Producer price inflation, UK: May 2022

• Producer input prices rose by 22.1% in the year to May 2022, up from 20.9% in the year to April 2022; this is the highest the rate has been since records began in January 1985.

• Producer output (factory gate) prices rose by 15.7% in the year to May 2022, up from 14.7% in the year to April 2022.

• Food products, and metals and non-metallic minerals provided the largest upward contributions to the annual rates of output and input inflation, respectively.

• Monthly producer input prices rose by 2.1% and output prices by 1.6% in May 2022, down from 2.7% and 2.8%, respectively, in April 2022.

Producer price inflation (PPI) annual growth rates

The headline output index has been extended back to 1974 (Figure 1) using previously published data, while the headline input index has been extended back to 1984 (Figure 2); more information can be found in Section 5: Measuring the data.

The annual rate of output PPI increased to 15.7% on the year to May 2022; the rate has now been positive for 17 consecutive months.

The annual rate of input PPI increased to 22.1% on the year to May 2022; the rate has now been positive for 18 consecutive months.

PPI output prices

On the month, the rate of output inflation was 1.6% in May 2022, down from 2.8% in April 2022 (Table 1). This is the first time the monthly rate has slowed since February 2022.

Of the 10 product groups, nine showed upward contributions to the annual rate in May 2022. Food products provided the largest upward contribution of 3.47 percentage points to the annual rate (Figure 4) and had annual price growth of 10.4% in May 2022 (Table 2). This is the highest the annual rate has been for food products since September 2008 and was mainly driven by preserved meat and meat products for the domestic market.

Despite providing a downward contribution to the annual rate, tobacco and alcohol products increased by 4.4% on the year to May 2022. The downward contribution is driven by weight changes implemented as part of the move to annual chain-linking. More information is available in our Chain-linking in business prices article. You can find out more about how these rates are calculated in Section 5: Measuring the data.

PPI output – change in the annual rate

The annual rate of output inflation increased by 1.0 percentage points from 14.7% in April 2022 to 15.7% in May 2022.

Of the 10 product groups, nine showed upward contributions to the change in the annual rate, with food products providing the largest, at 0.37 percentage points (Figure 5).

PPI input prices

On the month, the rate of input inflation was 2.1% in May 2022, down from 2.7% in April 2022 (Table 3). The monthly rate has slowed for the second consecutive month following a record high of 4.9% in March 2022.

The largest upward contribution to the annual input inflation rate came from metals and non-metallic minerals, which contributed 4.89 percentage points (Figure 6). This product group had positive annual price growth of 24.1% in May 2022 (Table 4), which was up from 23.7% in April 2022.

The monthly rate of imported inputs rose by 1.9 percentage points, from 1.7% in April 2022 to 3.6% in May 2022. The annual rate also rose, from 15.4% in April 2022 to 19.6% in May 2022 (Table 5).

PPI input – change in the annual rate

The annual rate of input inflation increased by 1.2 percentage points from 20.9% in April 2022 to 22.1% in May 2022.

Of the 10 product groups, eight showed upward contributions to the change in the annual rate, with crude oil providing the largest, at 0.52 percentage points (Figure 7).

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.

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.

• A decrease in weight and in inflation rate - contribution is negative

• A decrease in weight and an increase in inflation rate - contribution is usually negative

• No change in weight or inflation rate - no change

• No change in weight and an increase in inflation rate - no change

• An increase in weight and a decrease in inflation rate - contribution is usually positive

• An increase in weight and no change in inflation rate - contribution is positive

• An increase in weight and an 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 our Producer Price Index (PPI) Quality and Methodology Information report and our Services Producer Price Indices (SPPI) Quality and Methodology Information report.

Other useful documentation for the PPI and the 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 (PDF, 197KB)

• PPI methods and guidance (PDF, 1.14MB)

• SPPI user guidance and methodology article

• PPI standard errors article

• SPPI standard errors article

Extension of back series

Prior to last month's release, the existing back series of headline output (GB7S) and input (GHIP) data were available back to 1996. This release now sees an extension to these back series by making historical data readily available. PPI data going back to January 1974 have been stored digitally and so this publication sees the release of these index values, linked together and re-referenced to 2015 equals 100, for the headline PPI output series (GB7S).

For headline input (GHIP), this publication sees the release of a back series to January 1984. Unlike the headline output index, the input headline was first introduced in the early 1990s, with the index data starting from 1984, hence the difference in available back series between the two headline indices.

Annual growth rates for the output and input back series are displayed in Figures 1 and 2, respectively.

The addition of these back series does not affect the methodology used to calculate our previous data to 1996. For the periods January 1974 to December 1995, we have rescaled data from a number of historical rebased series to make these comparable with our previously published data.

The addition of these historical back series extends our understanding of the narrative around UK manufacturing, allowing the current data to be viewed within a much longer context.

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 transactions 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.

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.

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

• Our data are created using a rotational sampling method to enable many new products and new respondents to be included in our data.

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

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 May 2022

Response rates for the domestic PPI and Import Price Index (IPI) show an increase between April 2022 and May 2022, whereas the response rate for the Export Price Index (EPI) shows a decrease between April 2022 and May 2022 (Table 6).