Producer price inflation, UK: May 2024

• Producer input prices fell by 0.1% in the year to May 2024, up from a revised fall of 1.4% in the year to April.

• Producer output (factory gate) prices rose by 1.7% in the year to May 2024, up from an increase of 1.1% in the year to April.

• On a monthly basis, producer input prices showed no movement, while output (factory gate) prices fell by 0.1% in May 2024.

• The annual inflation rates for both input and output PPI are at their highest levels since May 2023, based on provisional data.

Producer input prices fell by 0.1% in the year to May 2024, up from a revised fall of 1.4% in the year to April (Figure 1). Monthly input prices were unchanged between April and May 2024, following a revised monthly inflation rate of 0.8% in April (Table 1).

Producer output (factory gate) prices rose 1.7% in the year to May 2024, up from an increase of 1.1% in the year to April. Monthly output prices fell by 0.1% in May 2024, following a revised monthly inflation rate of 0.3% in April (Table 1).

The annual inflation rates for both input and output PPI are at their highest levels since May 2023 (Figure 1).

Estimates for both April and May 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 8: Strengths and limitations.

Producer input prices fell by 0.1% in the year to May 2024, up from a fall of 1.4% in the year to April.

Of the 10 product groups for the input Producer Price Index (PPI), 5 made downward contributions to the annual inflation rate in May 2024. The largest of these came from inputs of fuels, inputs of other parts and equipment, and inputs of chemicals, which contributed negative 0.59, 0.55 and 0.52 percentage points, respectively (Figure 3).

Fuel prices fell by 12.0% in the year to May 2024, up from a fall of 14.0% in the year to April (Table 2). The main contribution to this fall came from electricity prices. Fuel covers electricity and gas (D35) and coal (B05) of the classification of products by activity (CPA 2.1).

In comparison, the largest offsetting upward contribution came from inputs of crude petroleum at 1.01 percentage points. The annual inflation rate for crude petroleum increased from 13.9% in April 2024 to 18.3% in May.

Of the 10 product groups for input PPI, 7 made upward contributions to the change in the annual inflation rate in May 2024. Inputs of metals and non-metallic minerals provided the largest, at 0.47 percentage points (Figure 4). The annual inflation rate for this product group increased from negative 3.6% in April 2024 to negative 1.4% in May.

The prices of materials and fuels imported by UK manufacturers fell by 0.7% in the year to May 2024, up from a fall of 1.3% in the year to April. Prices fell by 0.7% between April and May 2024, compared with a revised rise of 0.8% between March and April. The fall in import prices in the year to May 2024 may partly reflect the higher level of sterling, which rose by 3.3% in the same year (Table 3).

Producer output (factory gate) prices rose by 1.7% in the year to May 2024, up from a rise of 1.1% in the year to April.

Of the 10 product groups for the output Producer Price Index (PPI), 7 made upward contributions to the annual inflation rate in May 2024. The largest of these came from refined petroleum products and "other outputs", which contributed 2.54 and 1.12 percentage points, respectively (Figure 5).

Coke and refined petroleum prices rose by 16.2% in the year to May 2024 (Table 4), up from 12.8% in the year to April. This is the highest the annual inflation rate for this product group has been since January 2023. Prices for "other outputs" rose by 2.3% in the year to May 2024, up from a rise of 2.0% in the year to April.

In comparison, offsetting downward contributions came from chemicals and paper products, at negative 1.44 and 1.14 percentage points, respectively. Chemical prices fell by 4.0% in the year to May 2024 (Table 4), which was primarily driven by fertiliser prices.

Of the 10 product groups for output PPI, 6 made upward contributions to the change in the annual inflation rate in May 2024. Chemicals provided the largest, at 0.35 percentage points (Figure 6). The annual inflation rate for this product group increased from negative 8.8% in April 2024 to negative 4.0% in May.

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

Since 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: Measuring the data.

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 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 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 and robust analysis, 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 May 2024

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

Accredited official statistics

These accredited official statistics were independently reviewed by the Office for Statistics Regulation in May 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".