Index of Services, UK: May 2015

What’s new

Following the recent assessment by the UK Statistics Authority covering short-term economic output indicators, the Index of Services (IoS) has been re-designated as a National Statistic. A letter of confirmation was published on 26 March 2015 and is available on the Assessment reports web page on our website (report number 278).

Continuous improvement of GDP: sources, methods and communication

The GDP Output Improvement Report published on 30 September 2014, provides a detailed update of the implementation of improvements for Blue Book 2014, progress on industry reviews and wider cross-cutting improvements, a comprehensive timetable for the industry review project, an update of industry quality ratings and progress on experimental statistics. It also features sections on deflation and annual coherence adjustments to improve the understanding and transparency of the methods involved in producing Index of Production (IoP), IoS, and GDP(O).

Assessment reports by the UK Statistics Authority are available on our website for the output approach to measuring GDP and the short-term indicators that feed into it. Furthermore, the priorities for national accounts production and development over a 5 year period (financial year ending 2014 to financial year ending 2018) are highlighted in the National Accounts and Related Statistics Work Plan and an independent review of the UK's national accounts and balance of payments has been produced as part of ONS's programme of National Statistics Quality Reviews (NSQRs).

What do you think?

As a user of our statistics we would welcome your feedback on this publication. If you would like to get in touch please contact us via email: stoi.development@ons.gov.uk.

A review of the experimental statistics status for 9 IoS industries

The IoS has been designated as National Statistics by the UK Statistics Authority, although a number of components are experimental. In August 2012 the article Index of Services - Industry Reviews (249.1 Kb Pdf) was published, highlighting the industries that are classed as experimental and the work that is ongoing to remove the experimental label.

Section 5 of the GDP Output Improvement Report outlines plans to review the removal of experimental statistics status for the following industries:

• SIC07 industry 60 - Programming and broadcasting

• SIC07 industry 62 - Computer programming

• SIC07 industry 63 - Information service activities

• SIC07 industry 68.3 - Real estate activities (fee or contract basis)

• SIC07 industry 77 - Rental and leasing activities

• SIC07 industry 81 - Services to buildings and landscape

• SIC07 industry 86 - Human health

• SIC07 industry 94 - Activities of membership organisations

• SIC07 industry 97 - Activities of households as employers of domestic personnel

Appendix 8 of the report outlines the data sources and methods in use for each industry at Blue Book 2014. The removal of the experimental statistics label and subsequent replacement as National Statistics is a process that follows from adherence to the Code of Practice for Official Statistics. This means that an industry may have a quality rating of C but would still be classified as National Statistics due to the extent to which it follows the principles and protocols that surround the Code of Practice. Users are invited to respond to the review through ios.quality@ons.gov.uk.

Special events

ONS maintains a list of candidate special events in the Special Events Calendar. As explained in ONS’s Special Events policy, it is not possible to separate the effects of special events from other changes in the series.

Understanding the data

Short guide to the Index of Services

The Index of Services shows the monthly movements in the gross value added (GVA) of the service industries (2007 Standard Industrial Classification (SIC 2007) sections G to T). These industries account for around 78% of gross domestic product (GDP) in 2011. The index is estimated using the same data sources and national accounts methodology as the quarterly estimate of services industries’ gross value added within the output approach to measuring GDP (GDP (O)). These consist of the distribution, hotels and restaurant industries (SIC 2007 sections G and I); transport, storage and communication (sections H and J); business services and finance (sections K to N); and government and other services (sections O to T).

International comparison

International comparison with the IoS is difficult, as most comparable economies do not produce equivalent estimates. Eurostat turnover in services estimates are not comparable with the IoS, as they exclude the wholesale and retail trade; furthermore, most of the estimates are only available quarterly. The USA also produces services output estimates, but only on a quarterly basis, with a 4 month lag time. Japan has a direct equivalent of the IoS, but the estimates are not seasonally adjusted. The closest equivalent estimates are from Canada, which produces a monthly output estimate of GDP with a breakdown by industry (including an aggregate for services). There are also comparable quarterly estimates from Sweden and Ireland.

Short guide to national accounts

The national accounts provide an integrated description of all economic activity within the economic territory of the UK, including activity involving both domestic units (that is, individuals and institutions resident in the UK) and external units (those resident in other countries). In addition to being comprehensive, the accounts are fully integrated and internally consistent. More information can be found in UK national accounts: a short guide.

How our statistics explain the economy

The IoS is mentioned in a video summary which highlights 14 ways ONS statistics help you understand the economy. The video summary, along with an interactive version of the video, was released on our website on 27 June 2014 alongside the Quarterly National Accounts for Quarter 1 (Jan to Mar) 2014.

Interpreting the data

Some monthly data are volatile. When looking at growth rates, the headline IoS figures focus on the percentage change between the most recent month-on-a-year earlier and the most recent 3-months-on-a-year earlier.

The monthly Index of Services statistical bulletin is usually published on the same days as the Gross Domestic Product Preliminary Estimate statistical bulletin, the Second Estimate of Gross Domestic Product statistical bulletin or the Quarterly National Accounts statistical bulletin.

The data for the IoS in this statistical bulletin are generally consistent with the Gross Domestic Product Preliminary Estimate published on 28 April 2015. However, rounding can sometimes cause differences between the 3-monthly growth rates presented in this release compared with the quarterly growth rates presented in the Gross Domestic Product Preliminary Estimate. Data for the retail industry are broadly comparable with the Retail Sales release published on 23 April 2015, but as the 2 series operate under different revisions policies, there can be timing differences in the updating of the 2 series. Also, adjustments to the data within the IoS release are sometimes made at the time of the Blue Book to improve the coherence of the 3 approaches to measuring GDP. Therefore, inconsistencies between the 2 series are not unusual but tend to be small. There are also conceptual and coverage differences between retail sales and retail output which can lead to apparent inconsistencies.

Definitions and explanations

Definitions found within the main statistical bulletin are listed:

Index number An index number is a number which indicates the change in magnitude relative to the magnitude at a specified point, the latter usually taken as 100. For example, the level of services for February 2015 is given in Table 1 as 109.0. This means that services output was 9.0% higher than the average in the reference period, which is currently 2011.

Seasonal adjustment The index numbers in this statistical bulletin are all seasonally adjusted. This aids interpretation by removing annually recurring fluctuations, for example, due to holidays or other regular seasonal patterns. Unadjusted data are also available. Seasonal adjustment removes regular variation from a time series. Regular variation includes effects due to month lengths, different activity near particular events such as shopping activity before Christmas, and regular holidays such as the May bank holiday. Some features of the calendar are not regular each year, but are predictable if we have enough data, for example, the number of certain days of the week in a month may have an effect, or the impact of the timing of Easter. As Easter changes between March and April, we can estimate its effect on time series and allocate it between March and April depending on where Easter falls. Estimates of the effect of the day of the week and Easter are used respectively to make trading day and Easter adjustments prior to seasonal adjustment.

X-13-ARIMA-SEATS is the current seasonal adjustment software used for IoS.

Value (current price) Economic transactions involve the production of goods and the sale of goods and services (commodities). The monetary value (or current price) of these transactions is a product of the quantity produced or sold and the unit price. In a particular period, the total (aggregate) value of all transactions taking place in the economy is simply the sum of the individual transaction values in that period. The current price is sometimes referred to as the "nominal" price.

Volume (constant price) When it comes to comparing the difference in aggregate values between 2 time periods, the observed movement is generally a combination of changes in quantity and changes in price. In a lot of cases, the interest of users of economic data lies in understanding the degree to which economic growth is being driven by changes in quantities (that is, physical volumes of production and consumption). It is standard practice to present many economic statistics as volume series (showing changes in the level of the series that have not been affected by changes in price) and such series are referred to as "at constant prices" or "real" prices.

Deflation The process of removing price changes from a value series and converting to a volume series is known as deflation. All index numbers presented in this bulletin are volume measures and have had the effect of price changes removed.

Chained volume measures The indices in this bulletin are presented as "chained volume" measures, meaning that successive volume estimates have been linked (or chained) together. Annual chain-linking was introduced in 2003 and is considered preferable to producing standard volume series as chained volume measures more accurately reflect volume changes over time. More information on chain-linking can be found in the Tuke and Reed (2001) (92.8 Kb Pdf) article, and a paper on chain-linking weights in the output approach to measuring GDP can be found on the Methods and Sources page.

Gross domestic product (GDP) The total value of production activity in the economic territory. It is the balancing item on the production account for the whole economy. Domestic product can be measured gross or net of consumption of fixed capital (or depreciation). It is presented in the accounts at market (or purchasers’) prices. A further distinction is that it can be at current prices or chained volume measures.

Methods

Index of Services methodology can be found on our website.

Composition of the data

The IoS uses a wide variety of different data, from many sources, which are produced on either an annual, quarterly or monthly basis.

Some of the indicators are derived using current price turnover deflated by a suitable price index. This includes data from the monthly business burvey (MBS): an ONS short-term survey on different parts of the economy. It is one of the main data sources used in the compilation of the IoS.

More information on monthly business survey data can be found within the Economic and Labour Market Review release (2.65 Mb Pdf).

Other sources use direct volume measures that do not need to be deflated, such as Civil Aviation Authority data for air transport. Other proxies, such as employment numbers, are also used. This is the case with Public Sector Employment and Workforce Jobs data.

Where monthly data are not available (for example, when data are delivered quarterly or annually), monthly estimates are derived by forecasting data. This is done using the X-13-ARIMA-SEATS forecasting method and interpolating a monthly path using a cubic spline.

An X-13-ARIMA-SEATS forecast is also used where actual data at industry level are not available for the latest period (a lower proportion of actual data are available for the latest month). When the forecast is replaced by actual data, this may lead to revisions to the published data.

The IoS adheres to the Government Statistical Service Disclosure Control Policy (337 Kb Word document). More information can be found in the Quality and Methodology Information (QMI) (207.3 Kb Pdf) report.

Response rates

Approximately 42% of the IoS estimates are based on data collected via the ONS monthly business survey (MBS). In addition, approximately 7% of the IoS estimates are collected via ONS's Retail Sales Inquiry (RSI). The remainder is based on data received from other ONS sources and external data sources. The MBS and RSI response rates for data included in this publication are presented for the current month and 3 months prior in Table 4. The response rates for the historical periods are updated to reflect the current level of response, incorporating data from late returns. There are 2 response rates included; the first is a percentage of the sampled turnover returned and the other is a percentage of the amount of questionnaire forms returned.

Basic quality information

Some general information on the quality of the Index of Services (IoS) can be found in the "Understanding the Index of Services" section in the main part of this statistical bulletin.

Additionally a Quality and Methodology Information (QMI) (207.3 Kb Pdf) report for the IoS was published on 11 February 2015. The report pulls together qualitative information on the 5 Eurostat criteria of quality (relevance, accuracy, timeliness and punctuality, accessibility and clarity, and comparability and coherence) and provides a summary of the methods used to compile the IoS output, describing the strengths and limitations of the estimates produced.

Further quality information, including details of the quality adjustments process for IoS, was published on 31 October 2014 and can be found on the Index of Services Methods page on our website.

National accounts revisions policy

Key documentation explaining the national accounts revisions policy (43.3 Kb Pdf) is available.

Revisions triangles

SIC 2007 revisions triangles are contained in a zip folder. This folder can be found within the data section of this bulletin.

Revisions to data provide 1 indication of the reliability of key indicators. A statistical test has been applied to the average revision to find out if it is statistically significantly different from 0. An average revision close to 0 is desirable as it suggests that revisions are not predictable in any one direction. The result of the test is that the average revision is not statistically significantly different from 0.

Table 5 presents a summary of the differences published between February 2009 and February 2014 and the estimates published 12 months later.

Publication policy

Details of the policy governing the release of new data are available from our media relations office. Also available is a Pre Release Access List of those given pre-publication access to the contents of this release

Accessing data

The data presented in the tables of this statistical bulletin are also available to download from the data section of this publication. A complete run of data is available as a time series dataset on our website.

We provide an analysis of past revisions in the IoS and other statistical bulletins; more information can be found in Revisions information in ONS First Releases (244.6 Kb Pdf).

Following ONS

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Code of Practice for Official Statistics

National Statistics are produced to high professional standards set out in the Code of Practice for Official Statistics. They undergo regular quality assurance reviews to ensure that they meet customer needs. They are produced free from any political interference.

The UK Statistics Authority has designated these statistics as National Statistics, in accordance with the Statistics and Registration Service Act 2007 and signifying compliance with the Code of Practice for Official Statistics.

Designation can be broadly interpreted to mean that the statistics:

• meet identified user needs

• are well explained and readily accessible

• are produced according to sound methods

• are managed impartially and objectively in the public interest

Once statistics have been designated as National Statistics it is a statutory requirement that the Code of Practice shall continue to be observed.

Details of the policy governing the release of new data are available by visiting www.statisticsauthority.gov.uk/assessment/code-of-practice/index.html or from the Media Relations Office email: media.relations@ons.gov.uk

These National Statistics are produced to high professional standards and released according to the arrangements approved by the UK Statistics Authority.