Index of Services, UK: June 2019

• Services output increased by 0.1% in Quarter 2 (Apr to June) 2019 compared with Quarter 1 (Jan to Mar) 2019, following growth of 0.4% for Quarter 1 2019.

• The information and communication sector made the largest contribution to this growth, contributing 0.14 percentage points.

• The Index of Services (IoS) was flat between May 2019 and June 2019.

• Month-on-month growth of 0.8% in the professional, scientific and technical activities sector was offset by a fall of 1.4% in the administrative and support service activities sector.

• In the three months to June 2019, services output increased by 1.6% compared with the three months ending June 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 (9 August 2019) is the GDP first quarterly estimate, UK: April to June 2019.

This June 2019 release publishes updated and revised estimates from April 2019 onwards and is consistent with the National Accounts Revisions Policy.

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 Value Added Tax (VAT) returns, which have been included in the IoS.

Care should be taken when using the month-on-month growth rates as data can 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 UK 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 IoS 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.

During Quarter 2 (Apr to June) 2019, services output increased by 0.1%, weakening from growth of 0.4% in Quarter 1 (Jan to Mar) 2019. This is the lowest quarterly growth since Quarter 2 2016, which also grew by 0.1%. This weakening is widespread, with most of the services sectors contributing less than they did in the second half of 2018. Quarter 2 2019 also has the most sector decreases since Quarter 1 2016.

Information and communication was the largest contributing sector to growth in the latest quarter. It increased by 1.6% and contributed 0.14 percentage points.

The information and communication sector has seen consistent growth between Quarter 1 2015 and Quarter 2 2019, recording only one quarter-on-quarter decrease (Quarter 1 2017 where it fell by 0.1%). The sector is also the best performing services sector over this period, with the computer programming industry the main driver behind this.

Figure 1 shows the quarter-on-quarter Index of Services (IoS) and the information and communication sector seasonally adjusted index from Quarter 1 2015 to Quarter 2 2019.

Figure 2 shows the quarter-on-quarter contribution of the information and communication sector along with the other IoS sectors for Quarter 2 2019.

The two industries contributing to the rise in the information and communication sector were:

• computer programming, which increased by 1.9%, contributing 0.07 percentage points

• motion pictures, which increased by 5.4%, contributing 0.05 percentage points

The real estate sector, predominantly the owned and leased real estate industry, also contributed to the quarterly growth. The industry grew by 1.3% and contributed 0.06 percentage points. Growth in letting of commercial property was the main reason for this.

The professional, scientific and technical activities sector is one of the sectors responsible for the weakening in quarterly growth since Quarter 3 2018 (Figure 3). After consistent contributions to services growth throughout 2018, the sector fell in Quarter 1 2019 for the first time since Quarter 1 2016. Several industries within the sector saw strong growth at the end of 2018 and then saw a fall-back at the start of 2019, with growth from fewer industries offsetting these falls.

The professional, scientific and technical activities sector grew by 0.1% in the latest quarter and contributed 0.01 percentage points. A large fall in the architectural and engineering activities industry of 3.3% (negative 0.07 percentage points) offset growth within the sector. This was a widespread fall with the architectural side of the industry the main factor behind the decrease.

There has also been weakening in the other services sectors from the start of 2019. The sectors mainly responsible for this were human health activities, education and real estate activities, all of which saw stronger growth in Quarter 4 2019. The transportation and storage sector has also weakened in 2019 after seeing strong growth through much of 2018.

The financial and insurance activities sector fell again in the latest quarter; it decreased by 0.2% and contributed negative 0.02 percentage points. This sector has not seen positive growth for nine consecutive quarters, the longest period on record without a rise.

Services output showed no growth to one decimal place in June 2019.

Figure 4 shows the month-on-month Index of Services (IoS) growth rates since January 2012. Figure 5 shows the month-on-month contributions of each of the IoS sectors for June 2019.

IoS growth has been muted more recently and has not seen monthly growth larger than 0.3% since December 2016 (Figure 4). This is also the fourth consecutive month of flat growth.

Care should be taken when using the month-on-month growth rates as data can be volatile.

Sector movement was mixed in June 2019, with falls in 7 out of 14 sectors, while there were increases in six sectors and one sector showed no growth.

The professional, scientific and technical activities sector was the largest positive contributing sector. It increased by 0.8% and contributed 0.08 percentage points. The industries responsible for this rise were:

• head offices and management consultancy, which increased by 1.6%, contributing 0.03 percentage points

• legal activities, which increased by 1.4%, contributing 0.03 percentage points

Large businesses within these industries were behind the growth in June 2019.

The other notable rise was the information and communication sector, which grew by 0.8%, contributing 0.07 percentage points. There was widespread growth within the sector with five out of the six industries increasing in the latest month. The largest contributing industries were motion pictures and publishing activities, which grew by 2.4% and 2.6% respectively, both contributing 0.02 percentage points.

Offsetting this growth was the administrative and support service sector, which decreased by 1.4%, contributing negative 0.09 percentage points. There were widespread falls within this sector, the largest of which was the travel agency and tour operators industry. It decreased by 5.3% and contributed negative 0.04 percentage points. The industry has been gradually declining since the end of 2017, driven by the larger businesses (Figure 6).

The largest industry contribution in June 2019 came from the retail trade industry, which grew by 1.0% and contributed 0.07 percentage points. Non-food stores provided the largest contribution to this growth; for more information please see Retail sales, Great Britain: June 2019.

This was offset by a fall in the wholesale trade industry, which decreased by 2.0% and contributed negative 0.09 percentage points. Nearly all components within this industry saw falls in June 2019; large businesses within the wholesale on a fee or contract component were the main contributor to the industry decrease.

Figure 7 shows the three-month on a year ago Index of Services (IoS) growth rates since January 2015.

In the three months to June 2019, services output increased by 1.6% compared with the three months ending June 2018. This was a weakening from the three months to May 2019, which grew by 1.8% and is the lowest since the three months to June 2018 (also 1.6%).

Alongside this publication, we publish the Index of Production (IoP) and Construction output in Great Britain. This allows for an estimate of monthly gross domestic product (GDP), which is also published today (9 August 2019) as part of the GDP first quarterly estimate, UK: April to June 2019.

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.

International comparisons

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 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 quarterly estimates from Ireland.

Blue Book 2019

Each year we produce an annual update to the UK National Accounts in the Blue Book and Pink Book and the associated releases. The Blue Book and Pink Book 2019 consistent datasets will be published on 30 September 2019.

Details have already been provided on the scope in the article Latest developments and changes to be implemented in Blue Book and Pink Book 2019. Indicative impacts on headline gross domestic product (GDP) components for the years 1997 to 2016 were published on 27 June 2019 in the article Blue Book 2019 Indicative impacts on GDP current price and chained volume measure estimates: 1997 to 2016.

This year, due to the very demanding set of changes being put through in the annual update, we are not going to fully reconcile 2017 annual data. Instead, we will produce an indicative balance to allow further time for final quality assurance of the data.

Consequently, the reference year and last base year for all chained volume measure series will remain as 2016.

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) data sources 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.

The GDP(o) methods and sources pages provide more information on the data that underpin these statistics; of particular note is the GDP(o) data sources 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: June 2019, published on 18 July 2019.
3. For further information on what is included within Other, please see the GDP(o) data sources catalogue.

This June 2019 release contains revisions from April 2019 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 IoS 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