Producer price inflation, UK: October 2021

• The headline rate of output prices showed positive growth of 8.0% on the year to October 2021, up from 7.0% in September 2021.

• The headline rate of input prices showed positive growth of 13.0% on the year to October 2021, up from 11.9% in September 2021.

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

On the month, the rate of output inflation was 1.1% in October 2021, up from 0.7% in September 2021 (Table 1). This is the highest the monthly rate has been since February 2013.

Transport equipment provided the largest upward contribution of 2.25 percentage points to the annual rate (Figure 2), but had negative annual price growth of 0.7% in October 2021 (Table 2).

Despite showing negative annual growth, transport equipment provided an upward contribution to the annual rate because of the 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.

The annual rate of output inflation increased by 1.0 percentage points from 7.0% in September 2021 to 8.0% in October 2021; this is the highest the annual rate of output inflation has been since September 2011.

Of the 10 product groups, 6 displayed upward contributions to the change in the rate, with petroleum products providing the largest, at 0.49 percentage points (Figure 3). Petroleum products saw a monthly increase of 10.3% between September 2021 and October 2021 compared with a decrease of 0.2% between the same months in 2020. This base effect is contributing to the positive annual growth rate for this product group, which has increased by 17.4 percentage points from 65.9% in September 2021 to 83.3% in October 2021. Annual growth rates for this product group were being driven by coke and refined petroleum products for domestic market.

The second largest upward contribution came from food products at 0.24 percentage points (Figure 3), with an annual growth rate increasing from 3.0% in September 2021 to 4.0% in October 2021. This was being driven by preserved meat and meat products for the domestic market.

On the month, the rate of input inflation was 1.4% in October 2021, up from 0.8% in September 2021 (Table 3).

The annual rate of imported inputs was 5.2% in October 2021 (Table 4), up from 4.7% in September 2021.

The largest upward contribution to the annual input inflation rate came from metals and non-metallic minerals, which contributed 4.61 percentage points (Figure 4) and had positive annual price growth of 21.3% in October 2021 (Table 5). This was mainly driven by basic iron and steel, and of ferro-alloys for domestic market.

The annual input inflation rate increased by 1.1 percentage points from 11.9% in September 2021 to 13.0% in October 2021. This is the highest the rate has been since September 2008.

Crude oil displayed the largest upward contribution to the change in the rate, at 0.87 percentage points (Figure 5). This product group saw a monthly increase of 12.0% between September 2021 and October 2021 compared with a decrease of 1.7% between the same months in 2020. This base effect is contributing to the positive annual growth rate for this product group, which has increased by 23.0 percentage points from 65.0% in September 2021 to 88.0% in October 2021 (Table 5). This is the second consecutive month that the annual rate has picked up for this product group following four months of slowing growth since April 2021.

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 weight’s change.

Contribution

A measure of influence 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.

• 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:

• 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
  
• SPPI standard errors
  

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 transaction in the manufacture sector.

Consultation on the Code of Practice for Statistics – proposed change to 9.30am release practice

On behalf of the UK Statistics Authority, the Office for Statistics Regulation (OSR) is conducting a consultation on the Code of Practise for Statistics, proposing changes to the 9.30am release practise. Please send comments by 21 December 2021 to regulation@statistics.gov.uk.

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 (COVID-19) in October 2021

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

Links to additional ONS sources of coronavirus information

Various articles have been published that help describe the Office for National Statistics (ONS) response to how the coronavirus (COVID-19) 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: August 2021 (published 13 October 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 coronavirus on the UK economy and population are also available. The ONS has released a public statement on coronavirus and the production of statistics. If you have any specific queries on this, you can email the Media Relations Office.