We are implementing annually chain-linked business prices in line with international best practice and to improve consistency with other price indices such as the Consumer Prices Index (CPI). This is a significant improvement to the weighting and linking of business inflation statistics, which we previously announced as part of a consultation in 2017. The implementation of chain-linking is recommended by Eurostat over the current method of rebasing for price statistics, as the weighting structures are updated more frequently.
This article discusses the impact of introducing chain-linking and the other new methods on weights used in the Services Producer Price Index (SPPI). This article is part of a collection of articles we are publishing. Other articles published are:
- producer price inflation methods changes: this outlines the move from net to gross basis to measure the headline producer price index, removal of duty and the sources used to compile the weights required for chain-linking
- services producer price inflation methods changes: this outlines the sources used to compile the weights required for chain-linking and a change to the classification framework
- producer price weight change impacts: this discusses the impact of introducing chain-linking and the other new methods on weights used in the Producer Price Indices (PPIs)
- chain-linking in business prices: this focuses on the methodology and practical implementation of chain-linking for business prices, including the technical process of price updating sales data to forecast more representative weights
To complete the collection of articles, we will publish a further two articles to provide the impact of implementing the new methods on the PPI and SPPI. We are planning to publish the PPI and SPPI using the new methods towards the end of 2020.Back to table of contents
The purpose of this article is to compare and explain changes in the weights and sales data from 2008 to 2019. This period covers weights calculated using three types of methodology:
- 2008 to 2013 – 2010 fixed base weights, which are updated every five years
- 2014 to 2018 – annually chain-linked weights excluding consumer transactions (business-to-business)
- 2019 onwards – annually chain-linked weights including consumer transactions (business-to-all)
The focus of this article is on how the weights movements align to changes in the structure of the UK economy. However, some of the changes are also driven by changes in the methodologies used to calculate them. This is explored in more detail in Chain-linking in business prices and Services Producer Price Index (SPPI) method changes. Further detail on the methodology used at the last 2010 rebasing exercise is available in the SPPI Methods and Guidance (PDF, 457KB).
Throughout this article, the weights used to calculate the SPPI between 2008 and 2013 will be referred to as 2010 rebasing weights, as this is the method and year the data are sourced from. From 2014 onwards, the chain-linked weights are calculated using price updated sales from the Quarter 4 (Oct to Dec) of the previous year. These weights will be referred to by the year they are used to calculate the index. For example, weights used to calculate the 2018 index use sales data from Quarter 4 2017 data.Back to table of contents
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