Index of Production, UK: January 2020

• Total production output decreased by 1.0% for the three months to January 2020, compared with the three months to October 2019; this was led by manufacturing output, which fell by 1.2%.

• The three-monthly fall in manufacturing is because of widespread weakness, with 9 of the 13 subsectors providing downward contributions; this was led by food, beverages and tobacco, which fell by 2.1%.

• Production output fell by 0.1% between December 2019 and January 2020, with electricity and gas supply providing the largest downward contribution, falling by 4.2%; this was partially offset by rises from manufacturing (0.2%), water and waste (1.0%), and mining and quarrying (1.9%).

• The monthly increase of 0.2% in manufacturing output was led by chemicals and chemical products, which rose by 2.2%; only 6 of the 13 subsectors displayed upward contributions, indicating that overall strength was not widespread.

• For the three months to January 2020, production output decreased by 2.4%, compared with the same three months to January 2019; this was led by a fall in manufacturing of 3.2% where 12 of the 13 subsectors displayed downward contributions.

Total production output for the three months to January 2020 fell by 1.0%, compared with the three months to October 2019. This is the ninth consecutive three-monthy fall in output since April 2019. Further highlighting the current decline, this is the longest run of consecutive periods of three-monthly weakness since a run of 11 consecutive periods, from September 2011 to July 2012.

Manufacturing output provided by far the largest downward contribution (Figure 1), falling by 1.2%; this was led by widespread weakness throughout the sector, with negative contributions from 9 of the 13 subsectors. This was supported by downward contributions from mining and quarrying, which fell by 2.9%, and electricity and gas, which fell by 0.3%. In contrast, water and waste rose by 1.0%.

The Index of Production (IoP) displayed an upward trend from the beginning of 2016 until it peaked during August 2018. Since then, the index has displayed a downturn, although some volatility around the planned Brexit dates has impacted that trend, particularly during the early part of 2019. Additionally, the current three-monthly rolling index level is the lowest since October 2016.

The Index of Manufacturing (IoM) displayed an upward trend from the beginning of 2016 until January 2018. Output remained relatively stable during the first half of 2018, before a gradual downturn. The index has declined sharply since early 2019, impacted by volatility around the UK’s proposed Brexit dates, during March and October 2019. Additionally, the current three-monthly rolling index level is the lowest since March 2016 and only 0.5% higher, compared with January 2016.

For further detail on the longer-term trend within manufacturing, please see the article, Manufacturing sector performance, UK: 2008 to 2018, published on 2 April 2019. The article 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.

To supplement this, an article, Analysis of production growth in 2019, will be published during early April (date yet to be finalised). This article will provide an overview of growth in the production sector in 2019, focusing on the industries that have grown or shrunk the most in the latest year.

Total manufacturing output for the three months to January 2020 fell by 1.2%, compared with the three months to October 2019, mainly because of widespread weakness. Of the 13 subsectors, 9 displayed negative contributions; these were led by:

• food, beverages and tobacco, which fell by 2.1%, mainly because of export-driven weakness within alcoholic beverages, which fell by 6.9%; this was supported by a 4.1% fall from meat products
• transport equipment, which fell by 2.2%, caused by weakness from motor vehicles, trailers and semi-trailers, which fell by 5.1% because of the additional impact of shutdowns during November 2019; this industry is still showing a longer-term decline, as highlighted by the three months on same three months a year ago indicator, which fell by 7.1%
• machinery and equipment not elsewhere classified, which fell by 4.0%; this was a continuation of longer-term weakness since the beginning of 2019, highlighted by the three months on same three months a year ago indicator, which fell by 10.1%

The largest upward contribution came from basic pharmaceutical products, which rose by 2.1%, mainly because of monthly strength during November 2019.

Monthly manufacturing output in January 2020, compared with December 2019, rose by 0.2%. There is a mixed picture with only 6 of the 13 subsectors displaying upward contributions. Some of the strength results from a reaction to a weaker than expected position during December 2019.

Current monthly growth within manufacturing was most notably from:

• chemicals and chemical products (2.2%) because of widespread strength, with all six industries increasing, led by paints, varnishings and coatings (10.2%)
• basic pharmaceutical products (1.6%), which experienced a partial bounceback from weakness during December 2019
• rubber and plastic products (1.5%) because of widespread strength; this was led by a 1.1% increase from the rubber and plastic products industry
• wood, paper products and printing (1.3%) mainly because of a bounceback from a weak December 2019 for wood and wood products except furniture (3.4%) and paper and paper products (2.3%)

Partially offsetting growth and providing the largest downward contribution was a 1.9% fall from machinery and equipment not elsewhere classified. This subsector has declined strongly since the beginning of 2019 mainly because of weakness from larger businesses within this sector.

For the three months to January 2020 compared with the same three months to January 2019, total manufacturing output declined by 3.2%, the largest fall since a 3.3% fall in February 2013.

This is also the ninth consecutive three months compared with the same three months a year ago decline, further highlighting weakness throughout 2019 and into the beginning of 2020.

There was widespread weakness, with 12 of the 13 subsectors providing downward contributions; these were led by:

• a continuation of long-term weakness for machinery and equipment, which fell by 10.1%; this was the strongest fall since January 2016, when output fell by 10.4%
• widespread weakness from chemicals and chemical products, which fell by 8.5%; this was the strongest fall since April 2016, when output fell by 8.7%
• transport equipment, which fell by 3.8%, a continuation of ongoing weakness since June 2018
• a continuation of long-term weakness from other manufacturing and repair, which fell by 4.3%

The only upward contribution came from basic metals and metal products (1.8%) owing to a 4.8% increase from fabricated metals. This industry has displayed long-term strength with it previously falling in February 2019.

Because of reduced output from oil and gas extraction, both longer-term indicators display a decline in output, with three-monthly and three months compared to the same three months a year ago sector-level growth falling by 2.9% and 1.6% respectively.

At sector level, the three month on a year ago indicator is the eighth consecutive fall, indicating a slowdown in output during most of 2019. This followed the positive impact of newer oil fields coming online, which helped to steady growth during 2017 and 2018.

In contrast, the monthly indicator for January 2020 displays a 1.9% rise because of widespread strength, led by a 5.5% rise from other mining and quarrying. This is mainly a rebound from the weak December 2019, when the industry fell by 4.3%.

Both electricity and gas supply industries provided downward contributions across all three indicators during January 2020, mainly because of reduced demand owing to higher than average temperatures.

Monthly sector level output fell by 4.2% because of decreased demand for both electricity and gas supply, resulting in falls of 3.3% and 7.1% respectively. The Met Office reported that the provisional UK mean temperature was 5.6 degrees Celsius, which is 2.0 degrees Celsius above the 1981 to 2010 long-term average and the sixth warmest January in a series since 1884.

The three months compared with the same three months a year ago indicator fell by 2.5%, mainly because of gas supply, which fell by 8.8%, supported by a fall of 0.5% from electricity supply.

Sector-level growth across all three indicators was led by the sewerage industry during January 2020, which displayed upward contributions to three-monthly (2.6%), three-monthly on a year ago (3.8%) and monthly output (1.9%) growth.

The three months on same three months a year ago growth of 2.9% for the waste collection industry highlights the longer-term impact of work carried out on waste treatment projects. However, three-monthly output declined by 0.9% for this industry because of weakness from large businesses during November 2019.

Index number

The index number is a measure of the average level of prices, quantities or other measurable characteristics relative to their level for a defined time period or location.

Industrial classification or breakdown

The industrial classification or breakdown is the internationally standardised method for classifying the wide range of industrial sectors in an economy. We use the Standard Industrial Classification 2007 (SIC 2007) for industrial breakdowns.

Manufacturing

The manufacturing sector includes the output of manufacturing industries and is broken down into 13 subsectors.

Monthly Business Survey

The Monthly Business Survey (MBS) collects information on the monthly turnover of UK businesses within the production and services sectors from various industrial sectors and regions in the UK.

Production

The production sector includes the output in the manufacturing (the largest component of production), mining and quarrying, energy supply, and water supply and waste management industries.

Turnover

The turnover of a company is the value of the goods or services sold during a particular time period. It includes total takings or invoiced sales and receipts. Interest and similar income, other operating income, and extra ordinary income is excluded. Value Added Tax (VAT) invoiced to the customer is excluded.

The Index of Production (IoP) uses data from a variety of sources and is calculated by taking turnover and removing the impact of price changes or by using direct volume estimates.

The majority of data are collected as “turnover values” through the Monthly Business Survey (MBS). In addition, direct volume series are collected by the Department for Business, Energy and Industrial Strategy (BEIS) and the International Steel Statistics Bureau (ISSB) for steel industries.

From January 2018, Value Added Tax (VAT) data have also been included across 64 production industries for small and medium-sized businesses. For more information, see VAT turnover data in national accounts: background and methodology.

A comprehensive list of the IoP source data can be found in the Gross domestic product (GDP(O)) source catalogue (XLS, 715KB).

More quality and methodology information on strengths, limitations, appropriate uses, and how the data were created is available in the UK IoP QMI.

After EU withdrawal

As the UK leaves the EU, it is important that our statistics continue to be of high quality and are internationally comparable. During the transition period, those UK statistics that align with EU practice and rules will continue to do so in the same way as before 31 January 2020.

After the transition period, we will continue to produce our national accounts statistics in line with the UK Statistics Authority’s Code of Practice for Statistics and in accordance with internationally agreed statistical guidance and standards.

The Withdrawal Agreement outlines a need for UK Gross National Income (a fundamental component of the national accounts, which includes gross domestic product (GDP)) statistics to remain in line with those of other EU countries until the EU budgets are finalised for the years in which we were a member. To ensure comparability during this cycle, the national accounts will continue to be produced according to European System of Accounts (ESA) 2010 definitions and standards.

Seasonal adjustment

The data published in the Index of Production (IoP) release are all seasonally adjusted (although non-seasonally adjusted estimates are also available). This aids interpretation by removing annually recurring fluctuations, for example, those caused by holidays or other seasonal patterns.

Data volatility

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

Comparability with UK trade statistics

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 (British Pounds, millions). However, this is not always comparable with UK trade statistics. Further information on UK trade and how data on it are compiled can be found in the UK trade release.