Index of Services, UK: February 2018

• In the three months to February 2018, services output increased by 0.4% compared with the three months ending November 2017.

• Business services and finance continues to be the largest contributor to the three-month on three-month growth, contributing 0.26 percentage points.

• The Index of Services decreased by 0.2% between January 2018 and February 2018; this is the lowest month-on-month services growth since February 2017.

• Computer programming made the largest contribution to the month-on-month fall, contributing negative 0.05 percentage points.

• In the three months to February 2018, services output increased by 1.3% compared with the three months ending February 2017.

The monthly Index of Services (IoS) provides a timely indicator of growth in the output of the services industries and is the largest contributor to the output approach to the measurement of gross domestic product (GDP), accounting for 79.3% of UK GDP in 2015. Also published today (27 April 2018) is the Gross domestic product, preliminary estimate: January to March 2018.

The IoS measures UK output in: distribution, hotels and restaurants; transport, storage and communication; business services and finance; and government and other services. These data are used to produce seasonally adjusted estimates of output at chained volume measures (removing the effect of inflation). Unless otherwise stated, all estimates included in this release are based on seasonally adjusted data.

The IoS is an important economic indicator and one of the earliest short-term measures of economic activity. It is used in the compilation of the national accounts and widely used by private and public sector institutions, particularly by the Bank of England and Her Majesty’s Treasury to assist in informed decision and policy-making.

Data for the latest period are primarily based upon the Monthly Business Survey (MBS) of approximately 26,000 businesses as detailed in MBS Turnover in services industries.

In addition, from the October 2017 bulletin published in December 2017, we have also included VAT data across 35 services industries for small- and medium-sized businesses. These have been used to supplement data from the MBS from January 2016 to September 2017. Further information on the use of VAT data was published in the VAT turnover data in National Accounts: background and methodology update.

Further data is received from a wide variety of data sources as described in the GDP(O) source catalogue.

Data relating to the retail industry are broadly comparable with Retail sales, Great Britain: March 2018, published on 19 April 2018.

This February 2018 release contains revisions from January 2018 and is consistent with the National Accounts Revisions Policy. This means that we have incorporated additional data since this period.

Revisions can be made for a variety of reasons. The most common include:

• late responses to surveys and administrative sources

• forecasts being replaced by actual data

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

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

The UK Index of Services has been designated by the UK Statistics Authority as National Statistics, in accordance with the Statistics and Registration Service Act 2007 and signifying compliance with the Code of Practice for Statistics.

Table 1 shows data for the Index of Services (IoS) and each of the main components for February 2018.

In the three months to February 2018, services output increased by 0.4% compared with the three months ending November 2017.

The business services and finance component was the largest contributor to the growth in the three months to February 2018, contributing 0.26 percentage points. This component has made the largest contribution to each three-month on three-month growth since July 2017. In contrast, since the three months to January 2017 the distribution, hotels and restaurants component has contributed little to three-month on three-month IoS growth. This component has also seen five negative contributions over this period.

Figure 2 shows the contributions to growth from the four main IoS components in the three months to February 2018.

Three of the four main components of the services industries increased during February 2018. In order of their contribution to growth:

• business services and finance increased by 0.6%, contributing 0.26 percentage points

• transport, storage and communication increased by 1.3%, contributing 0.18 percentage points

• government and other services increased by 0.1%, contributing 0.03 percentage points

• distribution, hotels and restaurants fell by 0.2%, contributing negative 0.03 percentage points

There was widespread growth in the business services and finance component with 12 out of the 21 industries making positive contributions while only three made negative contributions. The remaining six industries had no impact on three-month on three-month growth. Of the 12 industries that contributed positively, architectural and engineering activities made the largest contribution, increasing by 3.2% and contributing 0.07 percentage points.

Motion pictures and telecommunications were the industries contributing most to the growth in the transport, storage and communication sector. They increased by 6.7% and 2.2% respectively, contributing 0.06 and 0.05 percentage points.

The largest positive contribution to the government and other services sector came from the human health activities industry, which increased by 0.7%, contributing 0.05 percentage points. Activities of membership organisations partially offset this, decreasing by 1.9% and contributing negative 0.02 percentage points.

Decreases in retail trade, and food and beverage services were the main cause for the fall in the distribution, hotels and restaurants component. Retail trade fell by 0.3%, contributing negative 0.02 percentage points. Please see the Retail sales – March 2018 release for more information. Food and beverage services decreased by 0.5% and contributed negative 0.01 percentage points.

Services output decreased by 0.2% in February 2018, following a rise of 0.1% in January 2018. This is the lowest services growth since February 2017.

Figure 3 shows the Index of Services (IoS) month-on-month growth rates since January 2015 and Figure 4 shows the month-on-month contributions of each of the main IoS components for February 2018.

Three of the four main components of the services industries decreased during February 2018. In order of their contribution to growth:

• distribution, hotels and restaurants increased by 0.2%, contributing 0.04 percentage points

• government and other services decreased by 0.1%, contributing negative 0.01 percentage points

• transport, storage and communication decreased by 0.5%, contributing negative 0.08 percentage points

• business services and finance decreased by 0.4%, contributing negative 0.18 percentage points

The industries contributing most to the fall of 0.2% in February 2018 were:

• computer programming, which decreased by 1.4%, contributing negative 0.05 percentage points

• land transport services, which decreased by 2.5%, contributing negative 0.04 percentage points

• legal activities, which decreased by 2.3%, contributing negative 0.04 percentage points

• travel agents and tour operators, which decreased by 4.8%, contributing negative 0.04 percentage points

• accounting activities, which decreased by 2.6%, contributing negative 0.04 percentage points

• food and beverage activities, which decreased by 1.4%, contributing negative 0.04 percentage points

Offsetting some of this downward movement were wholesale trade and retail trade, both of which contributed 0.06 percentage points. They increased by 1.3% and 0.8% respectively. Please see the Retail sales – March 2018 release for more information.

There were widespread falls across services in February 2018, with 21 industries making negative contributions. Snow in late February, however, had little observed impact on this overall decrease. The industry with the largest contribution to the fall was computer programming but this was not a result of snow. Similarly, decreases across the business services and finance component in legal activities, accounting activities, architectural and engineering activities, and advertising were all due to these industries returning to more normal levels in February following high January figures rather than any effect due to snow.

Food and beverage activities also saw a fall in February 2018, the consumer-focused element of this industry means that there was likely to have been some impact due to snow. However, this industry again saw a rise in January 2018 and has seen a fall back to more normal levels rather than a larger fall.

Data relating to the retail industry are broadly comparable with Retail sales – March 2018. Adverse weather conditions impacted the March 2018 retail figures but businesses responding to the Retail Sales Inquiry (RSI) for February 2018 reported for the period 28 January 2018 to 24 February 2018. This means that there is no impact on this industry due to snow in February and all effects will be seen in the March 2018 services figures. Further information can be found on retail trades February figures in the Retail sales – February 2018 release.

Figure 5 shows the three-month on a year ago Index of Services (IoS) growth rates along with the growths for distribution, hotels and restaurants, and business services and finance sectors since January 2012.

Since the start of 2017, three-month on a year ago services growth has slowed and reached 1.0% in November 2017, a low not seen since December 2011. The distribution, hotels and restaurants sector has been the main driver behind this slowdown, also weakening since the start of 2017. In contrast, the business services and finance sector has seen more stable growths over the last two years. The movements of these components indicate that the industries dominated by domestic consumption are falling whereas industries with larger export components display more stable growths.

In the three months to February 2018, services output increased by 1.3% compared with the three months ending February 2017.

The response rates and revisions tables can be found in the main datasets.

Monthly economic commentary was published alongside this release, presenting new analysis on the latest economic data.

Methods and sources

The gross domestic product output approach (GDP(O)) methods and sources pages provide more information on the data that underpin these statistics; of particular note is the GDP(O) source catalogue.

International comparisons

International comparison with the Index of Services (IoS) is difficult, as most comparable economies don’t 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 US Bureau of Economic Analysis also produces services output estimates, but only on a quarterly basis, with a four-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.

We welcome your feedback on this bulletin via our short survey.

The monthly Index of Services (IoS) was developed to provide a timely indicator of growth in the output of services industries, at constant prices for the UK. The IoS is an important component of monthly output (gross domestic product output approach (GDP(O)), representing about 79.3% of UK gross domestic product (GDP) as of 2015. The IoS shares the exact same industry coverage as the corresponding quarterly series within GDP(O).

The Index of Services datasets contain additional material, including:

• Monthly Business Survey (MBS) response rates (current and historic)
• IoS and main component indices to four decimal places

• publication tables

• revisions triangles

• lower-level time series data

• Monthly Business Survey (MBS) turnover of services industries

The Index of Services 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