Index of Services, UK: February 2019

• In the three months to February 2019, services output increased by 0.4% compared with the three months ending November 2018.

• Computer programming was the largest contributing industry to this growth, contributing 0.10 percentage points.

• The Index of Services increased by 0.1% between January 2019 and February 2019, following a rise of 0.3% between December 2018 and January 2019.

• The real estate activities sector was the main contributor to the month-on-month increase, contributing 0.06 percentage points.

• In the three months to February 2019, services output increased by 2.0% compared with the three months ending February 2018.

The monthly Index of Services (IoS) provides a timely indicator of growth in the output of the services industries. It is the largest contributor to the output approach to the measurement of gross domestic product (GDP), accounting for 79.6% of UK GDP in 2016. Also published today (10 April 2019) is the GDP monthly estimate, UK: February 2019.

This February 2019 release contains revisions from January 2018 onwards, and is consistent with the National Accounts Revisions Policy. The revisions up to December 2018 are consistent with those published in the Quarterly national accounts on 29 March 2019. These revised data now include Value Added Tax (VAT) data for the first time in Quarter 3 (July to Sept) 2018.

The current price non-seasonally adjusted estimates of industries collected by the Monthly Business Survey (MBS) can be found in the Monthly Business Survey turnover of services industries dataset, which was published alongside this release. Note that the MBS turnover of services industries dataset does not contain data from VAT returns, which have been included in the IoS.

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.

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.

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.

In the three months to February 2019, services output increased by 0.4% compared with the three months ending November 2018.

The real estate activities sector was the largest contributing sector to growth in the latest three months. It increased by 0.8% and contributed 0.14 percentage points.

Growth in this sector had outperformed total Index of Services (IoS) from the three months to January 2015. The sector growth weakened from the three months to May 2016 with five consecutive periods of negative growth but has since gradually increased. The real estate sector has now seen 15 consecutive three-month on three-month growths. The real estate sector has a large Index of Services (IoS) weight of 17.4%.

Figure 1 shows the three-month on three-month IoS and the real estate activities sector seasonally adjusted index from January 2015 to February 2019.

Figure 2 shows the three-month on three-month contribution of the real estate sector along with the other IoS sectors for the three months to February 2019.

There was widespread growth in the real estate sector with all three of the industries that comprise the sector increasing. The owned or leased real estate industry made the largest contribution, increasing by 1.2% and contributing 0.06 percentage points. Rentals paid by tenants and letting of commercial property were behind this rise. Within commercial property the industrial letting side (which includes warehouses) was the main driver to this increase as both the retail and office letting components decreased in the latest three months.

Also growing in the real estate activities sector were:

• imputed rent, which increased by 0.4%, contributing 0.05 percentage points

• real estate on a fee or contract basis, which increased by 5.7%, contributing 0.03 percentage points

The information and communication sector also saw a large rise in the three months to February 2019. The sector increased by 1.5% and contributed 0.13 percentage points. Computer programming was the main factor for this rise and was also the largest contributing industry to the three-month on three-month Index of Services (IoS) growth. The industry grew by 2.6% and contributed 0.10 percentage points. Growth in the industry was widespread with computer consultancy the largest factor.

Across the rest of the services sectors, the other notable industry increases contributing to the 0.4% IoS growth were:

• human health activities, which increased by 0.8%, contributing 0.05 percentage points

• retail trade, which increased by 0.7%, contributing 0.05 percentage points

• education, which increased by 0.6%, contributing 0.05 percentage points

Figure 3 shows the sectors that have contributed the most to three-month on three-month growth since February 2018 (greater than 0.15 percentage points). These were the wholesale, retail and motor trade sector along with the information and communication, and professional, scientific and technical activities sectors.

The wholesale, retail and motor trade sector saw large contributions from May 2018 to September 2018, due mainly to the wholesale and retail trade industries. This sector has seen smaller contributions since.

The professional, scientific and technical activities sector has seen consistent strong contributions to positive Index of Services growth since January 2018. However, there has been some weakening more recently and the fall in the three months to February 2018 is the first since April 2017. Several industries within the sector saw strong growth at the end of 2018 and are now seeing a slight fall back at the start of 2019.

The information and communication sector has also seen strong contributions over this period.

From the three months to December 2018 there have been larger contributions from the other services sectors. The sectors mainly responsible for this are real estate activities and human health activities.

Services output increased by 0.1% in February 2019, following a rise of 0.3% in January 2019.

Figure 4 shows the month-on-month contributions of each of the IoS sectors for February 2019.

There was very little movement in February 2019 with only two sectors contributing more than 0.02 percentage points.

The real estate activities sector was the largest contributor. It increased by 0.3% and contributed 0.06 percentage points. All three industries saw growth within this sector.

The other notable sector contribution came from other service activities which increased by 1.2% and contributed 0.03 percentage points. Other personal service activities were behind this with the industry rising by 1.9%, contributing 0.02 percentage points. This was largely due to the hairdressing and other beauty treatment component.

Legal activities were the largest contributing industry to the month-on-month growth, increasing by 2.8% and contributing 0.05 percentage points. There were widespread rises across large businesses within the industry. However, this growth was offset by the advertising and market research industry which fell by 4.0%, after a period of strong growth at the end of 2018. It contributed negative 0.04 percentage points. This resulted in flat growth within the professional, scientific and technical activities sector.

Figure 5 shows the three-month on a year ago Index of Services (IoS) growth rates since January 2015.

In the three months to February 2019, services output increased by 2.0% compared with the three months ending February 2018. This was slightly stronger than the 1.9% increase in the three months to January 2019. The three-month on a year growth rate has seen little change recently after weakening from 2.5% in the three months to July 2017.

Alongside this publication we publish the Index of Production (IoP) and Construction output in Great Britain, allowing for an estimate of monthly gross domestic product (GDP), which is also published today (10 April 2019).

International comparisons

International comparison with the Index of Services (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 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.

On 26 March 2019 we published Services sector performance, UK: 2008 to 2018. The article details the changes that have taken place in the UK services sector from 2008 to 2018. It also looks at the differences between public sector-dominated sectors and the rest of the Index of Services (IoS) and compares the growth of individual IoS sectors in more detail.

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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 79.6% of UK gross domestic product (GDP) as of 2016. The IoS shares the exact same industry coverage as the corresponding quarterly series within GDP(O).

These data are used to produce seasonally adjusted estimates of output at chained volume measures (removing the effect of price changes). Unless otherwise stated, all estimates included in this release are based on seasonally adjusted data.

The IoS is compiled using data from several different sources (Table 1), this is detailed further in the GDP(O) source catalogue. In addition, we include Value Added Tax (VAT) data across 42 Standard Industrial Classifications (SICs) for small- and medium-sized businesses. These have been used to supplement data from the Monthly Business Survey (MBS) for the period January 2016 to September 2018. Further information on the use of VAT data was published in the VAT turnover data in National Accounts: background and methodology update.

The 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.

Notes:

1. The Monthly Business Survey (MBS) data are published alongside this release in the MBS turnover of services industries dataset.
2. Data relating to the retail industry are broadly comparable with Retail sales, Great Britain: February 2019, published on 21 March 2019.
3. For further information on what’s included within Other, please see the GDP(O) source catalogue.

This February 2019 release contains revisions from January 2018 and is consistent with the National Accounts Revisions Policy. 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

• Her Majesty’s Revenue and Customs (HMRC) VAT returns replacing MBS data for small- and medium-sized businesses when VAT estimates become available every quarter

Published alongside this release, the Index of Services datasets contain additional material, including:

• MBS response rates (current and historic)

• IoS and main component and sector indices to four decimal places

• publication tables

• revisions triangles

• lower-level time series data

• 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