Construction Output Price Indices (OPIs), UK: October to December 2018

• The Construction Output Price Index (OPI) for all construction rose 2.7% in the year to December 2018, down from 2.8% in November 2018.

• The OPI for all new work increased by 3.3% in the year to December 2018, down from 3.5% in November 2018; housing provided the largest contribution to the annual rate.

• The OPI for all repair and maintenance increased by 1.6% in the year to December 2018, unchanged from November 2018; the housing repair and maintenance sector increased by 1.8% over the 12-month period, providing the largest contribution to the annual rate.

Since taking responsibility for the Construction Price and Cost Indices (CPCIs) on 1 April 2015, we have developed the Construction Output Price Indices (OPIs). The indices use our existing data sources, all of which are National Statistics, so that users can be assured of the quality of the source data.

Improvements to the OPIs were made in September 2017 and have been published in the article Construction development: impact of improvements to construction statistics.

Prior to the Quarter 3 (July to Sept) 2017 release, the OPIs were calculated on a base year of 2010 (2010 equals 100). As of the Quarter 3 2017 release, the base year has been updated to 2015 (2015 equals 100).

In addition, there were further improvements implemented in the Quarter 3 2017 release. Further details can be found in Section 5 of the Construction development article released on 29 September 2017.

Revisions are subject to the revisions policies of component series; for routine revisions the series will remain open for a period of five months, in line with the Producer Price Index (PPI), its main component.

This quarter the Construction OPI's saw revisions to the Average Weekly Earnings (AWE) data, to reflect a methodological improvement. The update was based on more up-to-date information from the Annual Survey of Hours and Earnings. It impacted AWE estimates from April 2014 to the present; for further information please see Improvements to earnings estimates for small businesses in average weekly earnings.

The OPI will also be revised on an annual basis to account for the profit mark-up margin update, introduced as part of the methodological improvements in the July to September 2017 release. It would be expected these changes would take effect in the April to June publication each year, although this may depend on the availability of the data. Alternative sources for profit mark-up data are currently being investigated as a future possibility to improve the timeframe and provide data continuity.

Due to the improvements made to the Construction Output Price Indices publication in Quarter 3 (July to Sept) 2017, this publication is now a statistical bulletin. Previous releases prior to this were published as articles.

Overall, prices in the construction industry, as estimated by the Construction Output Price Index (OPI), rose 9.7% between April 2014 and December 2018 (Figure 1). Peaks and troughs seen within the new work index between April 2014 and December 2018 are mostly due to movements within the earnings component of the OPI, which is sourced from the Average Weekly Earnings (AWE) index for construction.

The annual rate of inflation for all construction was 2.7% in December 2018 (Table 1), down from 2.8% in November 2018. Annual growth for new work was 3.3% in December 2018, whilst annual growth for repair and maintenance was 1.6% in December 2018. Annual growth rates for the three main construction OPIs have remained positive since September 2015 (Figure 2).

The Construction Output Price Index (OPI) for new construction work rose 3.3% on the year and 0.2% on the month to December 2018 (Table 2). The annual rate of inflation for new work slowed from 3.5% in November 2018. Private industrial showed the largest annual and monthly growth at 3.7% and 0.4% respectively.

Housing provided the largest upward contribution to the 12-month and 1-month rate for all new work in December 2018 at 1.16 and 0.18 percentage points respectively (Figure 3).

All sectors within new work provided upward contributions to both the 12-month and 1-month rate.

The Construction Output Price Index (OPI) for all repair and maintenance rose 1.6% in the year to December 2018 (Table 3), unchanged from November 2018. Housing repair and maintenance showed the largest annual increase of 1.8% in December 2018.

Housing repair and maintenance provided the largest upward contribution to the repair and maintenance annual rate at 0.98 percentage points (Figure 4). Housing, and non-housing repair and maintenance provided equal contributions on the month at 0.05 percentage points.

The Construction Output Price Indices (OPIs) Quality and Methodology Information report contains important information on:

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

• uses and users of the data

• how the output was created

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

Information on the impact of further improvements implemented in the Quarter 3 (July to Sept) 2017 release, including the impact of rebasing and the addition of annual updates to weights, are highlighted in Section 7 of the Quarter 3 2017 bulletin.

Further guidance on using indices in indexation clauses (PDF, 197KB) is also available.