’t performed as well, with two decreases and one flat quarter. Over the same period quarterly IoS growth has averaged 0.3%.

The other sector to make a large contribution to the growth in Quarter 2 2018 was information and communication, which increased by 1.5% and contributed 0.12 percentage points. The computer programming and motion pictures industries were behind the growth in this sector. They increased by 1.9% and 4.8% respectively and contributed 0.07 and 0.04 percentage points. Both these industries saw increases in June 2018, which was the main driver behind their respective quarterly growths.

Back to table of contents

4. Month-on-month services growth

Services output showed no growth to one decimal place in June 2018, following a rise of 0.2% in May 2018.

Figure 3 shows the month-on-month contributions of each of the Index of Services sectors for June 2018.

Sector movement in June 2018 was mixed, with increases in 6 out of the 14 sectors, while there were decreases in 5 and 3 showed no growth.

The professional, scientific and technical activities sector decreased by 1.0% and contributed negative 0.10 percentage points. The industries responsible for this fall were:

  • architectural and engineering activities, which decreased by 2.6%, contributing negative 0.05 percentage points

  • accounting and auditing activities, which decreased by 2.2%, contributing negative 0.03 percentage points

The other notable sector fall was wholesale, retail and motor trades, which decreased by 0.6% and contributed negative 0.08 percentage points. The industries responsible for this fall were:

  • motor trades, which decreased by 1.7%, contributing negative 0.04 percentage points

  • retail trade, which decreased by 0.5%, contributing negative 0.04 percentage points; please see the Retail sales – June 2018 release for more information

Retailers suggested that hot weather and the World Cup resulted in less footfall in non-food stores that, along with non-store retailing, was the cause for the month-on-month decrease in retail trade. Architectural and engineering activities, accounting and auditing activities, and motor trades all saw fall backs after growth in previous periods.

Offsetting some of this downward movement was the information and communication sector, which increased by 1.2%, contributing 0.10 percentage points. Within this sector the computer programming industry increased by 1.8% and contributed 0.07 percentage points.

There was also a rise in motion pictures, increasing by 5.8% and contributing 0.05 percentage points. The projection activities component of this industry saw a fall in June 2018, however, increases in motion picture distribution and television production resulted in an overall rise.

Back to table of contents

5. Three-month on a year ago services growth

Figure 4 shows the three-month on a year ago Index of Services (IoS) growth rates along with the growth for the food and beverage activities industry.

In the three months to June 2018, services output increased by 1.5% compared with the three months ending June 2017. This is the largest growth since the three months to October 2017 and the third consecutive period where the three-month on a year ago growth has strengthened.

The food and beverage activities industry has seen its three-month on a year ago growth weaken since the latter half of 2017. The fall in the three months to June 2018 of negative 1.6% is the fourth consecutive period of negative growth for this industry.

Within this industry, both the restaurants and mobile food service activities and public houses and bars components are seeing downward trends in their three-month on a year turnover growth and are responsible for the weakening at the overall industry level.

This industry saw a month-on-month increase of 0.7% in June 2018, contributing 0.02 percentage points. There was no evidence to suggest that the good weather or World Cup significantly impacted the industry during this month.

Back to table of contents

7. What’s changed in this release?

The Index of Services May 2018 release was the first Index of Services (IoS) to be published alongside the other short-term indicators, increasing the timeliness of the IoS and bringing forward the publication date by around two weeks. Along with this change we increased the detail in our industry sections and components tables, which now include all of the industry level series. As a continuation of this review to IoS publication content we have decided to remove some aggregate series from these tables as these have now been replaced by their industry components. However, all these series are still available with each release and can be found in the Index of Services time series dataset.

Back to table of contents

8. Feedback on this bulletin

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

Back to table of contents

9. 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

Back to table of contents