Construction output price indices (OPIs), UK: October to Decemeber 2016

Since taking responsibility for the Construction Price and Cost Indices (CPCIs) on 1 April 2015, the Office for National Statistics (ONS) has developed an interim Construction Output Price Index (OPI). This index was put together in a short time frame and uses our existing data sources, the majority of which are National Statistics, so that you can be assured of the quality of the source data.

The results for the interim Construction OPI were published for the first time on 12 June 2015. This article provides a quarterly update to these results and includes data to December 2016.

Information about the methods used to compile the interim Construction OPIs, as well as the results of our user survey and plans for the future development of price indices for construction, were published on 28 September 2015.

The interim Construction OPI for all construction rose 2.6% in the year to December 2016, up from an increase of 1.7% in the year to November 2016.

Prices rose in the year to December 2016 for all work types, within new work and repair and maintenance.

The interim Construction OPI for all new work increased 3.2% in the year to December 2016, up from an increase of 2.0% in the year to November 2016. Private industrial showed the largest movement with an increase of 5.5% in the year to December 2016.

The interim Construction OPI for all repair and maintenance increased by 1.4% in the year to December 2016, up from a 1.2% increase in November 2016. The housing repair and maintenance sector showed the largest increase of 1.6% in the year to December 2016.

Overall, prices in the construction industry, as estimated by the interim Construction OPI, rose between July 2014 and December 2016. There is an upward trend evident across all new work, and repair and maintenance sectors from July 2014 up to December 2016 (Figure 1). The peaks and troughs seen in the all new work index between July 2014 and December 2016 were driven by the earnings component of the Construction OPI, which is sourced from the Average Weekly Earnings (AWE) index for construction.

Annual growth rates for the interim Construction OPI were positive throughout the period to December 2016 (Figure 2). Annual growth in the all construction index peaked at 2.7% in July 2015 and was driven by 3.4% growth in the new work index. Growth in the new work index is linked to the earnings component of the Construction OPI, which is sourced from the AWE index for construction. Repair and maintenance work shows positive year-on-year growth in all periods.

The interim Construction OPI for all new construction work increased 3.2% in the year to December 2016. This increase was as a result of annual increases in output prices in all sectors, including infrastructure, which grew 0.5% on the year (Table 1), following 5 months of negative annual growth. Private industrial showed the largest movement where prices increased by 5.5% in the year to December 2016.

The interim Construction OPI for all repair and maintenance increased 1.4% in the year to December 2016, with the housing repair and maintenance sector showing the largest annual increase of 1.6% (Table 2).

1. Use within ONS

   These interim Construction OPIs were used to deflate Output in the Construction Industry for the first time in the April 2015 release, published on 12 June 2015. Further details on the impact of using these indices have been published in a separate article.

2. Linking to previous series

   The Construction Price and Cost Indices (CPCIs) were previously published by the Department for Business, Innovation and Skills (BIS) and were published for the last time in September 2014, with the release suspended in December 2014. Responsibility for these statistics transferred to us on 1 April 2015, as previously announced.

   Users wishing to link the BIS CPCIs (prior to 2014) and our new Construction OPIs (from 2014 onwards) to create longer-running time series, have many options. One approach would be to use a linking factor (based on a common time period) similar to the process suggested to link the Producer Price Index series (PPI) on different price bases, as described on page 2 of this question and answer paper.

   Further guidance on using indices in indexation clauses is also available.

3. De-designation as National Statistics

   The Construction Price and Cost Indices were de-designated as National Statistics in December 2014, after their suspension, as detailed in a letter from Ed Humpherson, Director General for Regulation.

4. Experimental Statistics

   These statistics have been published on an experimental basis to involve users in their development. As a result, improvements to methods may result in revisions to the series. Full details of any revisions will be released alongside the revised data.

5. Revisions policy

   The interim Construction OPIs are dependent on the revisions policies associated with their component series. For routine revisions, such as inclusion of late respondent data and monthly re-estimation of seasonal adjustment factors, the interim Construction OPIs will be open to revisions for a period of 5 months, in line with PPI, its main component.

   Non-routine revisions may also occur, for example, as a result of reviews and updates of methodologies of component series. When historic changes to component series arise, their impact on the Construction OPI series will be assessed and any changes highlighted to users.