Producer price inflation, UK: March 2022 including services, January to March 2022

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).

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17 May 2022 12:50

We have corrected an error in Figure 1 (Input and output PPI). The index value for input PPI (GHIP) for June 2020 was incorrectly published as 111.6. This has been corrected to 111.7. Monthly and annual growth rates have not been affected. This happened because of a processing error. We apologise for any inconvenience caused.

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Cyswllt:
Email Brogan Taylor

Dyddiad y datganiad:
13 April 2022

Cyhoeddiad nesaf:
18 May 2022

1. Main points

  • The headline rate of output prices showed positive growth of 11.9% on the year to March 2022, up from 10.2% in February 2022; this is the highest the rate has been since September 2008.

  • The headline rate of input prices showed positive growth of 19.2% on the year to March 2022, up from 15.1% in February 2022; this is the highest the rate has been since records began.

  • Metal products and crude oil provided the largest upward contributions to the annual rates of output and input inflation respectively.

  • The annual rate for the Services Producer Price Index (SPPI) showed positive growth of 4.0% in Quarter 1 (Jan to Mar) 2022, up from 3.7% in Quarter 4 (Oct to Dec) 2021; this is the highest the rate has been since records began in Quarter 1 1999.

  • Information and communication services provided the largest upward contribution to the annual rate of SPPI.

  • Weights for the SPPI have been updated this quarter in line with the annual chain-linking methodology (see Section 5: Measuring the data).

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2. Analysis

Producer price inflation (PPI) output prices

On the month, the rate of output inflation was 2.0% in March 2022, up from 0.9% in February 2022 (Table 1). This is the highest the monthly rate has been since May 2008.

Of the 10 product groups, nine displayed upward contributions to the annual rate in March 2022. Metal products provided the largest upward contribution of 2.85 percentage points to the annual rate (Figure 2) and had annual price growth of 18.2% in March 2022 (Table 2). This is the highest the annual rate has been for metal products since records began in January 1997 and was mainly driven by basic iron and steel, and of ferro-alloys for the domestic market.

Crude oil and gas prices continue to rise, driven in part by global geopolitical tensions, including the conflict in Ukraine and trade restrictions with Russia. These rises are passing through to factory gate prices (see Section 4: Glossary) for heavy industry, such as the manufacture of metal products, reflecting the importance of oil and fuel in their input costs.

Tobacco and alcohol was the only product group to show a downward contribution to the annual rate, as a result of the reduction in weight between 2021 and 2022. You can find out more about how these rates are calculated in Section 5: Measuring the Data.

More about economy, business and jobs

PPI output – change in the annual rate

The annual rate of output inflation increased by 1.7 percentage points from 10.2% in February 2022 to 11.9% in March 2022. This is the highest the annual rate has been since September 2008.

Of the 10 product groups, eight displayed upward contributions to the change in the annual rate, with metal products and transport equipment providing the largest, at 0.64 and 0.45 percentage points, respectively (Figure 3).

PPI input prices

On the month, the rate of input inflation was 5.2% in March 2022, up from 1.8% in February 2022 (Table 3). This is the highest the monthly rate has been since records began in February 1996.

The annual rate of imported inputs was 14.6% in March 2022, up from 10.4% in February 2022 (Table 4). This is the highest the rate has been since records began in December 2009. This was driven by non-EU imports of crude petroleum and natural gas.

The largest upward contribution to the annual input inflation rate came from crude oil, which contributed 5.16 percentage points (Figure 4) and had positive annual price growth of 98.0% in March 2022 (Table 5). This was driven by monthly growth of 32.7% in March 2022; this is the highest the monthly rate has been for this product group since June 2020.

PPI input – change in the annual rate

The annual rate of input inflation increased by 4.1 percentage points from 15.1% in February 2022 to 19.2% in March 2022. This is the largest percentage point increase to the annual rate and the highest the annual rate has been since records began in January 1997.

Of the 10 product groups, eight displayed upward contributions to the change in the annual rate. Crude oil displayed the largest, at 2.12 percentage points (Figure 5). The monthly rate of 32.7% between February 2022 and March 2022 for this product group is higher than the 8.3% between the same months a year ago; this has pulled the annual rate up by 36.4 percentage points from 61.6% in February 2022 to 98.0% in March 2022.

Services Producer Price Index (SPPI)

The annual rate of inflation for the Services Producer Price Index (SPPI) was 4.0% in Quarter 1 (Jan to Mar) 2022, up from 3.7% in Quarter 4 (Oct to Dec) 2021 (Figure 6). This is the highest the rate has been since records began in Quarter 1 (Jan to Mar) 1999.

The quarter-on-quarter growth of services sold by UK companies was 1.1% in Quarter 1 2022, up from 1.0% in Quarter 4 2021 (Table 6).

The largest upward contribution to the annual rate came from information and communication services, at 5.64 percentage points (Figure 7), with an annual price increase of 0.5% (Table 7).

Professional, scientific and technical services provided the largest upward contribution to the quarterly rate, at 0.75 percentage points, with a quarterly price increase of 2.8%.

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3. Producer price inflation data

Producer price inflation time series
Dataset | Released 13 April 2022
A comprehensive selection of data on input and output indices. Contains producer price indices of materials and fuels purchased and output of manufacturing industry by broad sector.

Output and input producer price inflation: contributions to the 12-month rates
Dataset | Released 13 April 2022
Contributions to the 12-month rates of input and output producer price inflation by component and overall rates.

Producer price inflation
Dataset MM22 | Released 13 April 2022
UK price movement data at all manufacturing, aggregated industry and product group level. Data supplied from individual manufacturers, importers and exporters. Monthly, quarterly and annual data.

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4. Glossary

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

A measure of influence that the index has on the overall growth rate. This depends on both the magnitude of the weight and the inflation rate. A positive contribution is an index that is driving a change in the annual growth rate value. Where the contribution is positive but the growth is negative, this indicates that the index is reducing the annual growth rate (for example, the growth rate would be higher if this index had a lower weight).

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.

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5. Measuring the data

Producer price inflation (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 as these tend to show greater change than the annual inflation rate.

  • Decrease in weight and in inflation rate - contribution is negative

  • Decrease in weight, increase in inflation rate - contribution is usually negative

  • No change in weight or inflation rate - no change

  • No change in weight, increase in inflation rate - no change

  • 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 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 PPI and the SPPI are:

  1. Producer price indices methods changes

  2. Chain-linking in business prices

  3. Producer price weight changes

  4. Services producer price weight changes

  5. Guidance on using indices in indexation clauses (PDF, 197KB)

  6. PPI methods and guidance (PDF, 1.14MB)

  7. SPPI user guidance and methodology article

  8. PPI standard errors article

  9. SPPI standard errors article

Weights

This quarter's SPPI is being published with updated sales data in line with the annual chain-linking methodology. New 2022 weights are used to calculate indices from Quarter 4 (Oct to Dec) 2021, which is the link period. Further details on the methodology are available in our Chain-linking in business prices article.

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 manufacturing sector.

Economic statistics governance after EU exit

Following the UK's exit from the EU, new governance arrangements are being put in place that will support the adoption and implementation of high-quality standards for UK economic statistics. These governance arrangements will promote international comparability and add to the credibility and independence of the UK's statistical system.

At the centre of this new governance framework will be the new National Statistician's Committee for Advice on Standards for Economic Statistics (NSCASE). NSCASE will support the UK by ensuring its processes for influencing and adopting international statistical standards are world leading. The advice NSCASE provides to the National Statistician will span the full range of domains in economic statistics, including the National Accounts, fiscal statistics, prices, trade and the balance of payments and labour market statistics.

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6. Strengths and limitations

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 are 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 (COVID-19) in March 2022

Response rates for the domestic PPI, Import Price Index (IPI) and Export Price Index (EPI) all show an increase between February 2022 and March 2022 (Table 9). The response rate for SPPI shows an increase between Quarter 4 (Oct to Dec) 2021 and Quarter 1 (Jan to Mar) 2022 (Table 10).

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Manylion cyswllt ar gyfer y Bwletin ystadegol

Brogan Taylor
business.prices@ons.gov.uk
Ffôn: +44 1633 456907