Index of Services, UK: May 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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This is an accredited national statistic.

Contact:
Email Mark Stephens

Release date:
10 July 2018

Next release:
10 August 2018

1. Main points

  • In the three months to May 2018, services output increased by 0.4% compared with the three months ending February 2018.

  • The wholesale, retail and motor trade sector 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 April 2018 and May 2018.

  • The wholesale, retail and motor trade also made the largest contribution to the month-on-month increase, contributing 0.18 percentage points.

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

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2. What’s new in this release?

This May 2018 release is the first Index of Services (IoS) to be published alongside the other short-term indicators, the Index of Production and output in the construction industry. This change has increased the timeliness of the IoS, bringing forward the publication date by around two weeks to give an even earlier picture of 79.6% of the UK economy. This move comes as part of the new gross domestic product (GDP) publication model and an estimate of monthly GDP is also published today (10 July 2018).

The IoS publication content has also been reviewed to align with our commitment to provide greater detail for services data. From this publication onwards the IoS will present data on 14 sectors as opposed to the previous four main services components (Table 1). This will give greater detail to the narrative of the bulletin and the movements in the data.

In addition to this 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.

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3. 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 (10 July 2018) is the GDP monthly estimate, UK: May 2018.

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 compiled using data from several different sources and is detailed in the GDP(O) source catalogue. Figure 1 shows the percentage of each data source to IoS based on their gross value added weight. 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.

This May 2018 release contains revisions to published estimates since the April 2018 release 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

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4. Index of Services (IoS) main figures

Table 2 shows data for the Index of Services (IoS) and each of the sector levels for May 2018.

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5. Three-month on three-month services growth

In the three months to May 2018, services output increased by 0.4% compared with the three months ending February 2018.

Figure 2 shows the three-month on three-month contributions of each of the Index of Services sectors for May 2018.

Eleven of the fourteen sectors increased in the three months ending May 2018, contributing to the total services growth of 0.4%. Only two sectors decreased, while one was flat over the same period.

Wholesale, retail and motor trade made the largest contribution to the three-month on three-month increase. This sector increased by 0.9% and contributed 0.11 percentage points. Within this sector both wholesale trade and retail trade contributed 0.07 percentage points and increased by 1.6% and 1.0% respectively.

The other sectors to make large contributions to the three-month on three-month rise were:

  • information and communication, which increased 1.0%, contributing 0.09 percentage points

  • real estate activities, which increased 0.4%, contributing 0.07 percentage points

  • professional, scientific and technical activities, which increased 0.6%, contributing 0.06 percentage points

Within these sectors the largest contributing industries were:

  • computer programming, which increased by 1.6%, contributing 0.06 percentage points

  • legal activities, which increased by 2.7%, contributing 0.05 percentage points

  • imputed rent, which increased by 0.3%, contributing 0.04 percentage points

Very few sectors offset the three-month on three-month growth, the food and beverage activities industry made the largest negative contribution and was behind all of the decrease in the accommodation and food services sector. This sector decreased by 1.5% and contributed negative 0.04 percentage points.

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6. Month-on-month services growth

Services output increased by 0.3% in May 2018, following a rise of 0.4% in April 2018.

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

Wholesale, retail and motor trade was the main driver behind most of the monthly growth, increasing by 1.3% and contributing 0.18 percentage points. All three of the industries within this sector increased. In order of their contribution to growth:

  • retail trade increased by 1.3%, contributing 0.08 percentage points

  • wholesale trade increased by 1.1%, contributing 0.05 percentage points

  • motor trades increased by 1.9%, contributing 0.04 percentage points

Feedback from retailers suggested that a sustained period of good weather and Royal Wedding celebrations encouraged spending in food and household goods stores in May 2018. Please see the Retail sales – May 2018 release for more information.

Wholesale trade similarly saw increases across food and household goods, which contributed to its monthly increase. The rise in oil prices was also a factor for this industry and caused large survey returns for the wholesale of fuel component.

Motor vehicle sales was the main cause for the rise in the motor trades industry. Published by the Society of Motor Manufacturers and Traders in the UK, new car demand grew in May 2018.

There were increases in 9 of the 14 sectors during May 2018 while there were falls in five. The industries that made the largest negative contributions were legal activities and rental and leasing activities. Both these industries saw fallbacks from high previous months. They decreased by 2.0% and 2.4% respectively, contributing negative 0.04 and 0.03 percentage points.

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7. 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 growths for wholesale, retail and motor trade, and accommodation and food services sectors.

In the three months to May 2018, services output increased by 1.5% compared with the three months ending May 2017. This is the largest growth since October 2017.

Services had seen a slowdown in the three-month on a year ago growth since July 2017 and reached a low of 1.2% in the three-months to March 2018. However, it strengthened slightly in April 2018 and has again in the three months to May 2018.

Weakening growth in two consumer-facing sectors was the main reason for this slowdown. Accommodation and food services has seen two consecutive decreases in its three-month on a year ago growth. These falls were driven by food and beverage activities, which decreased by 2.0% in the three-months to May 2018 compared with the three months ending May 2017.

Increases in the wholesale trade and retail trade industries in May 2018 have meant there was an uptick in the three-month on a year ago growth for the wholesale, retail and motor trade sector. However, motor trades remains weak on the three-month on a year ago growth. The fall of 2.4% in the three-months to May 2018 is the eighth consecutive decrease for this industry.

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9. Feedback on this bulletin

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

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10. 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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