Producer price inflation, UK: April 2019

Changes in the prices of goods bought and sold by UK manufacturers including price indices of materials and fuels purchased (input prices) and factory gate prices (output prices).

This is not the latest release. View latest release

This is an accredited national statistic.

Cyswllt:
Email Martina Portanti

Dyddiad y datganiad:
22 May 2019

Cyhoeddiad nesaf:
19 June 2019

1. Main points

  • The headline rate of output inflation for goods leaving the factory gate was 2.1% on the year to April 2019, down from 2.2% in March 2019.

  • The growth rate of prices for materials and fuels used in the manufacturing process was 3.8% on the year to April 2019, up from 3.2% in March 2019.

  • All product groups provided upward contributions to output annual inflation.

  • Crude oil provided the largest upward contribution to the annual rate of input inflation, increasing to 6.9% on the year.

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2. Things you need to know about this release

The public consultation to collect users’ views on possible changes to the level of detail published in the Producer Price Indices (PPI) has now been launched. We would like to know what you think of our proposed changes so the consultation will remain open until 26 June 2019. We will publish our initial findings of the responses within 12 weeks of this date.

The factory gate price (output price) is the amount received by UK producers for the goods that they sell to the domestic market. It includes the margin that businesses make on goods, in addition to costs such as labour, raw materials and energy, as well as interest on loans, site or building maintenance, or rent.

The input price measures the price of materials and fuels bought by UK manufacturers for processing. It includes materials and fuels that are both imported or sourced within the domestic market. It is also not limited to materials used in the final product, but includes what is required by businesses in their normal day-to-day running, such as fuels.

The use of core input inflation removes the more volatile indices of food, tobacco, beverages and petrol from our statistics.

Index numbers shown in the main text of this bulletin are on a net sector basis. The index for any industry relates only to transactions between that industry and other industries; sales and purchases within industries are excluded.

Indices relate to average prices for a month. The full effect of a price change occurring part way through any month will only be reflected in the following month’s index.

All index numbers exclude Value Added Tax (VAT). The Soft Drinks Industry Levy, introduced in April 2018, is also excluded. Excise Duty (on cigarettes, manufactured tobacco, alcoholic liquor and petroleum products) is included, except where labelled otherwise.

Each Producer Price Index (PPI) has two unique identifiers: a 10-digit index number, which relates to the Standard Industrial Classification 2007: SIC 2007 code appropriate to the index, and a four-character alpha-numeric code (series ID), which can be used to find series when using the time series dataset for PPI.

Figures for the latest two months are provisional and the latest five months are subject to revisions in light of late and revised respondent data. Revisions to seasonal adjustment factors are re-estimated every month for the seasonally adjusted series. A routine seasonal adjustment review is normally conducted in the autumn each year.

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3. Producer price inflation summary

Figure 1 shows input and output Producer Price Indices (PPI) over the past 15 years. Input PPI is driven mostly by commodity prices, which tend to be more volatile over time compared with prices for finished goods (output PPI). Input PPI is also sensitive to exchange rate movements as roughly two-thirds of inputs into the UK manufacturing sector are imported.

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4. Annual rate of output inflation slows while the monthly rate rises in April 2019

In April 2019, the annual rate of inflation for goods leaving the factory gate (output prices) slowed from 2.2% in March 2019 to 2.1% in April 2019 (Table 1). The 12-month rate of output inflation has remained positive since July 2016. The monthly rate was 0.3% in April 2019, up from 0.1% in March 2019.

Figure 2 shows contributions by product group to the monthly and annual rate of output inflation and Table 2 shows monthly and annual growth rates by product group.

All product groups provided positive contributions to the output annual rate.

Other manufactured products provided the largest upward contribution of 0.33 percentage points to the annual rate (Figure 2), due to price growth of 2.2% on the year to April 2019 (Table 2). This growth was driven mainly by other non-metallic mineral products, which increased by 3.3% on the year to April 2019.

Computers, electrical and optical products displayed the second-largest upward contribution of 0.31 percentage points to the annual rate, with annual growth of 2.6% in April 2019. This is the highest rate for this industry since February 2018.

Petroleum products provided the largest upward contribution to the monthly rate of output inflation, at 0.13 percentage points. Prices for this product group rose by 1.3% on the month in April 2019. Chemicals and pharmaceuticals provided the only downward contribution of 0.01 percentage points, falling to 0.1% on the month.

Figure 3 shows contributions to the change in the annual rate for factory gate prices (output prices).

There was a 0.1 percentage point decrease in the annual rate for outputs between March 2019 and April 2019. The largest downward contribution came from petroleum products at 0.08 percentage points, while alcohol and tobacco, and chemicals and pharmaceuticals both made negative contributions of 0.03 percentage points.

Three industries, computers, electrical and optical equipment, transport equipment, and other manufactured products, each made upward contributions of 0.02 percentage points to the change in the rate.

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5. Annual rate of input inflation rises in April 2019, supported by a positive movement in the monthly rate

The annual rate of inflation for materials and fuels purchased by manufacturers (input prices) rose to 3.8% in April 2019, up 0.6 percentage points from March 2019 (Table 3). The 12-month rate of input inflation has remained positive since July 2016.

The one-month rate for materials and fuels rose 1.9 percentage points to a positive 1.1% in April 2019 (Table 3).

The annual rate of inflation for imported materials and fuels was 3.3% in April 2019 (Table 4), which is up from March 2019. Imported materials and fuels represent roughly two-thirds of overall materials and fuels (input prices) in terms of index weight.

The sterling effective exchange rate index (ERI) fell 0.5% on the month to 79.5 in April 2019 (Table 4). This is the first time in 2019 that the ERI monthly rate has decreased. On the year, the ERI displayed negative growth of 0.9%, down from 1.0% in March 2019 (source: Bank of England).

All else equal, a weaker sterling effective exchange rate will lead to more expensive inputs of imported materials and fuels.

Figure 4 shows contributions by product group to the monthly and annual rate of input inflation and Table 5 shows monthly and annual growth rates by product group.

The largest positive contribution to the annual rate in April 2019 came from crude oil, which contributed 1.20 percentage points (Figure 4) and had annual price growth of 6.9% (Table 5). This is the highest the rate has been since November 2018. Crude oil also made the largest contribution to the monthly rate at 0.94 percentage points, with monthly growth of 5.7% in April 2019, up from 2.5% in March 2019. The monthly rate for world crude oil prices rose 7.5% in April 2019, with an average price of $69 per barrel (source: World Bank)

Inputs of fuel provided the second-largest contribution to the annual rate (0.87 percentage points), with annual price growth of 8.1% in April 2019.

There were no negative contributions to the annual rate from any product group.

The monthly rate of 1.1% was driven by crude oil, with other positive contributions coming from imported parts and equipment, and home food materials of 0.14 and 0.12 percentage points respectively.

In contrast to March 2019, when seven out of the nine product groups made negative contributions to the monthly rate, only two have contributed negatively in April 2019. Fuel and imported parts and equipment both made notable swings from negative to positive contributions between March and April 2019.

Figure 5 shows contributions to the change in the annual rate of inflation for fuels and materials purchased by manufacturers (input prices).

There was a 0.6 percentage points increase in the annual rate for inputs between March and April 2019, with seven out of the nine product groups displaying upward contributions to the change in the rate. Other imported parts and equipment provided the largest upward contribution of 0.22 percentage points, with crude oil and fuel also making positive contributions, at 0.17 and 0.13 percentage points respectively.

The largest downward contribution came from imported metals at 0.11 percentage points.

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7. Quality and methodology

The Producer Price Index (PPI) Quality and Methodology Information report contains important information on:

  • the strengths and limitations of the data and how it compares with related data

  • and users of the data

  • how the output was created

  • the quality of the output including the accuracy of the data

If you would like more information about the reliability of the data, a PPI standard errors article was published on 18 May 2018. The tables present the calculated standard errors of the PPI during the period January 2017 to December 2017, for both month-on-month and 12-month growth.

Guidance on using indices in indexation clauses (PDF, 197KB) covers producer prices, services producer prices and consumer prices.

An up-to-date manual for the PPI, including the import and export index, is now available. PPI methods and guidance (PDF, 1.18MB) provides an outline of the methods used to produce the PPI as well as information about recent PPI developments.

Gross sector basis figures, which include intra-industry sales and purchases, are shown in PPI dataset Tables 4 and 6.

The detailed input indices of prices of materials and fuels purchased by industry (PPI dataset Table 6) do not include the Climate Change Levy (CCL). This is because each industry can, in practice, pay its own rate for the various forms of energy, depending on the various negotiated discounts and exemptions that apply.

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