Producer price inflation, UK: August 2024

• Producer input prices fell by 1.2% in the year to August 2024, down from a revised increase of 0.2% in the year to July 2024.

• Producer output (factory gate) prices rose by 0.2% in the year to August 2024, down from an increase of 0.8% in the year to July 2024.

• On a monthly basis, producer input prices fell by 0.5%, while output (factory gate) prices fell by 0.3% in August 2024.

Producer input prices fell by 1.2% in the year to August 2024. This is down from a revised increase of 0.2% in the year to July (Figure 1). Monthly input prices fell by 0.5% in August 2024, following a revised fall of 0.3% in July (Table 1).

Producer output (factory gate) prices rose by 0.2% in the year to August 2024. This is down from an increase of 0.8% in the year to July (Figure 1). Monthly output prices fell by 0.3% in August 2024, following a flat rate of 0.0% in July (Table 1).

Estimates for both July and August 2024 are provisional. Figures for the latest 12 months are subject to revisions as additional survey data are returned and validated. Effective response rates at the time of first publishing can be found in Section 7: Data sources and quality.

Because of rounding, inflation rates in this bulletin may not correspond to index value changes, and contributions to the rate may not add up to the rate exactly.

We have now published feedback from the user engagement exercise we launched earlier this year. The purpose of the exercise was to better understand user needs as part of a review of outputs and publications for Producer Price Index (PPI) statistics.

Of the 10 product groups for the input Producer Price Index (PPI), 4 made downward contributions to the annual inflation rate in August 2024. The largest of these came from inputs of crude oil and fuels, which contributed negative 0.84 and negative 0.66 percentage points, respectively (Figure 2).

The prices of inputs of crude oil fell by 14% in the year to August 2024, which is down from a rise of 8.4% in the year to July (Table 2). Inputs of crude oil also provided the largest contribution to the change in the annual inflation rate between July and August 2024, with a downward contribution of 1.34 percentage points.

The prices of inputs of fuels fell by 13.5% in the year to August 2024, which is down from a fall of 12.5% in the year to July. The main contribution to this fall came from electricity for domestic market which fell by 13.2% in the year to August 2024.

The largest offsetting upward contributions came from inputs of domestic food, and metals and non-metallic mineral products, which contributed 0.32 and 0.30 percentage points, respectively (Figure 2).

Prices for inputs of domestic food increased by 0.7% in the year to August 2024 (Table 2). This upward contribution was partly caused by a poor yield in potato crops which pushed prices up.

Prices for inputs of metals and non-metallic mineral products rose by 0.8% in the year to August 2024. The main contribution came from aluminium for domestic market.

The prices of materials and fuels imported by UK manufacturers fell by 0.8% in the year to August 2024, down from a rise of 0.4% in the year to July. On a monthly basis, prices saw a 0.3% rise between July and August 2024, compared with a revised fall of 0.2% between June and July.

Of the 10 product groups for the output Producer Price Index (PPI), 7 made upward contributions to the annual inflation rate in August 2024. The largest of these came from "other outputs" and coke and refined petroleum products which contributed 0.92 and 0.73 percentage points, respectively (Figure 3).

Prices for "other outputs" rose by 1.5% in the year to August 2024, up from a rise of 1.2% in the year to July (Table 4). The main contribution to this rise came from soft drinks; mineral waters and other bottled waters for domestic market, which rose 1.0% in the year to August 2024.

Despite providing the second largest upward contribution on the year, coke and refined petroleum products had a growth rate of negative 9.5%. This upward contribution was caused by the weight changes introduced to the PPI in February. For worked examples, see the scenarios in Section 7: Data sources and quality. Coke and refined petroleum products also made the largest contribution to the change in the annual inflation rate in August 2024, with a downward contribution of 0.90 percentage points.

In comparison, the largest offsetting downward contributions came from outputs of chemicals and pharmaceutical preparations, and paper products, which detracted 1.23 and 1.05 percentage points, respectively.

Chemical prices fell by 1.3% in the year to August 2024 (Table 4). This decrease was mainly caused by paints, varnishes and similar coatings, printing ink and mastics for domestic market, which fell by 0.7% in the year to August 2024.

Weight

This is the importance of the price of interest relative to other prices collected. With annual chain-linking, this is updated every year using business turnover data.

Index value

Price level in a specific basket of goods.

Annual growth rate

The annual inflation rate.

Link factor

A smoothing factor applied to create a continuous series following a weights change.

Contribution

As the aggregate producer prices indices are built up from individual product indices, it is possible to decompose overall inflation into contributions from different products. Those contributions reflect both the inflation rates for each product and their weight in the index. For more worked examples, see the scenarios in Section 7: Data sources and quality.

Producer price inflation

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).

If the producer price inflation rate is a positive value, this indicates that prices have risen, while a negative value indicates that prices have fallen.

Input prices

The input price measures the price of materials and fuels bought by UK manufacturers for processing. It includes materials and fuels that are either imported or sourced from within the domestic market. It is 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.

Output prices

The output price (also known as the factory gate 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.

Services producer price inflation

Quarterly estimates monitoring the changes in prices charged for services provided to UK-based customers for a range of industries.

The Office for Statistics Regulation (OSR) quality report of the Producer Price Indices (PPI) was published in August 2023. The report notes the excellent progress made recently with bringing PPI in line with methodological best practice, but also highlights areas that need to be improved.

Our Producer prices development plan was published in October 2023, detailing the work that will be undertaken over the next year to improve the quality of PPI data and continue to meet user needs.

The Producer Price Index

The Producer Price Index (PPI) uses contributions to identify how indices influence the overall inflation rate. This section gives additional information on the calculation and how to interpret it.

Example scenarios

The following gives examples of how weight and inflation rate changes most commonly affect the contribution. In PPI, the weights usually have greater influence on the contribution to the annual rate, as these tend to show greater change than the annual inflation rate:

• decrease in weight, decrease in inflation rate – contribution is negative

• decrease in weight, no change in inflation rate – contribution is negative

• decrease in weight, increase in inflation rate – contribution is usually negative

• no change in weight, decrease in inflation rate – contribution is usually negative

• no change in weight or inflation rate – no change

• no change in weight, increase in inflation rate – contribution is usually positive

• increase in weight, decrease in inflation rate – contribution is usually positive

• increase in weight, no change in inflation rate – contribution is positive

• increase in weight, increase in inflation rate – contribution is positive

Contributions are calculated using the following formula:

Quality and methodology information (QMI) on strengths, limitations, appropriate uses, and how the data were created is available in our Producer price indices QMI and our Services Producer Price Inflation QMI.

Other useful documentation from the Office for National Statistics (ONS) for the PPI and the Services Producer Price Index (SPPI) are:

• Producer Price Indices methods changes article

• Chain-linking in business prices article

• Producer price weight changes article

• Services producer price weight changes article

• Guidance on using indices in Indexation Clauses (PDF, 197KB)

• PPI methods and guidance (PDF, 1.18MB)

• SPPI user guidance and methodology

• PPI standard errors: 2017 datasets

• UK SPPI standard errors: 2016 to 2017 article

Sterling effective exchange rate

The sterling effective exchange rate measures the level of sterling relative to a basket of other currencies. The weights in the basket reflect all UK trade, and may therefore be different from those for manufactured goods, which are most relevant for producer prices.

Data revisions policy

Figures for the latest two months are provisional, and the latest 12 months are subject to revisions because of late and revised respondent data. The PPI revision policy is now in line with that of the national accounts. Published information on our revisions policy and revisions triangles shows how estimates are revised over time.

Strengths

These data:

• provide users with valuable insight into the changes in the prices of goods and services bought and sold by UK manufacturers

• are comprehensive, covering many products at a much greater level of detail than other surveys

• are internationally comparable with any country using the classification by product activity (CPA) or the central product classification (CPC) systems

• are created using a rotational sampling method to enable many new products and new respondents to be included

• are chain-linked annually to improve results in deflation by reducing substitution bias

Limitations

The limitations are that:

• some products are produced by only a small number of manufacturers, meaning that there may not be enough manufacturers for a detailed analysis, requiring some estimation

• the data can be revised for 12 months

• the data for the latest two months of the PPI and two quarters of the SPPI are provisional

Response rates in August 2024

In August 2024, the response rate for the domestic PPI was higher than it was in August 2023, though the response rates for the Import Price Index (IPI) and Export Price Index (EPI) were lower (Table 5).

Accredited official statistics

These accredited official statistics were independently reviewed by the Office for Statistics Regulation in August 2010. They comply with the standards of trustworthiness, quality and value in the Code of Practice for Statistics and should be labelled "accredited official statistics".