Index of Production, UK: April 2019

• Production output rose by 0.7% for the three months to April 2019, compared with the three months to January 2019, due to rises from manufacturing (1.2%), and mining and quarrying (2.9%).

• The three-monthly increase in manufacturing is due mainly to rises of 5.5% from pharmaceuticals, and 2.6% from food products, beverages and tobacco.

• Production output fell by 2.7% between March 2019 and April 2019; the manufacturing sector provided the largest downward contribution, falling by 3.9%, its largest fall since June 2002 and the impact of Golden Jubilee shutdowns.

• In April 2019, transport equipment fell by 13.4%, the largest fall since January 1974, providing the largest downward contribution to the monthly decrease in manufacturing; within this subsector, motor vehicles, trailers and semi-trailers fell by a record 24.0% (records began in January 1995).

• For the three months to April 2019, production output increased by 0.2% compared with the same three months to April 2018; with notable rises in manufacturing of 1.0% and mining and quarrying of 5.0%, partially offset by a fall of 7.0% from electricity and gas.

Please take the time to complete our survey on the new gross domestic product (GDP) publication model, which was introduced in July 2018.

This April 2019 Index of Production (IoP) release contains no revisions and is consistent with the National Accounts Revisions Policy. Further to this release, the Quarterly national accounts published on 28 June 2019 will include revised production data from January 2019 to March 2019.

On the 11 April 2019, we published the Quality assurance of administrative data (QAAD) report for Value Added Tax turnover. This looks at how we compile and use VAT data in the short-term economic output indicators.

The IoP is an important economic indicator and one of the short-term measures of economic activity in the UK. It is used in the compilation of GDP; the production industries’ weight accounts for 13.8% of the output approach to the measurement of GDP.

The current price non-seasonally adjusted estimates of industries collected by the Monthly Business Survey (MBS) can be found in the Monthly Business Survey turnover in production industries dataset, which was published alongside this release. Note that the MBS turnover in production industries dataset does not contain data from VAT returns, which have been included in the IoP.

For further detail on the longer-term trend within manufacturing, please see an article titled Manufacturing sector performance, UK: 2008 to 2018, which was published on 2 April 2019. This provides an overview of the changes in the manufacturing sector between 2008 and 2018, focusing on the industries that have grown or shrunk the most.

Care should be taken when using the month-on-month growth rates as data can often be volatile; longer-term growth rates and examination of the time series allow for better interpretation of the statistics.

Figure 1 shows that growth for the Index of Production (IoP) and Index of Manufacturing (IoM) was more pronounced from the beginning of 2010, as the economy recovered, before a downturn during 2012. Production and manufacturing output have risen since then but remain 5.7% and 1.1% lower respectively for the three months to April 2019 than the pre-downturn gross domestic product (GDP) peak in Quarter 1 2008.

Table 1 shows the growth rates and contributions for the IoP and sectors for April 2019.

Total production output for the three months to April 2019, compared with the three months to January 2019, increased by 0.7%, driven by rises in two of the four main sectors. This is the third consecutive three-monthly rise in production output since January 2019.

Providing the largest upward contribution to total production output was an increase of 1.2% in manufacturing output, driven by widespread strength, with 10 of the 13 subsectors displaying upward contributions (Figure 2).

This is also the third consecutive three-monthly increase in manufacturing output since January 2019.

The rise in manufacturing was due primarily to strong increases from:

• basic pharmaceutical products (5.5%), due primarily to export strength during March 2019

• food products, beverages and tobacco (2.6%), as meat products rose by 4.5%, due to monthly strength during April 2019; and alcoholic beverages rose by 4.8%, due mainly to monthly strength during February 2019 and March 2019

The strong growth in manufacturing in the previous two months is consistent with an increase in activity ahead of the UK’s originally intended departure date from the European Union and relates to the timing of deliveries from manufacturing businesses to their customers. The negative growth in April 2019 is consistent with the widespread early completion of orders that took place in the first quarter (Jan to Mar) of 2019. However, we are unable to quantify the effect of this.

Partially offsetting the manufacturing growth was a decrease of 2.7% from transport equipment, driven by a fall within motor vehicles, trailers and semi-trailers, which fell by 7.3%. This is the largest fall since April 2009, when it fell by 7.7%. For further commentary on this subindustry, please see Section 5 of this bulletin.

Mining and quarrying rose by 2.9%, the strongest three-monthly increase since August 2018, led by oil and gas extraction (3.0%). This was due mainly to increased output during February 2019, where notable strength in the monthly index (4.0%) was due to newer oil fields increasing production.

The fall of 2.3% within electricity and gas supply was driven by a decrease of 2.3% from electricity generation and distribution, due to less demand because of warmer temperatures across the latest three months. The Met Office reported that long-term average temperatures were warmer by 2.4 degrees Celsius, 1.3 degrees Celsius and 1.0 degree Celsius respectively, during February 2019, March 2019 and April 2019.

Monthly total production output decreased for the first time since December 2018, falling by 2.7% in April 2019, the largest decrease since September 2012, when it fell by 3.5%.

The weakness is due primarily to manufacturing, decreasing by 3.9% and is supported by a fall from mining and quarrying of 2.4%. Within manufacturing there is widespread weakness, with 11 of the 13 subsectors falling, as the boost from the early completion of orders ahead of the UK’s original departure date has faded.

Providing half of the total downward contribution to monthly manufacturing output was transport equipment, which fell by 13.4%, the largest fall since January 1974 (January 1974 was during the miners’ strike and the UK economy moved to a three-day week – so the whole of production output saw widespread weakness as a result).

The significant decline this month within transport equipment is due to a record fall of 24.0% within motor vehicles, trailers and semi-trailers, the largest fall since records began in January 1995. The weakness was due mainly to the impact of planned shutdowns within this industry in April 2019. Users are directed to the December 2018 Index of Production bulletin, which highlights a number of factors behind a weakening in demand for new cars in the UK since the end of 2016.

In addition, weak domestic sales and a gradual decline in export sales in this industry, since a peak in October 2017 (see our Monthly Business Survey turnover in production industries dataset for more information), have contributed to the recent decline in the index level (Figure 3), with anecdotal evidence from respondents confirming weakening domestic and global demand.

Despite the fall from the transport equipment subsector, monthly manufacturing output would still have fallen by 2.3%. Providing supporting weakness within manufacturing were:

• pharmaceutical products, which fell by 8.7%, following export-driven strength during March 2019

• basic metals and metal products, which fell by 4.1%, led by a 3.5% decrease from fabricated metal products, the largest fall since January 2017; responder-led evidence suggests that the early completion of orders during February 2019 and March 2019 were a factor behind weakness into April 2019

• chemicals and chemical products, which fell by 5.9%, the largest fall since January 1979, driven by widespread weakness, with five of the six subindustries decreasing

Underpinning much of the widespread weakness across manufacturing this month is a significant drop in nominal total export and domestic turnover (see our Monthly Business Survey turnover in production industries dataset). Total export and domestic turnover fell by 18.8% and 11.6% respectively. These are both stronger falls into April than the average for the last five years.

The mining and quarrying sector fell by 2.4%, led by a fall of 3.2% in oil and gas extraction, driven by a general reduction in output.

Offsetting the downward contribution from mining and quarrying was the largest upward contribution from electricity and gas, which increased by 3.2%. Within this sector, both subindustries provided equal upward contributions.

Total production output for the three months to April 2019 increased by 0.2%, compared with the same three months to April 2018. This was driven by a rise in two of the four main sectors.

Mining and quarrying rose by 5.0%, due mainly to the impact of an expansion in oil and gas fields coming online at the end of 2017, with production steadily rising from that point.

Electricity and gas fell by 7.0%, affected by the UK experiencing a spell of severe winter weather (the Beast from the East), with low temperatures and snowfalls during February and March 2018. This weather effect increased demand in electricity and gas during that period, in comparison with the three months to April 2019.

Manufacturing rose by 1.0%, providing the largest upward contribution and was due to widespread strength, with 9 of the 13 subsectors increasing.

The rise in manufacturing was driven by notable increases from:

• basic pharmaceutical products at 9.3%

• food products, beverages and tobacco at 4.4%, due primarily to continued strength from alcoholic beverages, which rose by 9.9% and meat and meat products, which rose by 5.9%

Partially offsetting the increase in overall manufacturing growth was a fall of 6.2% within transport equipment, driven by the significant decline in the monthly index during April 2019, as highlighted in Section 5.

Alongside this publication we publish the Index of Services (IoS) and Construction output in Great Britain, allowing for an estimate of monthly gross domestic product (GDP), which is also published today (10 June 2019).

The corresponding price indices used to deflate the Index of Production (IoP) are published in the monthly publication of UK producer price inflation. Product sales by manufacturers are published on an annual basis in UK manufacturers’ sales by product (ProdCom) statistical bulletins; estimates are in current prices, unlike the chained volume measures published in the IoP release.

The data published by the Department for Business, Energy and Industrial Strategy (BEIS) in Energy trends are used to measure the mining and quarrying, electricity and gas, and the manufacture of coke and refined petroleum products sectors within this release.

The IoP follows the Eurostat short-term statistics (STS) regulation for measuring output in production. The latest release of industrial production and output in manufacturing are available from Eurostat and are updated monthly. It should be noted that an accurate comparison cannot be made between our publication and the Eurostat publication without re-indexing the data to the same base year, as Eurostat data are calculated on a 2015 equals 100 basis, while UK data are calculated on a 2016 equals 100 basis.

The Index of Production (IoP) measures the UK output in the mining and quarrying; manufacturing; energy supply; and water supply and waste management industries. The IoP estimates are based mainly on data from the Monthly Business Survey (MBS).

In addition, from the Index of Production, UK: November 2017 bulletin published in January 2018, Value Added Tax (VAT) data have been included across 64 production industries for small- and medium-sized businesses. For further information as to the use of VAT turnover within the national accounts, please see VAT turnover data in National Accounts: background and methodology (published on 19 March 2018).

On 11 October 2018, we published an article on the future use of VAT as part of the economic review, which considers the strategic collection model for administrative and survey data for short-term indicators, including the Index of Production.

For the mining and quarrying, and energy supply sectors, and two manufacturing industries, namely coke and refined petroleum, and basic iron and steel, we receive volume data from the Department for Business, Energy and Industrial Strategy (BEIS) and the International Steel Statistics Bureau (ISSB) respectively. Unless otherwise stated, all estimates included in this release are based on seasonally adjusted data.

The Monthly Business Survey (MBS) turnover in production industries dataset produces the proportion of turnover from exports by industry and level of turnover and exports (£ millions). However, this is not always comparable with UK trade statistics, for many reasons. These include, but are not limited to:

• different data sources – MBS are based on a survey of businesses; UK trade in goods uses administrative data collected by HM Revenue and Customs (HMRC)

• different concepts being measured – MBS reports the value of exports as a proportion of the industry's turnover; the UK trade in goods data report the change in ownership between the UK and other countries

• time lag – there can be time lags between the sale of a product reported in MBS and the movements of that product reported by UK trade

Further information on UK trade and how data on it are compiled can be found in the Things you need to know about this release section of the UK trade release.

The data collected on the MBS are turnover excluding VAT and exports for some applicable industries. The data collected on the VAT returns are also turnover excluding VAT. These data are then deflated using Producer Price Indices (PPI). Within the manufacturing sector we also receive direct volume data from BEIS for fuel industries and from the International Steel Statistics Bureau for steel industries.

The mining and quarrying sector is comprised mainly of data from BEIS, including volume of oil and gas extraction and coal extraction. The data used to produce the energy sector are also from BEIS and include energy and gas supply output. A comprehensive list of the IoP source data can be found in the Gross domestic product (GDP(O)) source catalogue (XLS, 715KB).

Revisions to the Index of Production can be made for a variety of reasons. The most common include:

• late responses to surveys and administrative sources

• forecasts being replaced by actual data

• revisions to seasonal adjustment factors, which are re-estimated every month and reviewed annually

• HMRC VAT returns replacing MBS data for small- and medium-sized businesses when VAT estimates become available every quarter

Within the suite of datasets published monthly alongside this release, you will find:

• Output of the production industries (IOP5) publication tables

• Revisions to output of the production industries (IOP5R)

• Monthly Business Survey response rates for production industries for this publication

• Revision triangle – monitors the size of monthly and three-monthly revisions

• Index of Production weights 2016 equals 100

• Index of Production and industry sectors to four decimal places

• Monthly Business Survey turnover in production industries

• Export proportions for manufacturing industries

The Index of Production 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

Summary information can be found in the Index of Production Quality and Methodology Information report.