Services producer price inflation, UK: July to September 2017

• The annual rate of growth for the Services Producer Price Index (SPPI) was 1.3% in Quarter 3 (July to Sept) 2017, which is up from 1.0% in Quarter 2 (Apr to June) 2017.

• The price of services sold by UK companies rose 0.5% in Quarter 3 2017; unchanged from Quarter 2 2017.

• Transportation and storage services, and professional, scientific and technical activities were the joint largest upward contributors to the annual rate.

• Professional, scientific and technical activities also provided the largest upward contribution to the quarterly rate.

The Services Producer Price Indices (SPPI) provides a measure of inflation for the UK services sector. It is constructed from a statutory quarterly survey, which measures changes in the price received for selected services provided by UK businesses to other UK businesses and government. Individual SPPIs are available, which provide information on price change for a selection of services industries. These individual price indices are also aggregated together to create a services industry SPPI with limited coverage (it does not provide full coverage of the “services sector”).

The services sector is estimated to account for around 78% of the UK economy based on its weight in gross domestic product (GDP). We do not produce an index for every industry in the services sector and so the SPPI is a partial, best estimate, of the overall inflation to UK businesses in the services sector. The SPPIs presented in this statistical bulletin are estimated to represent 59% of the total services sector at industry level. The SPPI's coverage of the services sector at standard industrial classification (SIC) class, division and section level is available in the SPPI coverage document.

As resources allow, we will continue to review the existing indices and expand coverage through developing indices for new industries. As such, the SPPI will change composition from time to time but will always remain our best estimate of inflation in the UK services sector. The fact that coverage may change over time should be considered when deciding which indices best meet your needs.

The figures presented in this statistical bulletin are considered provisional for the latest two quarters and may be revised as late data are received.

All figures presented in this statistical bulletin are calculated on a gross sector basis unless otherwise stated and all index numbers exclude VAT. None of the indices presented in this bulletin are seasonally adjusted.

Every five years, Services Producer Price Indices are rebased and their weights updated to reflect changes in industry.

The Services Producer Price Index (SPPI) has reported positive growth for most of the period across the past 10 years (Figure 1). During the economic downturn, SPPI annual growth fell from a rise of 3.7% in Quarter 2 (Apr to June) 2008 to a decline of 1.6% in Quarter 3 (July to Sept) 2009 before returning to more typical growth for the remainder of the period. Since a return to positive growth in Quarter 1 (Jan to Mar) 2010, the annual rate has averaged 1.1%. The annual inflation rate in the latest quarter was above the average for the period, at 1.3%.

For analysis of which SPPI industries have contributed to annual growth between Quarter 2 2012 and Quarter 2 2017, please see section 5 of the Quarter 2 release.

The Services Producer Price Index (SPPI) rose 1.3% on the year to Quarter 3 (July to Sept) 2017, up from an increase of 1.0% on the year to Quarter 2 (Apr to June) 2017 (Table 1). The price of services sold by UK companies increased 0.5% between Quarter 2 and Quarter 3 2017.

The annual growth rate slowed for three consecutive periods between Quarter 4 (Oct to Dec) 2016 and Quarter 2 2017 but has now risen 0.3 percentage points, the largest increase in the rate over a single period since Quarter 1 (Jan to Mar) 2016.

The quarterly rate has now been positive for 9 out of the last 10 periods, the rate was flat between Quarter 3 2016 and Quarter 4 2016.

Of the 10 sections (as defined by the 2007 Standard Industrial Classification) that are combined to form the Services Producer Price Index (SPPI), nine showed annual price increases with only prices for other services lower now than they were in Quarter 3 (July to Sept) 2016 (Table 2). Nine industries also showed quarterly price increases, with only prices for information and communication services falling since Quarter 2 (Apr to June) 2017.

Water supply, sewerage and waste management showed the largest increases over the quarter and on the year to Quarter 3 2017 (Table 2). The quarterly and annual rates, 4.2% and 8.1% respectively, represent the highest rate of growth seen in the index since Quarter 2 2010. This growth was largely as a result of price increases within sorted materials recovery services, prices are up 9.8% over the quarter and 31.6% over the year.

Information and communication was the only industry to show a negative change over the quarter. Prices fell 0.1% between Quarter 2 2017 and Quarter 3 2017 due mainly to prices for computer software services falling 0.3% over the same period. However, prices remain 0.3% higher than they were over the same period in 2016 (Figure 2).

Prices for other services have fallen 4.8% over the year to Quarter 3 2017. The decline is driven by a fall in the price for commercial washing and dry cleaning services.

Professional, scientific and technical activities, and transportation and storage services provided the joint largest upward contributions to the annual rate. Both industries contributed 0.34 percentage points to the overall annual rate of 1.3% (Figure 2). Prices for professional, scientific and technical activities were up 1.2% over the year while for transportation and storage services prices rose 1.8% over the year (Table 2).

Professional, scientific and technical activities also gave the largest upward effect on the quarterly rate, contributing 0.21 percentage points to the overall quarterly rate of 0.5%. Prices within the industry increased 0.7% between Quarter 2 2017 and Quarter 3 2017 and were driven mainly by rising prices for business and management consultancy services, which were up 2.4% over the period.

In addition to the data included within this statistical bulletin, the following detailed datasets are available.

Higher, lower and equal movements for each Services Producer Price Index are shown in the SPPI Records.

A summary of the revisions to SPPI data are available in the SPPI revision triangles.

Other important measures of inflation and prices include the Consumer Prices Index (CPI) and the Producer Price Index (PPI).

The SPPI Quality and Methodology information report contains important information on:

• the strengths and limitations of the data and how it compares with related data

• users and uses of the data

• how the output was created

• the quality of the output including the accuracy of the data

If you would like more information about the reliability of the data, an SPPI standard errors article was published on 28 July 2016. The article presented the calculated standard errors of the Services Producer Price Index (SPPI) during the period Quarter 2 (Apr to June) 2012 to Quarter 1 (Jan to Mar) 2016, for both quarter-on-quarter and 12-month growth.

Guidance on using indices in indexation clauses (2015) has been published. It covers producer prices, services producer prices and consumer prices.

Detailed information on the methods used to compile the SPPI is available in the SPPI manual.