Index of Production, UK: March 2017

Movements in the volume of production for the UK production industries: manufacturing, mining and quarrying, energy supply, and water and waste management. Figures are seasonally adjusted.

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This is an accredited National Statistic. Click for information about types of official statistics.

Cyswllt:
Email Mark Stephens

Dyddiad y datganiad:
11 May 2017

Cyhoeddiad nesaf:
9 June 2017

1. Main points

  • The Index of Production for Quarter 1 (Jan to Mar) 2017 was estimated to have increased by 0.1%. Increases of 0.3% in manufacturing and 1.8% in mining and quarrying were offset by a fall of 4.3% in energy supply.

  • In March 2017, total production decreased by 0.5% compared with February 2017, due to falls of 4.2% in energy supply and 0.6% in manufacturing.

  • Basic metals and metal products provided the largest downward pressure on manufacturing in March 2017, while warmer-than-average temperatures led to a decrease in energy supply.

  • Total production output for March 2017 compared with March 2016 increased by 1.4%, with growth in three of the four main sectors, with manufacturing providing the largest contribution, increasing by 2.3%.

  • In this release, the Index of Production estimate for Quarter 1 2017 was revised downwards to 0.1% from 0.3%, published in the Gross domestic product, preliminary estimate: Jan to Mar 2017. The largest contributions to the revision came from revised data for manufacturing and electricity. The downward impact of these revisions to the previously published gross domestic product (GDP) was 0.02 percentage points, which does not impact the headline GDP growth rate to one decimal place.

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2. Things you need to know about this release

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 14.6% 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 mainly based on the Monthly Business Survey (MBS) of approximately 6,000 businesses. 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 today’s (11 May 2017) publication of TOPSI: Production and services turnover.

As part of the Short-term Economic Indicators theme day, IoP produces the proportion of turnover from exports, by industry. Level of exports (£ millions) is published in TOPSI. 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 – IoP and TOPSI 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 – IoP reports the value of exports as a proportion of the industry's turnover; UK trade in goods reports 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 IoP and the movements of that product reported by UK trade

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

This release has a revisions period back to January 2017. 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
  • forecasts being replaced by actual data
  • revisions to seasonal adjustment factors, which are re-estimated every month and reviewed annually

This revisions period is consistent with the National Accounts revisions policy.

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.

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3. Index of Production (IoP) main figures and the longer-term trend

Figures 1 and 2 show that both the Index of Production (IoP) and Index of Manufacturing followed a broadly upward trend following the economic downturn. Growth was more pronounced from the beginning of 2010, as the economy recovered, before a slight downturn during 2012. Since then, both production and manufacturing output have steadily risen but remain well below their level reached in the pre-downturn gross domestic product (GDP) peak in Quarter 1 (Jan to Mar) 2008, by 7.5% and 3.8% respectively in the 3 months to March 2017.

Table 1 shows the growth rates and contributions for the IoP and main sectors for March 2017. The monthly estimate of total production decreased by 0.5%. There were falls in two of the four main sectors, namely manufacturing and energy supply.

The 3 months-on-previous 3 months estimate of total production increased by 0.1% in March 2017, with increases in three of the four main sectors. The largest contribution came from manufacturing, which increased by 0.3%, following growth of 1.9% in the 3 months to February 2017.

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4. What is contributing to the quarterly increase?

The Quarter 1 (Jan to Mar) 2017 estimate of total production increased by 0.1%, the largest upward contribution came from manufacturing, which rose by 0.3% (Table 2). The increase in manufacturing was broad-based across 8 of the 13 manufacturing sub-sectors; the largest upward contribution came from an increase of 3.2% in transport equipment. Within this sub-sector, motor vehicles increased by 3.7% and increased turnover was reported in the Monthly Business Survey, published in Turnover in Production and Services Industries, March 2017. In contrast, the highly volatile pharmaceutical industry fell by 9.2%.

The energy supply sector provided a downward pressure on Quarter 1, with a fall of 4.3%. The Department for Business, Energy and Industrial Strategy (BEIS) advised that the decreases were largely caused by warmer-than-average temperatures during the months of February and March 2017, at 1.6 degrees Celsius and 1.8 degrees Celsius respectively above the long-term average (according to the Met Office).

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5. What is contributing to the month-on-month decrease?

The monthly estimate of total production decreased by 0.5% in March 2017 (Table 3), following a decrease of 0.8% in the previous month. The energy supply and manufacturing sectors fell by 4.2% and 0.6% respectively.

The monthly fall of 0.6% in manufacturing was broad-based across 8 of the 13 sub-sectors. The largest downward contribution came from the basic metals and metal products sub-sector; within this, fabricated metals fell by 5.8%, the largest fall since June 2012.

The energy supply sector fell by 4.2%; the largest contribution to the fall came from electricity generation, decreasing by 4.1%, while the supply of gas also decreased. The Department for Business, Energy and Industrial Strategy (BEIS) advised that the decrease was largely caused by warmer temperatures. March 2017 was the joint-fifth warmest March in the temperature series since 1910, with the temperature increasing from 5.3 degrees Celsius in February 2017 to 7.3 degrees Celsius in March 2017 (according to the Met Office).

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6. What is contributing to the month-on-same-month a year ago increase?

Total production increased by 1.4% in March 2017 compared with March 2016; three of the four main sectors provided upwards contributions (Table 4). The largest contribution came from manufacturing, which increased by 2.3%, following an increase of 3.0% in the previous period.

The growth across manufacturing was broad-based with increases in 11 of the 13 sub-sectors. Transport equipment provided the largest contribution, increasing by 5.2% on the same month a year ago. Increased turnover and exports were reported in the Monthly Business Survey, published in Turnover in Production and Services Industries, March 2017. In contrast, the volatile pharmaceutical industry provided the largest downward contribution, falling by 6.7% compared with the same month a year ago.

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8. What’s new?

The Short-term indicators economic commentary was published alongside this release, presenting new information on economic conditions in March 2017, with data available for output in production, construction and the trade balance.

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9. Quality and methodology

The majority of data used to compile the manufacturing sector, and thus the Index of Production (IoP), is collected via the Monthly Business Survey (MBS). The MBS samples around 6,000 businesses every month. The data collected are turnover excluding Value Added Tax (VAT) and exports for some applicable industries. This data is 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 (ISSB) for steel industries.

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

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

The TOPSI: Production and services turnover is published alongside this release, providing current price estimates for industries collected by the MBS.

The Index of Production Quality and Methodology Information document 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
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