Producer price inflation, UK: June 2015

• The price of goods bought and sold by UK manufacturers, as estimated by the producer price index, continued to fall in the year to June 2015, with crude oil impacting input prices, which feeds through to petroleum products contributing to the decrease in output prices

• The factory gate prices (output prices) for goods produced by UK manufacturers fell 1.5% in the year to June 2015, compared with a fall of 1.6% in the year to May 2015

• Core factory gate prices, which exclude the more volatile food, beverage, tobacco and petroleum products, rose 0.1% in the year to June 2015, unchanged since March 2015

• The overall price of materials and fuels bought by UK manufacturers for processing (total input prices) fell 12.6% in the year to June 2015, down from a fall of 12.3% in the year to May 2015

• Core input prices, which exclude the more volatile food, beverage, tobacco and petroleum products, fell 4.0% in the year to June 2015, compared with a fall of 3.9% in the year to May 2015

The producer price index (PPI) is a monthly survey that measures the price changes of goods bought and sold by UK manufacturers and provides an important measure of inflation, alongside other indicators such as the consumer price index (CPI) and services producer price index (SPPI). This statistical bulletin contains a comprehensive selection of data on input and output index series and also contains producer price indices of materials and fuels purchased and output of manufacturing industry by broad sector.

The output price indices measure change in the prices of goods produced by UK manufacturers (these are often called factory gate prices).

The input price indices measure change in the prices of materials and fuels bought by UK manufacturers for processing. These are not limited to materials used in the final product, but also include what is required by the company in its normal day-to-day running.

The factory gate price (the output price) reflects the total price received by the manufacturer for a particular product. It includes costs such as labour, raw materials and energy, as well as interest on loans, site and building maintenance or rent.

Core factory gate inflation excludes price movements from food, beverage, tobacco and alcohol, and petroleum products, which tend to have volatile price movements. It should give a better indication of the underlying output inflation rates.

The input price is the cost of goods bought by UK manufacturers for use in manufacturing, such as the actual cost of materials and fuels bought for processing.

Core input inflation strips out purchases from the more volatile food, beverage, tobacco and alcohol, and petroleum industries to give an indication of the underlying input inflation pressures facing the UK manufacturing sector.

Factory gate inflation fell 1.5% in the year to June 2015, up from a fall of 1.6% in the year to May 2015.

The rate of both total output and core inflation has generally been reducing since autumn 2011 when output inflation reached its post-economic downturn high of 5.3% in September 2011. During this period, core factory gate inflation has tended to run at a lower rate and show a smaller degree of volatility than total output. However, since January 2014, core output price inflation has been running at a slightly higher rate than total output: a result of the downward pressures from petroleum which is excluded from the core measure of inflation (Figure A).

Looking at the latest estimates (Table A), movements in factory gate prices over the 12 months to June 2015 were as follows:

• factory gate prices fell 1.5%, compared with a fall of 1.6% in the year to May 2015

• core factory gate prices rose 0.1%, unchanged since March 2015

• factory gate inflation excluding excise duty fell 1.1%, compared with a fall of 1.3% in the year to May 2015

Between May and June 2015:

• factory gate prices saw no movement (0.0%), compared with 0.1% last month

• core factory gate prices showed no movement, unchanged since February 2015

Table B shows the annual percentage change in price across all product groups and Figure B shows their contribution to the annual factory gate inflation rate.

Table C shows the monthly percentage change in price across all product groups and Figure C shows their contribution to the month factory gate inflation rate.

Factory gate prices fell 1.5% in the year to June 2015, compared with a fall of 1.6% in the year to May 2015. Prior to July 2014, there has been no fall in the annual rate since October 2009, when it fell 0.1%. The main contributions to the annual rate for June 2015 came from a fall in the price of petroleum and food products (Figure B).

The price index between May and June 2015 saw no movement (0.0%), compared with a rise of 0.1% last month. All sections showed very small movements, resulting in the low monthly rate (Figure C).

Petroleum product prices fell 14.2% in the year to June 2015, unchanged in the year to May 2015. The petroleum index has been rising steadily since January 2015, when it had fallen by 20.7%. The largest decrease seen in this index was in July 2009, when it fell by 21.3%. The main contributions to the fall in the annual rate came from diesel and gas oil, which fell by 13.6% in the year to June 2015.

Petroleum prices between May and June 2015 fell 0.1%, down from a rise of 2.1% between April and May 2015. Diesel and gas oil prices were the main contribution to the fall in the monthly index, decreasing by 0.5%. This was offset by a rise in unleaded petrol, which rose by 0.9% between May and June 2015.

Food product prices fell 3.2% in the year to June 2015, up from a fall of 3.5% in the year to May 2015. This was mainly due to a fall in the price of dairy products, which fell 13.1% in the year to June 2015, down from a fall of 12.9% in the year to May 2015. Since October 2014, dairy products have seen record falls (data back to 1997). This is the result of falls in the price of processed liquid milk, which fell 19.4% in the year to June 2015. The highest recorded fall for processed liquid milk was in March 2015 when it fell 25.4% (data back to 2008).

Food product prices fell 0.3% between May and June 2015, compared with a fall of 0.4% last month. This is the result of a drop in the price of preserved meat and meat products, which fell 0.5% between May and June 2015.

Core factory gate inflation

Core factory gate prices, which exclude the more volatile food, beverage, tobacco and petroleum product prices, giving a measure of the underlying factory gate inflation, rose 0.1% in the year to June 2015, unchanged since March 2015.

Since autumn 2011 when input prices rose by around 16%, the price inflation of materials and fuels purchased by UK manufacturing industry, as measured by input prices, has been falling (Figure D). Input price inflation showed a steady but fairly slow increase from October 2012 to July 2013, when it reached 4.7%. From November 2013, prices started to decrease rapidly. The largest fall was seen in January 2015 (14.1%) and input prices are currently falling by 12.6%. The core measure of inflation has also decreased through this period but at a significantly slower rate.

Looking at the latest data (Table D), the main movements in the year to June 2015 were as follows:

• the total input price index fell 12.6%, compared with a fall of 12.3% in the year to May 2015

• the core input price index saw a fall of 4.0%, compared with a fall of 3.9% last month

• the price of imported materials as a whole (including crude oil) fell 12.6%, down from a fall of 11.4% last month (Table 7 Input prices: detailed by commodity (not seasonally adjusted) - SIC 2007) (230.5 Kb Excel sheet)

Between May and June 2015:

• the total input price index fell 1.3%, compared with a fall of 1.1% last month (Table D)

• in seasonally adjusted terms, (see Table D) the input price index for the manufacturing industry excluding the food, beverage, tobacco and petroleum industries fell 0.1%, unchanged from last month

Notes for Input prices: summary

1. These indices include the Climate Change Levy (CCL) which was introduced in April 2001

2. These indices include the Aggregates Levy which was introduced in April 2002

Table E and Figure E show the percentage change in the price of the main commodities groups over the year and their contributions to the total input index.

Table F and Figure F show the percentage change in the price of the main commodities groups over the month and their contributions to the total input index.

The overall input index for all manufacturing, which measures changes in the price of materials and fuels purchased by manufacturers, fell 12.6% in the year to June 2015, compared with a fall of 12.3% in the year to May 2015. The main downward contributions to the index came from crude oil (down 39.7% in the year to June 2015) and home-produced food (down 11.0% in the year to June 2015).

The monthly input index fell 1.3% between May and June 2015, compared with a fall of 1.1% last month. This fall was driven by a decrease in the price of crude oil and home-produced food, which fell by 3.3% and 3.5% respectively between May and June 2015 (see Table F and Figure F).

Crude oil annual prices have been falling overall since October 2013. The annual index fell 39.7% in the year to June 2015, down from a fall of 37.0% last month. The monthly index which had shown increases since February 2015, between May and June 2015 fell by 3.3%. In recent years, factors such as supply disruptions, concerns over the global economic recovery, instability in euro zone countries, and the expectation of reduced demand, have all affected prices.

Home-produced food prices fell by 11.0% in the year to June 2015, up from a fall of 13.8% in the year to May 2015. The main contribution to the annual rate came from home-produced cereals and animal products. Home-produced cereals fell 24.2% and home-produced animal products fell 19.9%.

The monthly rate for home-produced food fell 3.5% between May and June 2015, up from a fall of 6.4% in the previous month. The main contribution to the monthly rate came from home-produced root crops, specifically early ware potatoes. This large effect is due to the fact that these are very seasonal items, unavailable through the majority of the year and priced at a premium at the beginning of their short growing season. This season is now over and therefore we have seen a drop in prices.

Core input price index (excluding purchases from the food, beverage, tobacco and petroleum industries)

The core input price index, in seasonally adjusted terms, fell 0.1% between May and June 2015, unchanged from last month. The unadjusted index fell 0.5% between May and June 2015, compared with a fall of 0.6% last month.

This additional section of the PPI statistical bulletin introduces some new charts to explain contributions to the change in the PPI rate of inflation. They are currently being published in a separate section for clarity and as an opportunity for users to provide feedback. Please email ppi@ons.gov.uk with your comments.

Output Prices

The annual percentage growth rate for the output PPI in June 2015 was -1.5%, up from a fall of -1.6% last month, resulting in an increase in the annual rate of 0.1% between May and June 2015. The main contributions to this change in the rate came from food products, offset by a fall in clothing, textiles and leather products (Figure G). Food product prices fell 3.2% in the year to June 2015, up from a fall of 3.5% in the year to May 2015, and clothing, textiles and leather product prices saw no movement (0.0%) in the year to June 2015, down from a rise of 0.5% last month.

Input Prices

The annual percentage growth rate for the input PPI in June 2015 was -12.6%, down from -12.3% last month, resulting in a fall in the annual rate of 0.3% between May and June 2015. The main contribution to this change in the rate came from crude oil where prices fell by 39.7% in the year to June 2015, down from a fall of 37.0% last month.

For this bulletin reference tables 8R and 9R (230.5 Kb Excel sheet) highlight revisions to movements in price indices previously published in last month’s statistical bulletin. Revisions are generally a result of changes to the most recent estimates, as more price quotes are received, and revisions to seasonal adjustment factors, which are re-estimated every month.

The output headline figure has small revisions, but the headline figure for input has larger than normal revisions, which were mainly caused by late data and revised data for home-produced crude oil. For more information about the revisions policy see our website.

Revisions to data provide one indication of the reliability of main indicators. Table G shows summary information on the size and direction of the revisions which have been made to the data, covering a 5-year period. A statistical test has been applied to the average revision to find out if it is statistically significantly different from zero. An asterisk (*) shows that the test is significant.

Table G presents a summary of the differences between the first estimates, published between 2007 and 2015, and the estimates published 12 months later. These numbers include the effect of the reclassification onto the Standard Industrial Classification (SIC) 2007.

Spreadsheets giving revisions triangles of estimates for all months from January 1998 through to May 2015 and the calculations behind the averages in the table, are available in the reference table area of our website:

• revision triangle for total output (12 months) (2.39 Mb Excel sheet)
• revision triangle for total output (1 month) (2.35 Mb Excel sheet)
• revision triangle for total input (12 months) (2.4 Mb Excel sheet)
• revision triangle for total input (1 month) (2.39 Mb Excel sheet)