Index of Production, UK: May 2019

• Production output rose by 0.3% for the three months to May 2019, compared with the three months to February 2019, due to rises from all four main sectors, led by mining and quarrying (1.6%), and manufacturing (0.1%).

• The three-monthly increase in manufacturing is due mainly to widespread strength with 9 of the 13 subsectors increasing; however overall strength is partially offset by a strong fall of 4.6% from transport equipment.

• Production output rose by 1.4% between April 2019 and May 2019 due to rises from all four main sectors; the manufacturing sector provided the largest upward contribution, rising by 1.4%.

• Within manufacturing over half of the subsectors fell, so overall growth is due to transport equipment, which rose by 12.4%; this is the strongest rise since April 2005 and is a partial bounceback from the fall of 13.8% during April 2019.

• For the three months to May 2019 compared with the same three months to May 2018, production output increased by 0.4%, with notable rises in manufacturing of 0.6% and mining and quarrying of 4.1%; partially offset by a fall of 3.7% 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 May 2019 release contains revisions from January 2019 onwards, and is consistent with the national accounts revisions policy. The revisions up to March 2019 are consistent with those published in the Quarterly national accounts on 28 June 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.

Blue Book 2019

Each year we produce an annual update to the UK National Accounts in the Blue Book and Pink Book and the associated releases. As already announced, the Blue Book and Pink Book 2019 consistent datasets will be published on 30 September 2019.

Details have already been provided on the scope in the article Latest developments and changes to be implemented in Blue Book and Pink Book 2019. Indicative impacts on headline gross domestic product (GDP) components for the years 1997 to 2016 were published on 27 June 2019 in the article Blue Book 2019 indicative impacts on GDP current price and chained volume measure estimates: 1997 to 2016.

This year, due to the very demanding set of changes being put through in the annual update, we are exceptionally not going to fully reconcile 2017 annual data, instead producing an indicative balance to allow further time for final quality assurance of the data.

Consequently, the reference year and last base year for all chained volume measure series will remain as 2016.

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 7.3% and 3.2% lower respectively for May 2019 than the pre-downturn peak in February 2008.

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

Total production output for the three months to May 2019, compared with the three months to February 2019, increased by 0.3%, driven by rises in all four main sectors. This is the fourth consecutive three-monthly rise in production output since January 2019.

Providing the largest upward contribution to total production output was an increase of 1.6% in mining and quarrying, led by oil and gas extraction (1.6%). This was due mainly to notable strength in the growth of the monthly index (2.5%) during March 2019, due to newer oil fields increasing production. Additionally, the growth in other mining and quarrying, which rose by 1.8%, is due to the continuation of three-monthly strength since June 2018, from mining support service activities (3.3%).

Total manufacturing output rose by 0.1%, displaying a fourth consecutive three-monthly increase since January 2019, with 9 of the 13 subsectors increasing.

The largest upward contributions to manufacturing growth were led by:

• Electrical equipment (8.0%), due primarily to cumulative strength from large businesses
• Computer, electronic and optical products (3.9%) is a continuation of strength since November 2018

Partially offsetting overall growth was transport equipment, which fell by 4.6%, led by a continuation of weakness within motor vehicles, trailers and semi-trailers, which fell by 9.2%. This is the largest fall within this sub-industry since March 2009, when it fell by 23.3%. The most recent three monthly weakness was due mainly to the impact of planned shutdowns within this industry in April 2019.

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

The increase of 0.6% within electricity and gas supply was driven by an increase of 1.1% from electricity generation and distribution, due mainly to monthly strength during April 2019 (2.8%) and May 2019 (2.5%).

Monthly total production output rose by 1.4% in May 2019, due to all four main sectors increasing and follows a significant fall of 2.9% in April 2019.

Electricity and gas output rose by 2.1%. The Met Office (PDF, 250KB) reported that the long-term average temperature for May 2019 was colder by 0.3 degrees Celsius, resulting in increased demand.

The largest upward contribution this month came from manufacturing, which increased by 1.4% and follows the significant fall of 4.2% during April 2019. The negative growth last month is consistent with the widespread early completion of orders that took place during Quarter 1 (Jan to Mar) 2019. However, we are unable to quantify the effect of this.

Despite the strength within manufacturing during May 2019, 7 of the 13 subsectors displayed weakness and were it not for transport equipment, then overall manufacturing output would have fallen by 0.1%.

The significant increase in transport equipment is due to a partial bounceback effect from motor vehicles, trailers and semi-trailers, which increased by a record 24.2% in May 2019 following a strong fall in April 2019. However, output within this sub-industry in May 2019 remains below the level of output seen at the end of the first quarter of 2019 (Figure 3).

Providing supporting strength was a 2.6% increase from basic metals and metal products, where export strength within weapons and ammunition, led to a 15.5% rise. This sub-industry can be volatile due to the completion of high value contracts. Fabricated metal products also increased by 1.6%, its strongest growth since June 2018.

Providing the largest downward contributions within manufacturing were:

• Food products, beverages and tobacco, which fell by 1.4% driven by falls within meat products (2.9%) and bakery and farinaceous products (3.6%), following pre-production for Easter during the majority of April 2019
• Pharmaceutical products, which fell by 2.8%

Total production output for the three months to May 2019 increased by 0.4%, compared with the same three months to May 2018. This was driven by a rise in three of the four main sectors.

Mining and quarrying rose by 4.1%, due mainly to the continuation of strength within oil and gas extraction (2.6%), where an expansion in oil and gas fields coming online at the end of 2017, has steadily increased production from that point. This is supported by widespread strength within other mining and quarrying, which increased by 7.9%.

Electricity and gas fell by 3.7%, affected by the UK experiencing a spell of severe winter weather (the “Beast from the East”), with low temperatures and snowfalls during March 2018. This weather effect increased demand in electricity and gas during that period, in comparison with the three months to May 2019.

Manufacturing rose by 0.6%, 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 a notable increase from food products, beverages and tobacco at 3.4%, due primarily to continued strength from alcoholic beverages, which rose by 8.2% and meat products, which rose by 5.0%. Underpinning much of the strength within the alcoholic beverages and meat products subindustries is an increase in nominal total export and domestic turnover (see our Monthly Business Survey turnover in production industries dataset).

Partially offsetting the increase in overall manufacturing growth was a fall of 7.4% within transport equipment. Additionally, The Society of Motor Manufacturers and Traders (SMMT) have reported a decline in the number of cars manufactured for domestic and export markets during May 2019 compared with May 2018.

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 July 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.