Producer price inflation, UK: July 2021

• The headline rate of output prices showed positive growth of 4.9% on the year to July 2021, up from 4.5% in June 2021.
• The headline rate of input prices showed positive growth of 9.9% on the year to July 2021, up from 9.7% in June 2021.
• Transport equipment, and metals and non-metallic minerals provided the largest upward contributions to the annual rates of output and input inflation respectively.

On the month, the rate of output inflation was 0.6% in July 2021, unchanged from June 2021 (Table 1).

Transport equipment provided the largest upward contribution of 2.02 percentage points to the annual rate (Figure 2) but had negative annual price growth of 2.3% in July 2021 (Table 2).

Despite showing negative annual growth, transport equipment provided an upward contribution to the annual rate. This is because of the weight changes implemented as part of the move to annual chain-linking.

The annual rate of output inflation increased by 0.4 percentage points from 4.5% in June 2021 to 4.9% in July 2021; this is the highest the annual rate of output inflation has been since December 2011. Petroleum products had the highest annual growth rate of any component of output prices in July 2021, at 46.6% (Table 2), but had a downward contribution to the change in the annual rate as it fell from 54.3% in June. This was mainly driven by a base effect as there was only a relatively small price movement of 3.6% on the month.

Of the 10 product groups, seven displayed upward contributions to the change in the rate, with other manufactured products providing the largest, at 0.35 percentage points (Figure 3). Annual growth rates for this product group were being driven by products of wood, cork, straw and plaiting materials for domestic market.

On the month, the rate of input inflation was 0.8% in July 2021, up from 0.5% in June 2021 (Table 3).

The annual rate of imported inputs was 4.8% in July 2021 (Table 4), up from 4.6% in June 2021.

The largest upward contribution to the annual input inflation rate came from metals and non-metallic minerals, which contributed 4.0 percentage points (Figure 4) and had positive annual price growth of 18.6% in July 2021 (Table 5).

The annual input inflation rate increased by 0.2 percentage points from 9.7% in June 2021 to 9.9% in July 2021. Crude oil had the highest annual growth rate of any component of input prices in July 2021, at 52.7% (Table 5), but had a downward contribution to the change in the annual rate as it fell from 60.0% in June. This was mainly driven by a base effect as there was only a relatively small price movement of 3.1% on the month.

Of the 10 product groups, seven displayed upward contributions to the change in the rate, with chemicals providing the largest, at 0.25 percentage points (Figure 5). Annual growth rates for this product group were being driven by other organic basic chemicals for domestic market.

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).

Output prices

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.

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 both imported or sourced 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.

Services producer price inflation

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

Quality and methodology information on strengths, limitations, appropriate uses, and how the data were created is available in the Producer Price Index (PPI) Quality and Methodology Information report and the Services Producer Price Indices (SPPI) Quality and Methodology information report.

Other useful documentation for the Producer Price Index (PPI) and the Services Producer Price Index (SPPI) are:

• Producer price indices methods changes
• Chain-linking in business prices
• Producer price weight changes
• Services producer price weight changes
• Guidance on using indices in indexation clauses
• PPI methods and guidance
• SPPI user guidance and methodology article
• PPI standard errors article and SPPI standard errors article

Office for Statistics Regulation (OSR) publishing review

The Office for Statistics Regulation (OSR) is undertaking a review into whether the 9:30am release time stated in the Code of Practice for Statistics meets the needs of users. During the pandemic, exemptions were granted to allow the release of market sensitive statistics at 7:00am.

Sterling effective exchange rate

The sterling effective exchange rate measures changes in the strength of sterling relative to basket of other currencies. The sterling effective exchange rate is only indicative of the rates applied to producer prices. This is because the sterling effective exchange rate is a trade weighted index that represents all UK trade, whereas producer prices reflect transaction in the manufacture sector.

Strengths

• These data provide users with valuable insight into the changes in the process of goods and services bought and sold by UK manufacturers.
• Our data is very comprehensive, covering many products at a much greater level of detail than other surveys.

Limitations

• Some products are produced by only a small number of manufacturers, meaning that there may not be enough manufacturers for a detailed and robust analysis and the sector may be volatile, requiring some estimation.
• The data can be revised for 12 months.
• The data for the latest two months of the Producer Price Index (PPI) and two quarters of the Services Producer Price Index (SPPI) are provisional.

Coronavirus in July 2021

Response rates for the domestic Producer Price Index (PPI) and Import Price Index (IPI) show a decrease between June 2021 and July 2021, whereas the response rates for the Export Price Index (EPI) show an increase between June 2021 and July 2021 (Table 6).

Links to additional sources of coronavirus information from the Office for National Statistics (ONS)

Various articles have been published that help describe the ONS response to how the coronavirus might be seen in our estimates:

• Coronavirus and the effects on UK prices (published 6 May 2020)
• Coronavirus and the impact on output in the UK economy, UK: March 2021 (published 12 May 2021)
• Meeting the challenge of measuring the economy through the COVID-19 pandemic (published 6 May 2020)
• Coronavirus and the effects on UK GDP (published 6 May 2020)
• Real-time turning point indicators: a UK focus (published 27 April 2020)
• Communicating gross domestic product (published 27 April 2020)

Our latest data and analysis on the impact of the coronavirus on the UK economy and population are also available.

The ONS has released a public statement on the coronavirus and the production of statistics, and any specific queries on this can be directed to the Media Relations Office.