Services producer price inflation, UK: April to June 2020

• The annual rate of growth for the Services Producer Price Index (SPPI) was 1.8% in Quarter 2 (Apr to June) 2020, down from 1.9% in Quarter 1 (Jan to Mar) 2020.

• The quarterly rate of growth for the Services Producer Price Index (SPPI) was 0.1% in Quarter 2 2020, down from 0.7% in Quarter 1 2020.

• Transportation and Storage, and Professional, Scientific and Technical activities provided the joint largest upward contributions to the annual rate; Transportation and Storage provided the largest upward contribution to the quarterly rate.

• The Office for National Statistics (ONS) has released a public statement on the coronavirus (COVID-19) and production of statistics; Section 4: Quality and methodology describes the situation in relation to Services Producer Price Inflation (SPPI).

• A new bulletin will be introduced in October 2020, which collates information from the Services Producer Price Index (SPPI) and Producer Price Index (PPI) – Producer Price Inflation including Services, UK.

Coronavirus (COVID-19) in Quarter 2 (Apr to June) 2020

During the coronavirus (COVID-19) pandemic, we are working to ensure that we continue to publish the Services Producer Price Index (SPPI). We have streamlined our bulletin so that we can focus on coronavirus-related analysis to support decision-making across the UK. For this reason, this quarter’s SPPI bulletin does not include its regular detailed analysis; the SPPI datasets are published as usual.

On 23 March 2020, the UK and devolved governments announced official guidance on restrictions on movement for the UK as a result of the coronavirus pandemic. Data collection for the SPPI survey for Quarter 2 2020, was via paper questionnaires that were sent to businesses on 21 April 2020, asking to return prices that were applicable for April 2020.

The closure of workplaces and premises during April 2020 as a result of the government restrictions has led to the response for Quarter 2 2020 being lower in comparison with other quarters. We closely monitor response rates in each publication and use statistical methods to deal with non-response. For further information, please see the Quality and methodology section.

As this situation evolves, we are developing a contingency plan to meet potential scenarios depending on the amount of data that are able to be collected both through our in-house surveys and by our external data suppliers to ensure we are still able to produce the SPPI over the coming months. These include considering incorporating fewer prices into the indices, using the previous month’s movements to construct the latest estimates, and reducing the level of detail published. Users will be informed of any changes to how the SPPI is constructed.

Methodology changes

The Office for National Statistics (ONS) will be implementing important methodological improvements to the Services Producer Price Index (SPPI) and Producer Price Index (PPI) after summer 2020. These include moving from quinquennially fixed-base weights to annual chain-linking, which will improve the accuracy of these statistics, and aligning the SPPI to the international Statistical Classification of Products by Activity (CPA).

To ensure producer price indices are more accessible to users, we will be implementing a new bulletin that collates information from the Services Producer Price Index (SPPI) and Producer Price Index (PPI) in October 2020 – Producer Price Inflation including Services, UK. The methodology, data collection, and production of the Producer Price Index (PPI) and Services Producer Price Index (SPPI) will not be affected as a result of this change.

About the SPPI

The 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 of services provided to UK-based customers for a range of industries. Individual SPPIs are available that 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 80% 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 user guidance and methodology article.

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. You should consider that coverage may change over time 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 Value Added Tax (VAT). None of the indices presented in this bulletin are seasonally adjusted.

Every five years, SPPIs are rebased and their weights updated to reflect changes in industry.

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

Details of when the annual and monthly inflation rates were previously higher than, lower than, or at the same rate as the current quarter are shown in the Services producer price inflation (SPPI) records.

A summary of the revisions to SPPI data is 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 Consumer Price Index estimates the rate at which the price of goods or services bought by households rise or fall using price indices.

The Producer Price Index measures 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 you would like more information about the reliability of the data, the latest SPPI standard errors were published on 13 March 2019. The dataset presents calculated standard errors for the period between Quarter 2 (Apr to June) 2017 and Quarter 4 (Oct to Dec) 2018, for both quarter-on-quarter and 12-month growth. A previous SPPI standard errors article presents the calculated standard errors for the period Quarter 1 (Jan to Mar) 2016 to Quarter 3 (July to Sept) 2017.

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.

More quality and methodology information on strengths, limitations, appropriate uses, and how the data were created is available in the Services Producer Price Inflation QMI.

Coronavirus (COVID-19)

As highlighted in the Things you need to know about this release section, the coronavirus (COVID-19) pandemic has had an impact on response rates in this release and is likely to be a factor in reduced response for future releases.

Table 1 shows the response rates to the Services Producer Price Index (SPPI) survey at time of publishing for each reference period. Response rates were lower in Quarter 2 (Apr to June) 2020 compared with other quarters.

After EU withdrawal

As the UK leaves the EU, it is important that our statistics continue to be of high quality and are internationally comparable. During the transition period, those UK statistics that align with EU practice and rules will continue to do so in the same way as before 31 January 2020.

After the transition period, we will continue to produce our inflation statistics in line with the UK Statistics Authority’s Code of Practice for Statistics and in accordance with internationally agreed statistical guidance and standards.