Index of Services, UK: October 2019

• In the three months to October 2019, services output increased by 0.2% compared with the three months ending July 2019.

• The professional, scientific and technical sector made the largest contribution to this growth, contributing 0.07 percentage points.

• The Index of Services (IoS) increased by 0.2% between September 2019 and October 2019.

• The real estate and the professional, scientific and technical sectors made the largest contribution to this growth, both contributing 0.07 percentage points.

• In the three months to October 2019, services output increased by 1.3% compared with the three months ending October 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 in the measurement of gross domestic product (GDP), accounting for 79.6% of UK GDP in 2016. Also published on 10 December 2019 is the GDP monthly estimate, UK: October 2019.

This October 2019 release contains no revisions and is consistent with the National Accounts Revisions Policy. Further to this release, the Quarterly national accounts to be published on 20 December 2019 will include revised services data from January 2018 to September 2019. These revised data will also include Value Added Tax (VAT) data for the first time in Quarter 2 (Apr to June) 2019.

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 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.

In the three months to October 2019, services output increased by 0.2% compared with the three months ending July 2019 (Figure 1).

Professional, scientific and technical activities was the largest contributing sector to growth in the latest three months. It increased by 0.7% and contributed 0.07 percentage points.

The professional, scientific and technical activities sector has seen consistent strong growth since January 2015. The sector, however, weakened at the start of 2019 and saw four consecutive periods of negative growth from the three months to February 2019. Several industries within the sector saw strong growth at the end of 2018 and then saw a fallback at the start of 2019, with growth from fewer industries offsetting these falls. The sector has now strengthened since the three months to July 2019 (Figure 2).

Most sectors saw growth in the three months to October 2019, with 10 out of the 14 sectors increasing. There was a widespread rise in the professional, scientific and technical activities sector in the latest three months, with five out of the eight industries increasing. The largest contributing industries were:

• accounting and auditing, which increased by 1.8%, contributing 0.03 percentage points
• head offices and management consultancy, which increased by 1.6%, contributing 0.03 percentage points

Human health and social work activities also contributed to the growth in the three months to October 2019. The sector increased by 0.7% and contributed 0.06 percentage points. The public sector component of this sector was the main factor behind this growth. More detail on measuring public sector-dominated industries was covered in the Index of Services, UK: September 2019. All five of these industries increased in the latest three months.

The wholesale trade industry was behind nearly all the growth in the wholesale, retail and motor trade sector. This industry increased by 1.0% and contributed 0.05 percentage points. Wholesale on a fee or contract basis was the component within this industry largely behind the three-month on three-month growth.

Offsetting some of this growth were falls in the administrative and support services, and accommodation and food services sectors. They fell by 1.0% and 1.4% respectively, contributing negative 0.07 and 0.05 percentage points.

Both these sectors were responsible for the Index of Services weakening in the three months to October 2019 (Figure 3). The administrative and support services sector weakened the most out of all sectors in the latest three-month estimate. The industries responsible for this were:

• office administrative and office support, which decreased by 3.0%, contributing negative 0.05 percentage points
• employment activities, which decreased by 1.3%, contributing negative 0.03 percentage points

The food and beverage services industry was behind nearly all the fall in the accommodation and food services sector. With a widespread fall across all components, the largest falls were in restaurants and event catering.

Services output increased by 0.2% in October 2019, following no growth in September 2019.

Index of Services (IoS) growth has been subdued through 2019 and has not seen monthly growth larger than 0.3% since May 2018, and 0.4% since September 2016. Services has also seen five month-on-month estimates of no positive growth in the last 12 months (Figure 4).

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

The real estate activities and the professional, scientific and technical activities sectors contributed most to services growth in October 2019. They grew by 0.4% and 0.7% respectively, both contributing 0.07 percentage points (Figure 5).

All three industries in the real estate activities sector grew in the latest month but the owned and leased real estate industry was the main factor behind the rise. It grew by 1.1% and contributed 0.05 percentage points. Growth in the letting of commercial property was behind this increase, with only office letting within this component seeing minimal growth this month.

The industries responsible for the rise in the professional, scientific and technical activities sector were:

• research and development, which increased by 5.0%, contributing 0.05 percentage points
• architectural and engineering activities, which increased by 2.9%, contributing 0.05 percentage points

The wholesale, retail and motor trade sector also increased in October 2019. It grew by 0.5% and contributed 0.06 percentage points. The industries responsible for this rise were:

• wholesale trade, which increased by 0.9%, contributing 0.04 percentage points
• motor trade, which increased by 1.5%, contributing 0.03 percentage points

Financial and insurance activities was the largest month-on-month sector decrease with all industries within the sector falling. The sector fell by 0.5% and contributed negative 0.04 percentage points. A large proportion of data in the month across the sector are forecast, and are replaced with actual data once they become available.

The other notable industry falls offsetting some of the monthly increase were:

• head offices and management consultancy, which decreased by 2.5%, contributing negative 0.04 percentage points
• office administrative and office support, which decreased by 2.4%, contributing negative 0.04 percentage points
• employment activities, which decreased by 1.6%, contributing negative 0.03 percentage points

In the three months to October 2019, services output increased by 1.3% compared with the three months ending October 2018 (Figure 6). This continues a weakening from the three months to December 2018 (2.6%).

We have not seen growth lower than the three months to October 2019 since the three months to December 2017, which grew by 1.2%. Services has been more subdued recently but also saw a strong summer in 2018, which will be a factor behind the current weakening in the three-month on three-month growth a year ago.

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 December 2019).

A comparison between official estimates of UK output and diffusion indices, looking at the level of correlation between Office for National Statistics data and IHS Markit and Chartered Institute of Procurement and Supply Purchasing Managers' Indices was published on 21 October 2019.

On 2 April 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.

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 March 2019.

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 MBS turnover in services industries.
2. Data relating to the retail industry are broadly comparable with Retail sales, Great Britain: October 2019, published on 14 November 2019.
3. For further information on what is included within Other, please see the GDP(o) data sources catalogue.

This October 2019 release contains no revisions 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 historical)

• 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