Producer price inflation, UK: March 2024, including services, January to March 2024

• Producer input prices fell by 2.5% in the year to March 2024, down from a revised fall of 2.2% in the year to February 2024.

• Producer output (factory gate) prices rose by 0.6% in the year to March 2024, up from a rise of 0.4% in the year to February 2024.

• On a monthly basis, producer input prices fell by 0.1% but output prices rose by 0.2% in March 2024.

• Input and output price levels have been relatively stable since mid-2022 but remain substantially higher than their early 2021 levels.

• Services producer prices rose by 3.6% in the year to Quarter 1 (Jan to Mar) 2024, up from a revised increase of 3.5% in the year to Quarter 4 (Oct to Dec) 2023.

• This month's Services Producer Price Index (SPPI) estimates are being published with updated weights in line with the annual chain-linking methodology (see Section 6: Weights).

The annual inflation rate of the input Producer Price Index (PPI) fell to negative 2.5% in the year to March 2024, down from a revised negative 2.2% in the year to February 2024 (Figure 1). This was the 10th consecutive month the annual rate has been negative. The monthly input PPI fell by 0.1% in March 2024, after a revised rise of 0.3% in February 2024 (Table 1).

The annual inflation rate of the output (factory gate) PPI was 0.6% in the year to March 2024, up from 0.4% in the year to February 2024. This is the highest the rate has been since May 2023 (Figure 1). The monthly inflation rate was 0.2% in March 2024, down from 0.3% in February 2024 (Table 1).

Estimates for both February and March 2024 are provisional, and figures for the latest 12 months are subject to revisions as additional survey data are returned and validated. Effective response rates at time of first publishing can be found in Section 10: Strengths and limitations.

We are reviewing our range of outputs and publications for PPI statistics to better suit user needs. We would welcome feedback from users on their use of PPI statistics via our user engagement survey.

Producer input prices fell by 2.5% in the year to March 2024, down from a revised fall of 2.2% in the year to February 2024. Of the 10 product groups for input Producer Price Index (PPI), 5 made downward contributions to the annual inflation rate in March 2024. The largest of these came from inputs of chemicals, and inputs of other parts and equipment, which contributed negative 1.12 and 0.74 percentage points, respectively (Figure 3).

Chemical prices fell by 6.9% in the year to March 2024 (Table 2), with falls in the prices of "other organic basic chemicals", which survey respondents noted were the result of market dynamics (supply and demand) and falling gas prices.

Despite providing the second-largest downward contribution to the annual rate, prices for other parts and equipment increased by 0.1% in the year to March 2024 (Table 3). The downward contribution was caused by weight changes, which were introduced to the PPI last month. We provide more information in our Chain-linking in business prices article.

In comparison, the offsetting upward contributions were small (totalling 0.35 percentage points), with inputs of fuel and other inputs providing the largest of these, at 0.24 and 0.09 percentage points, respectively.

Of the 10 product groups for input PPI, 4 made downward contributions to the change in the annual inflation rate, with inputs of fuel providing the largest, at negative 0.21 percentage points (Figure 4). The annual inflation rate for this product group fell from 8.0% in February 2024 to 4.1% in March 2024.

The prices of materials and fuels imported by UK manufacturing fell by 3.2% in the year to March 2024, which is up from a revised fall of 3.7% in February 2024. The monthly prices fell by 0.1% between February and March 2024, compared with a revised increase of 0.7% between January and February 2024. The fall in annual import prices is consistent with the stronger value of sterling, which rose by 5.8% in the year to March 2024 (Table 3).

Producer output (factory gate) prices rose by 0.6% in the year to March 2024, up from 0.4% in the year to February 2024. Of the 10 product groups for the output Producer Price Index (PPI), 7 made upward contributions to the annual inflation rate in March 2024. The largest of these came from refined petroleum products and other outputs, which contributed 1.99 and 1.04 percentage points, respectively (Figure 5).

Petroleum prices rose by 6.0% in the year to March 2024 (Table 4), the highest the rate has been since February 2023. This contribution was partly influenced by weight changes, with this product group increasing in weight from 6.1% in 2023 to 7.5% in 2024 (see Table 6 in our February 2024 statistical bulletin).

In comparison, offsetting downward contributions came from chemicals and paper products, at negative 1.82 and 1.19 percentage points, respectively. Chemical prices fell by 9.2% in the year to March 2024 (Table 4), with the main price falls coming from fertilisers.

Of the 10 product groups for output PPI, 4 made upward contributions to the change in the annual inflation rate, with refined petroleum products providing the largest, at 0.44 percentage points (Figure 6). The annual inflation rate for this product group rose by 4.2 percentage points, from 1.8% in February 2024 to 6.0% in March 2024.

The annual rate of inflation for services, excluding financial and insurance services, provided by UK companies, was 3.6% in Quarter 1 (Jan to Mar) 2024, up from a revised increase of 3.5% in the year to Quarter 4 (Oct to Dec) 2023. The annual rate has increased for the second consecutive month but is well below its recent peak (Figure 7).

The quarter-on-quarter growth of services producer prices was 1.3% in Quarter 1 2024, up from 0.4% in Quarter 4 2023 (Table 5).

The largest upward contribution to the annual rate for Services Producer Price Index (SPPI) in Quarter 1 2024 came from accommodation and food services, at 3.35 percentage points (Figure 8). The annual rate for this product group in Quarter 1 2024 was 5.8%, down from 5.9% in Quarter 4 2023 (Table 6). This was mainly attributed to price increases in other food serving services.

The second-largest annual contribution came from administrative and support services, at 2.0 percentage points, with an annual inflation rate of 4.6%.

The contributions for these two product groups were partly influenced by weight changes, with both seeing increases in their weights from 2023 to 2024 (See Section 6: Weights).

The largest upward contribution to the quarterly rate came from professional, scientific and technical services, at 0.62 percentage points, with a quarterly price increase of 2.4%. Transportation and storage services provided the joint second-largest contribution to the quarterly rate, at 0.20 percentage points. Prices increased 1.3% on the quarter, with increases in the prices of “other transportation support services”, which a small proportion of survey respondents noted were a result of the Red Sea trade disruption.

This month's Services Producer Price Index (SPPI) is being published with updated sales data, in line with the annual chain-linking methodology. New weights are applied to the data from Quarter 4 (Oct to Dec) 2023, which is the link period (Table 7). Further details on the methodology are available in our Chain-linking in business prices article.

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 attributed to an increase in the annual growth rate value. Where the contribution is negative, but the growth is positive, 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).

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.

Producer prices development plan

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

For further details, see the full OSR report.

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, 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 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, 1.175KB)

• 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 changes in the strength of sterling relative to baskets 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 transactions in the manufacturing sector.

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 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

Response rates in March 2024

The response rates for the domestic PPI, the Import Price Index (IPI) and the Export Price Index (EPI) all decreased between February and March 2024 (Table 8).

The response rate for the SPPI increased between Quarter 4 (Oct to Dec) 2023 and Quarter 1 (Jan to Mar) 2024 (Table 9).