Index of Production, UK: February 2019

• Production output rose by 0.2% in the three months to February 2019, compared with the three months to November 2018, due to rises from manufacturing, and mining and quarrying.

• The three-monthly increase of 0.4% in manufacturing is due mainly to rises of 2.5% from pharmaceuticals and 1.1% from food, beverages and tobacco.

• Production output rose by 0.6% between January 2019 and February 2019; the manufacturing sector provided the largest upward contribution, rising by 0.9%, its second consecutive monthly rise.

• In February 2019, the monthly increase in manufacturing output was due to rises in 11 of the 13 subsectors and follows a 1.1% rise in January 2019; the largest upward contribution came from basic metals, which rose by 1.6%.

• In the three months to February 2019, production output decreased by 0.2% compared with the same three months to February 2018; driven by falls of 0.6% from manufacturing and 3.2% from electricity and gas.

This February 2019 release contains revisions from January 2018 onwards, and is consistent with the National Accounts Revisions Policy. The revisions up to December 2018 are consistent with those published in the Quarterly national accounts on 29 March 2019. These revised data now include Value Added Tax (VAT) data for the first time in Quarter 3 (July to Sept) 2018.

The Index of Production (IoP) is an important economic indicator and one of the short-term measures of economic activity in the UK. It is used in the compilation of gross domestic product (GDP); the production industries’ weight accounts for 13.8% of the output approach to the measurement of GDP.

The current price non-seasonally adjusted estimates of industries collected by the Monthly Business Survey (MBS) can be found in the Monthly Business Survey turnover in production industries dataset, which was published alongside this release. Note that the MBS turnover in production industries dataset does not contain data from VAT returns, which have been included in the IoP.

Care should be taken when using the month-on-month growth rates as data can often be volatile; longer-term growth rates and examination of the time series allow for better interpretation of the statistics.

Figures 1 and 2 show that growth for the Index of Production (IoP) and Index of Manufacturing (IOM) was more pronounced from the beginning of 2010, as the economy recovered, before a downturn during 2012. Production and manufacturing output have risen since then but remain 6.1% and 1.9% lower respectively for the three months to February 2019 than the pre-downturn gross domestic product (GDP) peak in Quarter 1 (Jan to Mar) 2008.

Table 1 shows the growth rates and contributions for the IoP and sectors for February 2019.

Total production output for the three months to February 2019, compared with the three months to November 2018, increased by 0.2% (Figure 3), driven by rises in two of the four main sectors and is the first increase in three-monthly output since October 2018 when output rose by 0.1%.

Providing the largest upward contribution to total production output was an increase of 0.4% in manufacturing output. Figure 3 shows that this is the first three-monthly positive growth since September 2018, driven by 8 of the 13 subsectors displaying upward contributions. The rise in manufacturing was due primarily to strong increases from:

• the volatile pharmaceutical products subsector (2.5%), due primarily to export strength during January 2019

• food, beverages and tobacco (1.1%)

• computer, electronic and optical products (2.9%), continuing three-monthly strength since November 2018

• chemicals and chemical products (2.3%), continuing three-monthly strength since June 2018

Within food, beverages and tobacco, meat products rose by 2.4%, due to monthly strength during January 2019; and alcoholic beverages rose by 3.1%, the strongest three-monthly growth since August 2017, due primarily to monthly strength during both January and February 2019. Strong export sales of spirits such as whisky is a factor behind increased output.

In contrast, the two largest decreases in output were:

• other manufacturing and repair, with a continuation of weakness since September 2018 within the repair and maintenance of aircraft and spacecraft subindustry, which fell by 13.8%; the weakest three-monthly growth since June 2012

• the continuation of three-monthly weakness since September 2018 within transport equipment, driven by a 2.6% fall in the motor vehicles, trailers and semi-trailers sub-industry

Users are directed to the December 2018 Index of Production bulletin, which highlights a number of factors behind a weakening in demand for new cars in the UK since the end of 2016. Additionally, data provided by the Society of Motor Manufacturers and Traders (SMMT) indicate that car manufacturing has fallen for February 2019 compared with February 2018.

Mining and quarrying rose by 0.9%, driven by an increase of 1.5% in oil and gas extraction. This was due mainly to increased output during February 2019, where notable strength in the monthly index was due to newer oil fields increasing production.

The fall of 0.6% within electricity and gas supply was due mainly to a decrease of 1.1% from electricity generation and distribution, due to less demand. The temperatures in December 2018, and February 2019 were above the long-term average by 1.9 degrees Celsius and 2.4 degrees Celsius respectively.

Monthly total production output increased for the second consecutive period, rising by 0.6% in February 2019, following a rise of 0.7% during January 2019.

The strength is due primarily to manufacturing increasing by 0.9% and is supported by a rise from mining and quarrying of 2.3%.

Within manufacturing, there is widespread strength this month, with 11 of the 13 subsectors rising.

Driving the strength within manufacturing this month were:

• basic metals, which rose by 1.6%

• computer, electronic and optical products, which rose by 2.9%, underpinned by an increase in nominal domestic turnover growth of 15.3%

The nominal turnover growth rates are published alongside this release, within our Monthly Business Survey in production industries.

There has been external evidence that some manufacturing businesses changed the timing of their activity as we approached the original planned date for the UK’s departure from the European Union. We do not routinely collect detailed data on the reasons behind the behaviour of businesses, but as part of our survey validation we have found some qualitative evidence that supported this view. However, we were unable to quantify its impact.

The mining and quarrying sector rose by 2.3%, led by a rise of 4.0% in oil and gas extraction, due mainly to the effect of increased production from existing oil fields and a number of newer oil fields.

Offsetting the upward contribution from mining and quarrying, is the downward contribution from electricity and gas, which decreased by 1.3%. Within this sector, gas supply fell by 3.7%, due mainly to less demand. The Met Office reports that the the provisional UK mean temperature was 6.0 degrees Celsius, which is 2.4 degrees Celsius above the 1981 to 2010 long-term average. Additionally, the mean temperature for February 2019 was the second-highest in the series since 1998.

Total production output for the three months to February 2019 has decreased by 0.2%, compared with the same three months to February 2018. This was driven by a fall in output from three of the four main sectors. However, mining and quarrying partially offsets the decline, rising by 9.8%.

The electricity and gas sector fell by 3.2%, due primarily to reduced demand during the latest three months to February 2019, following warmer than average temperatures during December 2018 and February 2019. This is allied to the impact of the colder spell of weather during February 2018, where the provisional UK mean temperature was 2.4 degrees Celsius, which was 1.3 degrees Celsius below the 1981 to 2010 long-term average, leading to increased demand during the three months to February 2018.

Providing the largest downward contribution was manufacturing, which fell by 0.6%.

The fall in manufacturing was driven by notable decreases from:

• transport equipment, at 5.1%, due mainly to a fall within motor vehicles, trailers and semi-trailers, which fell by 7.6% and is primarily export-driven

• basic metals and metal products, at 5.2%, due primarily to a fall of 4.4% within fabricated metal products; underpinned by a fall in nominal export turnover growth of 13.8%

• machinery and equipment not elsewhere classified, at 6.3%, due mainly to a fall in nominal domestic turnover growth of 9.6%

Partially offsetting the decline in overall manufacturing growth was a rise of 3.2% within food products, beverages and tobacco. The strength within this subsector was driven by alcoholic beverages, which rose by 8.3%, underpinned by strong nominal export growth of 27.1% as reported in our Monthly Business Survey in production industries. Whisky exports are continuing to perform strongly (as highlighted earlier in this bulletin).

Manufacturing output peaked in November 2017 at 3.9% but has slowed since then, with negative growth from November 2018. However, since the beginning of 2019, three-month on a year ago growth has seen a slight improvement (Figure 4).

For further detail on the longer-term trend within manufacturing please see an article titled Manufacturing sector performance, UK: 2008 to 2018, which was published on 2 April 2019. This provides an overview of the changes in the manufacturing sector between 2008 and 2018, focusing on the industries that have grown or shrunk the most.

Alongside this publication we publish the Index of Services (IoS) and Construction output in Great Britain, allowing for an estimate of monthly gross domestic product (GDP), which is also published today (10 April 2019).

The corresponding price indices used to deflate the Index of Production (IoP) are published in the monthly publication of UK producer price inflation. Product sales by manufacturers are published on an annual basis in UK manufacturers’ sales by product (ProdCom) statistical bulletins; estimates are in current prices, unlike the chained volume measures published in the IoP release.

The data published by the Department for Business, Energy and Industrial Strategy (BEIS) in Energy trends are used to measure the mining and quarrying, electricity and gas, and the manufacture of coke and refined petroleum products sectors within this release.

The IoP follows the Eurostat short-term statistics (STS) regulation for measuring output in production. The latest release of industrial production and output in manufacturing are available from Eurostat and are updated monthly. It should be noted that an accurate comparison cannot be made between our publication and the Eurostat publication without re-indexing the data to the same base year, as Eurostat data are calculated on a 2015 equals 100 basis, while UK data are calculated on a 2016 equals 100 basis.

The Index of Production (IoP) measures the UK output in the mining and quarrying; manufacturing; energy supply; and water supply and waste management industries. The IoP estimates are based mainly on data from the Monthly Business Survey (MBS).

In addition, from the Index of Production, UK: November 2017 bulletin published in January 2018, Value Added Tax (VAT) data have been included across 64 production industries for small- and medium-sized businesses. For further information as to the use of VAT turnover within the national accounts, please see VAT turnover data in National Accounts: background and methodology (published on 19 March 2018).

On 11 October 2018, we published an article on the future use of VAT as part of the economic review, which considers the strategic collection model for administrative and survey data for short-term indicators, including the Index of Production.

For the mining and quarrying, and energy supply sectors, and two manufacturing industries, namely coke and refined petroleum, and basic iron and steel, we receive volume data from the Department for Business, Energy and Industrial Strategy (BEIS) and the International Steel Statistics Bureau (ISSB) respectively. Unless otherwise stated, all estimates included in this release are based on seasonally adjusted data.

The Monthly Business Survey (MBS) turnover in production industries dataset produces the proportion of turnover from exports by industry and level of turnover and exports (£ millions). However, this is not always comparable with UK trade statistics, for many reasons. These include, but are not limited to:

• different data sources – MBS are based on a survey of businesses; UK trade in goods uses administrative data collected by HM Revenue and Customs (HMRC)

• different concepts being measured – MBS reports the value of exports as a proportion of the industry's turnover; the UK trade in goods data report the change in ownership between the UK and other countries

• time lag – there can be time lags between the sale of a product reported in MBS and the movements of that product reported by UK trade

Further information on UK trade and how data on it are compiled can be found in the Things you need to know about this release section of the UK trade release.

The data collected on the MBS are turnover excluding VAT and exports for some applicable industries. The data collected on the VAT returns are also turnover excluding VAT. These data are then deflated using Producer Price Indices (PPI). Within the manufacturing sector we also receive direct volume data from BEIS for fuel industries and from the International Steel Statistics Bureau for steel industries.

The mining and quarrying sector is comprised mainly of data from BEIS, including volume of oil and gas extraction and coal extraction. The data used to produce the energy sector are also from BEIS and include energy and gas supply output. A comprehensive list of the IoP source data can be found in the Gross domestic product (GDP(O)) source catalogue (XLS, 715KB).

Revisions to the Index of Production 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

• HMRC VAT returns replacing MBS data for small and medium-sized businesses when VAT estimates become available every quarter

Within the suite of datasets published monthly alongside this release, you will find:

• Output of the production industries (IOP5) publication tables

• Revisions to output of the production industries (IOP5R)

• Monthly Business Survey response rates for production industries for this publication

• Revision triangle – monitors the size of monthly and three-monthly revisions

• Index of Production weights 2016 equals 100

• Index of Production and industry sectors to four decimal places

• Monthly Business Survey turnover in production industries

• Export proportions for manufacturing industries

The Index of Production 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

Summary information can be found in the Index of Production Quality and Methodology Information report.