Construction output price indices (OPIs), UK: January to March 2017

Since taking responsibility for the Construction Price and Cost Indices (CPCIs) on 1 April 2015, the Office for National Statistics (ONS) has developed an interim Construction Output Price Index (OPI). This index was put together in a short time frame and uses our existing data sources, the majority of which are National Statistics, so that users can be assured of the quality of the source data.

The results for the interim Construction OPI were published for the first time on 12 June 2015. This article provides a quarterly update to these results and includes data to March 2017.

Information about the methods used to compile the interim Construction OPIs, as well as the results of our user survey and plans for the future development of price indices for construction, were published on 28 September 2015.

• The interim Construction Output Price Index (OPI) for all construction rose 1.9% in the year to March 2017, unchanged from February 2017.

• Prices rose in the year to March 2017 for all work types within new work and repair and maintenance, with the exception of infrastructure, which fell 1.5% on the year.

• The interim Construction OPI for all new work increased 1.7% in the year to March 2017, down from an increase of 1.9% in the year to February 2017. Private industrial showed the largest movement with an increase of 4.4% in the year to March 2017.

• The interim Construction OPI for all repair and maintenance increased by 2.3% in the year to March 2017, up from a 2.2% increase in February 2017. The housing repair and maintenance sector showed the largest increase of 2.7% in the year to March 2017.

Overall, prices in the construction industry, as estimated by the interim Construction Output Price Index (OPI), rose between October 2014 and March 2017. There is an upward trend evident across all new work, and repair and maintenance sectors from October 2014 up to March 2017 (Figure 1). The peaks and troughs seen in the all new work index between October 2014 and March 2017 are mostly the result of the movements within the earnings component of the Construction OPI, which is sourced from the Average Weekly Earnings (AWE) index for construction.

The headline rate of inflation for all construction was positive but unchanged at 1.9% in March 2017. This is equal to the average growth rate seen across the period October 2014 to March 2017. Annual growth in the all construction index peaked at 2.7% in July 2015.

Annual growth rates for the three main interim construction OPIs remained positive throughout the period to March 2017 (Figure 2). Annual growth for the repair and maintenance index grew at its fastest rate in March 2017 at 2.3%. Growth in the new work index peaked in January 2016 at 3.5%, but has now fallen below the all construction index for the first time since January 2015.

The interim Construction Output Price Index (OPI) for all new construction work increased 1.7% on the year to March 2017. This increase was as a result of annual increases in output prices within most sectors, with the exception of infrastructure, which fell 1.5% on the year (Table 1). This is the ninth consecutive month of negative annual growth. Private industrial showed the largest positive movement at 4.4% on the year to March 2017.

The interim Construction Output Price Index (OPI) for all repair and maintenance increased 2.3% in the year to March 2017, with the housing repair and maintenance sector showing the largest annual increase of 2.7% (Table 2).

1. Use within the Office for National Statistics

   These interim Construction Output Price Indices (OPIs) were used to deflate Output in the Construction Industry for the first time in the April 2015 release, published on 12 June 2015. Further details on the impact of using these indices have been published in a separate article.

2. Linking to previous series

   The Construction Price and Cost Indices (CPCIs) were previously published by the Department for Business, Innovation and Skills (BIS) and were published for the last time in September 2014, with the release suspended in December 2014. Responsibility for these statistics transferred to us on 1 April 2015, as previously announced.

   Users wishing to link the BIS CPCIs (prior to 2014) and our new Construction OPIs (from 2014 onwards) to create longer-running time series, have many options. One approach would be to use a linking factor (based on a common time period) similar to the process suggested to link the Producer Price Index series (PPI) on different price bases, as described on page 2 of this question and answer paper.

   Further guidance on using indices in indexation clauses is also available.

3. De-designation as National Statistics

   The Construction Price and Cost Indices were de-designated as National Statistics in December 2014, after their suspension, as detailed in a letter from Ed Humpherson, Director General for Regulation.

4. Experimental Statistics

   These statistics have been published on an experimental basis to involve users in their development. As a result, improvements to methods may result in revisions to the series. Full details of any revisions will be released alongside the revised data.

5. Revisions policy

   The interim Construction OPIs are dependent on the revisions policies associated with their component series. For routine revisions, such as inclusion of late respondent data and monthly re-estimation of seasonal adjustment factors, the interim Construction OPIs will be open to revisions for a period of 5 months, in line with PPI, its main component.

   Non-routine revisions may also occur, for example, as a result of reviews and updates of methodologies of component series. When historic changes to component series arise, their impact on the Construction OPI series will be assessed and any changes highlighted to users.