Index of Production, UK: January 2018

• In the three months to January 2018, the Index of Production increased by 0.2% compared with the three months to October 2017, due to a rise of 0.9% in manufacturing; this was partially offset by a decrease of 6.4% in mining and quarrying, caused mainly by the shut-down of the Forties oil pipeline within December 2017.

• Total production output increased by 1.4% for the three months to January 2018 compared with the same three months to January 2017; manufacturing provided the largest upward contribution with an increase of 2.6%.

• In January 2018, total production was estimated to have increased by 1.3% compared with December 2017; mining and quarrying provided the largest upward contribution, increasing by 23.5% due mainly to the re-opening of the Forties oil pipeline.

• Compared with December 2017, manufacturing output in January 2018 was estimated to have increased by 0.1%; this was the ninth consecutive period of growth and is the first time this has occurred since records began in February 1968.

• In this release, there are no periods open for revision.

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 14.0% of the output approach to the measurement of GDP.

The 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 the Monthly Business Survey (MBS) of approximately 6,000 businesses. In addition, from the November 2017 bulletin published in January 2018, we have also included VAT data across 64 production industries for small and medium-sized businesses. These have been used to supplement data from the MBS from January 2016 to June 2017. 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 current price non-seasonally adjusted estimates of industries collected by the MBS can be found in the MBS production industries dataset, which was published alongside this release. Note that the MBS production industries dataset does not contain data from VAT returns, which have been included in the IoP.

The MBS 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 a number of 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.

This release has no open periods for revision. This is in line with the updated National Accounts Revisions Policy.

Revisions can be made for a variety of reasons; the most common include:

• late responses to surveys and administrative sources, or changes to original returns; the MBS production industries dataset published alongside this bulletin includes a revision to the aircraft, spacecraft and related machinery industry caused by a re-stated return from a large business

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

• forecasts being replaced by actual data

• revisions to seasonal adjustment factors, which are re-estimated every month and reviewed annually

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.

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

Figures 1 and 2 show that both the Index of Production (IoP) and Index of Manufacturing (IoM) followed a broadly upward trend following the economic downturn. Growth was more pronounced from the beginning of 2010, as the economy recovered, before a downturn during 2012. Since then, both production and manufacturing output have risen but remain below their level reached in the pre-downturn gross domestic product (GDP) peak in Quarter 1 (Jan to Mar) 2008, by 5.2% and 0.3% respectively in the three months to January 2018.

Table 1 shows the growth rates and contributions for the IoP and main sectors for January 2018.

The three months-on-previous three months estimate of total production rose by 0.2% in January 2018, with the largest upward contribution coming from manufacturing, rising by 0.9%. This was offset partially by a fall in mining and quarrying of 6.4% due to the shut-down of the Forties oil pipeline for a large part of December 2017.

The monthly estimate of total production increased by 1.3%. Mining and quarrying provided the largest upward contribution, rising by 23.5% and was a bounce-back due to the re-opening of the Forties oil pipeline. In contrast, manufacturing displayed growth of 0.1%, with only 5 of 13 sub-sectors increasing, but was the ninth consecutive monthly rise, which is a record.

In the three months‐on‐previous three months to January 2018, total production was estimated to have increased by 0.2% (Table 2); this followed an increase of 0.5% in the three months to December 2017. This was the seventh consecutive increase since the three months to June 2017.

Following an increase of 1.3% in the three months to December 2017, manufacturing provided the largest upward contribution to total production in the three months to January 2018, rising by 0.9%. This was the weakest growth since the three months to July 2017, when it increased by 0.8%. Additionally, only 6 of the 13 sub-sectors experienced growth over this period. This points to a slowdown in manufacturing output.

Basic metals and metal products provided the largest upward contribution within manufacturing, rising by 4.3% in the three months to January 2018 and follows a rise of 5.7% in the three months to December 2017. This was the strongest growth since March 1998. Within this sub-sector, the fabrication of metal products other than weapons provided the largest contribution, increasing by 5.0%.

The overall strength within manufacturing was partially offset by a fall of 3.3% in the motor vehicles, trailers and semi-trailers sub-industry, due mainly to a weak November 2017 (see November 2017 IoP bulletin for further information).

The mining and quarrying sector decreased by 6.4%, due mainly to weakness in the oil and gas extraction sub-industry, which fell by 8.1%. This was due mainly to weakness in December 2017 because of the Forties oil pipeline shut-down.

Total production increased by 1.4% in the three months to January 2018, compared with the same three months to January 2017 (Table 3). This was the 23rd consecutive increase since March 2016.

The largest upward contribution came from manufacturing, which increased by 2.6%, due to broad-based strength across the sector, with 8 of the 13 sub-sectors increasing. Other manufacturing and repair provided the largest upward contribution, increasing by 7.4%. Within this sub-sector, the rest of repair and installation increased by 21.6%, continuing the recent strength in this sub-industry since June 2016. Increases in export turnover of 16.8% and domestic turnover of 21.1% were also reported for the three months to January 2018 compared with the same three months to January 2017; this was published today in the Monthly Business Survey (MBS) production industries dataset. However, it is important to note that this dataset is based on current prices and does not reflect the impact of price changes, and is not seasonally adjusted.

Basic metals and metal products; transport equipment; and machinery and equipment not elsewhere classified provide supporting strength but are partially offset by a fall in the pharmaceuticals sub-sector.

The monthly estimate of total production increased by 1.3% in January 2018 (Table 4). This follows a decrease of 1.3% in December 2017.

The largest contribution came from mining and quarrying, which increased by 23.5% in January 2018 and follows a decrease of 19.1% in December 2017. Within this sector, oil and gas extraction increased by 32.3% due mainly to the re-opening of the Forties oil pipeline, which was off-line within December 2017 and was the contributing factor to the 24.2% fall (Figure 3).

Figure 3 shows the monthly volatility in growth for oil and gas extraction. This is normally due to the timing of planned and unplanned maintenance and shutdowns to oil fields, allied to demand for oil and gas. The fall of 25.8% within September 2012 was due to planned maintenance affecting a major oil field. Whereas the fall of 24.2% within December 2017 was due mainly to an unplanned shutdown to the Forties oil pipeline.

Manufacturing output displays growth of 0.1% and was the ninth consecutive monthly rise. Since records began in February 1968, this sector has never recorded nine consecutive monthly growths. However, only 5 of the 13 sub-sectors display growth this month.

Growth this month within manufacturing was due mainly to a rise of 1.9% in transport equipment. Within this sub-sector motor vehicles, trailers and semi-trailers rose by 3.2%. It should be noted that this industry includes the manufacture of engines, spare parts and commercial vehicles as well as cars. Increases in export turnover of 19.1% and domestic turnover of 38.1% were reported by this sub-industry; this was published today in the Monthly Business Survey (MBS) production industries dataset. However, it is important to note that this dataset is based on current prices and does not reflect the impact of price changes, and is not seasonally adjusted.

There are two other sub-industries that provide significant supporting strength. Machinery and equipment not elsewhere classified increased by 3.2% and rubber and plastic products increased by 5.1%, its strongest growth since January 2014, but was a bounce-back following a weak December 2017, when it fell by 3.8%.

Energy supply fell by 3.4% due mainly to a warmer than expected January 2018. According to the Met Office, the provisional UK mean temperature was 4.1 degrees Celsius, which is 0.4 degrees Celsius above the 1981 to 2010 long-term average and remains unchanged from the December 2017 UK mean temperature.

The month-on-same-month a year ago estimate of total production output increased by 1.6% in January 2018 (Table 5). Manufacturing provided the largest contribution, increasing by 2.7% and was the 22nd consecutive period of growth.

Within manufacturing, 7 of the 13 sub-sectors provided upward contributions, led by basic metals and metal products, increasing by 6.7%, the sixth consecutive growth since July 2017. Within this sub-sector, fabricated metal products other than weapons increased by 7.2%, its strongest growth since December 2016 when it increased by 10.7%. Increases in export turnover of 15.6% and domestic turnover of 14.2% were reported by this sub-industry; this was published today in the Monthly Business Survey (MBS) production industries dataset. However, it is important to note that this dataset is based on current prices, does not reflect the impact of price changes and is not seasonally adjusted.

Partially offsetting overall strength was a fall in energy supply of 4.5% due in part to an increase of 0.2 degrees Celsius in the provisional UK mean temperature for January 2018 compared with January 2017.

It should be noted that the Index of Production data released on 9 March 2018 will not necessarily be consistent with the data used in the next Quarterly national accounts publication on 29 March 2018.

The Quarterly national accounts will incorporate latest standard revisions as noted in section 2 of this bulletin and updated Value Added Tax (VAT) data for January 2017 to June 2017 and new VAT data for July 2017 to September 2017, with the potential for revisions to the published Index of Services, Index of Construction and Index of Production. On 11 April 2018, the next Index of Production bulletin will include the new VAT data published within Quarterly national accounts.

We published the Short-term economic indicators commentary alongside this release (on 9 March 2018), presenting new information on economic conditions in January 2018, with data available for output in production, construction and the trade balance.

We published the Monthly economic commentary: February 2018 on 22 February 2018, presenting analysis of the latest estimate of gross domestic product and economic commentary for prices, short-term indicators and labour market indicators to complement theme day economic commentary.

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 2010 equals 100 basis, while UK data are calculated on a 2015 equals 100 basis.

Outside the EU, the US Census Bureau releases Manufacturing and Trade Inventories and Sales reports. Accurate comparisons cannot be made between our publication and the US Census Bureau release, as the UK data are calculated at chained volume indices, which take into account price changes, while the US publication is not adjusted for price changes.

The majority of data used to compile the manufacturing sector and therefore the Index of Production (IoP), are collected via the Monthly Business Survey (MBS). Since the Index of Production: November 2017 publication, the IoP also contains Value Added Tax (VAT) returns for 76,390 businesses across 64 production industries. The MBS samples around 6,000 businesses every month, this is now supplemented with VAT returns.

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 the Department for Business, Energy and Industrial Strategy (BEIS) for fuel industries and 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).

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 2015 equals 100
• Index of Production and sectors to four decimal places
• Monthly Business Survey (MBS) 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

At present the Quality and Methodology Information report is being updated to reflect the inclusion of VAT data and will be published later this year.