Producer price inflation, UK: October 2024

• Producer input prices fell by 2.3% in the year to October 2024, down from a revised fall of 1.9% in the year to September.
• Producer output (factory gate) prices fell by 0.8% in the year to October 2024, down from a revised fall of 0.6% in the year to September.
• On a monthly basis, producer input prices rose by 0.1%, while output (factory gate) prices were flat at 0.0% in October 2024.
• Crude oil continues to be the largest contributor to falling input prices.
• The fall in the annual inflation rate for output prices between September and October was more than accounted for by lower prices for refined petroleum products.

Producer input prices fell by 2.3% in the year to October 2024. This is down from a revised fall of 1.9% in the year to September (Figure 1). Monthly input prices rose by 0.1% in October 2024, following a revised fall of 0.5% in September (Table 1).

Producer output (factory gate) prices fell by 0.8% in the year to October 2024. This is down from a revised fall of 0.6% in the year to September (Figure 1). Monthly output prices were flat at 0.0% in October 2024, following a revised fall of 0.4% in September (Table 1).

Estimates for both September and October 2024 are provisional. Figures for the latest 12 months are subject to revisions as additional survey data are returned and validated. Effective response rates at the time of first publishing can be found in Section 7: Data sources and quality.

Because of rounding, inflation rates in this bulletin may not correspond to index value changes, and contributions to the rate may not add up to the rate exactly.

Of the 10 product groups for the input Producer Price Index (PPI), 5 made downward contributions to the annual inflation rate in October 2024. The largest of these came from inputs of crude oil, inputs of “other parts and equipment” and inputs of fuel, which contributed negative 1.45, negative 0.78 and negative 0.46 percentage points, respectively (Figure 2).

The price of inputs of crude oil fell by 22.5% in the year to October 2024, compared with a fall of 18.6% in the year to September (Table 2). This is the lowest the annual rate has been since July 2023. Inputs of crude oil also provided the largest contribution to the change in the annual inflation rate between September and October 2024, with a downward contribution of 0.29 percentage points.

Despite making the second largest downward contribution to the annual rate, prices for “other parts and equipment” increased by 0.5% in the year to October 2024 (Table 2). This downward contribution was caused by the weight changes introduced to the PPI in February 2024. For worked examples, see the scenarios in Section 7: Data sources and quality.

The prices of inputs of fuel fell by 9.9% in the year to October 2024, compared with a fall of 10.6% in the year to September (Table 2). The main contributions to this fall came from electricity and gas prices, which fell by 8.0% and 16.9% in the year to October 2024, respectively.

The largest offsetting upward contribution came from inputs of domestic food, which contributed 0.43 percentage points (Figure 2). Prices for inputs of domestic food increased by 1.6% in the year to October 2024 (Table 2). This upward contribution was partly caused by a decrease in the supply of potatoes, which pushed their prices up.

The prices of materials and fuels imported by UK manufacturers fell by 5.9% in the year to October 2024, following a revised fall of 5.2% in the year to September. On a monthly basis, prices saw a 0.1% increase between September and October 2024, compared with a revised fall of 1.8% between August and September. The fall in import prices in the year to October 2024 may partly reflect the higher level of sterling, which rose by 5.3% in the same year (Table 3).

Of the 10 product groups for the output Producer Price Index (PPI), 4 made downward contributions to the annual inflation rate in October 2024. The largest of these came from outputs of chemicals, outputs of paper and printed material and outputs of coke and refined petroleum products, which contributed negative 1.12, negative 0.99 and negative 0.72 percentage points, respectively (Figure 3).

However, despite providing the two largest downward contributions to the annual rate, prices for chemicals and paper increased by 0.6% and 0.2%, respectively in the year to October 2024 (Table 4). The downward contributions were caused by the weight changes introduced to the PPI in February 2024. For worked examples, see the scenarios in Section 7: Data sources and quality.

Prices for coke and refined petroleum products fell by 26.2% in the year to October 2024, compared with a fall of 22.1% in the year to September (Table 4). This is the lowest the annual rate has been since August 2023. Petroleum also made the largest contribution to the change in the annual inflation rate in October 2024, with a downward contribution of 0.39 percentage points.

In comparison, the largest offsetting upward contribution came from “other outputs”, which contributed 0.99 percentage points. The main contribution to this rise came from soft drinks; mineral waters and other bottled waters for domestic market, which saw a price rise of 2.7% in the year to October 2024.

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

As 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: Data sources and quality.

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

Our Producer prices development plan (article) was published in October 2023, detailing the work that will be undertaken to improve the quality of PPI data and continue to meet user needs.

The Producer Price Index

The 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 (SPPI) QMI.

Other useful documentation from the Office for National Statistics (ONS) for the PPI and SPPI are:

• our Producer Price Indices methods changes article
• our Chain-linking in business prices article
• our Producer price weight changes article
• our Services producer price weight changes article
• our Guidance on using indices in Indexation Clauses (PDF, 197KB)
• our PPI methods and guidance (PDF, 1.18MB)
• our SPPI user guidance and methodology
• our PPI standard errors: 2017 datasets
• our 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. We publish information on revisions policy on our Revisions and corrections of errors webpage.

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 analysis, requiring some estimation
• the data can be revised for 12 months
• the data for the latest two months of the PPI and two quarters of the SPPI are provisional

Response rates in October 2024

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

Accredited official statistics

These accredited official statistics were independently reviewed by the Office for Statistics Regulation in September 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”.