Index of Production, UK: September 2017

• In the three months to September 2017, the Index of Production was estimated to have increased by 1.1% compared with the three months to June 2017, due mainly to a rise of 1.1% in manufacturing.

• The largest contribution to the rise in manufacturing in the three months to September 2017 came from transport equipment, which rose by 3.0% followed by other manufacturing and repair, which rose by 4.4%.

• In September 2017, total production was estimated to have increased by 0.7% compared with August 2017, due mainly to a rise of 0.7% in manufacturing, with the largest upward contribution from machinery and equipment not elsewhere classified and smaller increases from a range of other industries.

• Total production output for September 2017 compared with September 2016 increased by 2.5%, with manufacturing providing the largest upward contribution, increasing by 2.7%; this was supported by rises in the other three main sectors.

• In this release, the Index of Production estimate for Quarter 3 (July to Sept) 2017 was revised up by 0.1% from the increase of 1.0% published in Gross domestic product, preliminary estimate: July to September 2017; the upward impact of this revision to the previously published GDP was 0.03 percentage points, which does not impact the headline GDP growth rate to one decimal place.

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 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 (10 November 2017) publication of TOPSI: Turnover in production and services industries.

As part of the Short-term Economic Indicators theme day, TOPSI 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 – 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; 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 IoP 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 a revisions period back to July 2017. This is in line with the standard 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

• 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.

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 6.4% and 2.5% respectively in the three months to September 2017.

Table 1 shows the growth rates and contributions for the IoP and main sectors for September 2017. The monthly estimate of total production rose by 0.7%. There were rises in two of the four main sectors, with manufacturing providing the largest upward contribution, increasing by 0.7%, supported by mining and quarrying, rising by 2.2%.

The three months-on-previous three months estimate of total production rose by 1.1% in September 2017, with rises in all four of the main sectors. Manufacturing provided the largest upward contribution, increasing by 1.1%.

In the three months‐on‐previous three months to September 2017, total production was estimated to have increased by 1.1% (Table 2) and follows a decrease of 0.3% in the three months to June 2017.

Manufacturing provided the largest upward contribution to total production, rising by 1.1%, with 8 of its 13 sub-sectors rising. Within this sector, transport equipment provided the largest contribution, rising by 3.0%, due mainly to an increase of 4.2% in motor vehicles, trailers and semi-trailers. The strength came from the month of July 2017 and evidence suggested that the production of new models of motor vehicles contributed to the growth. This industry experienced a weak Quarter 2 (Apr to June) 2017, when it fell by 5.3%.

The monthly estimate of total production increased by 0.7% in September 2017 (Table 3). There were rises in two of the four main sectors.

Manufacturing provided the largest upward contribution, increasing by 0.7%, with 10 of the 13 sub-sectors rising. This is the fifth consecutive monthly rise in this sector and follows growth of 0.4% in August 2017. Machinery and equipment not elsewhere classified provided the largest upward contribution to the growth in manufacturing, rising by 3.2%, following 0.0% in August 2017.

The rise of 2.2% in the mining and quarrying sector was due to a rise of 2.7% in oil and gas extraction. The higher output in September 2017 was largely due to a period of maintenance during August 2017.

Total production increased by 2.5% in September 2017 compared with September 2016; all four of the main sectors provided upwards contributions (Table 4).

The largest upward contribution came from manufacturing, which increased by 2.7%. There was broad-based strength throughout the sector, with 9 of the 13 sub-sectors increasing. The largest upward contribution came from transport equipment, which rose by 5.8%. Within this sub-sector, air and spacecraft and related machinery rose by 10.2%. This is a contract driven industry that can experience large milestone payments.

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 of 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.

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

We published the Monthly economic commentary: October 2017 on 25 October 2017, 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.

We previously announced that we would publish an article on VAT turnover implementation into national accounts: November update on 10 November 2017; this will now be published on 20 November 2017.

We will begin using Value Added Tax (VAT) data, alongside the Monthly Business Survey (MBS) data, in the production of gross domestic product (GDP) statistics from December 2017. This change means that the Monthly Business Survey will no longer be the sole turnover data source.

We announced in our previous bulletin that we were planning to stop the publication of Turnover in Production and Services Industries (TOPSI), which is based on the Monthly Business Survey (MBS), in its current form. The final release of TOPSI in its current form is today, 10 November 2017. From December 2017, the IoP bulletin will contain an additional annex covering the Monthly Business Survey data used in its compilation.

The majority of data used to compile the manufacturing sector, and thus the Index of Production (IoP), are 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. 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.

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

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 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