Index of Production, UK: November 2016

In November 2016, total production was estimated to have increased by 2.1% compared with October 2016.

The increase in production was due to an increase in mining and quarrying output following the end of a maintenance period in the oil and gas industry and an increase in manufacturing.

The monthly estimate of manufacturing increased by 1.3% in November 2016; the largest contribution came from pharmaceuticals, which increased by 11.4%. Pharmaceuticals can be highly erratic, with significant monthly changes, often due to the delivery of large contracts.

The month-on-same month a year ago estimate of total production increased by 2.0% in November 2016, with increases in all 4 main sectors; the largest contribution came from manufacturing, 1.2%.

This release has a revisions period back to October 2016. This means that we have incorporated additional data since this period.

Revisions can be made for a variety of reasons, the most common include:

• late responses to surveys and administrative sources, or changes to original returns
• forecasts being replaced by actual data
• revisions to seasonal adjustment factors, which are re-estimated every month and reviewed annually

This revisions period is consistent with the National Accounts revisions policy.

The Index of Production (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 gross domestic product (GDP); the production industries’ weight accounts for 14.6% of the output approach to the measurement of GDP).

Care should be taken when using the month-on-month growth rates as data (for example, pharmaceuticals) can often be volatile, longer-term growth rates and examination of the time series allows for better interpretation of the statistics.

The IoP measures the UK output in the mining and quarrying; manufacturing; energy supply; and water supply and waste management industries. The IoP estimates are mainly based on the Monthly Business Survey (MBS) of approximately 6,000 businesses. For the mining and quarrying and energy supply sectors, and 2 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. However, the current price non-seasonally adjusted estimates of industries collected by the MBS can be found in today’s publication of Turnover in Production and Services Industries (TOPSI).

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

Table 1 shows the growth rates and contributions for the IoP and main sectors for November 2016. The monthly estimate of total production in November 2016 increased by 2.1%. There were increases in 3 of the 4 main sectors. The largest contribution came from mining and quarrying, 8.2%. The month-on-same month a year ago estimate of total production increased by 2.0% in November 2016, with increases in all 4 main sectors. The largest contribution came from manufacturing, 1.2%.

Figure 1 shows that both the Index of Production and Index of Manufacturing followed a broadly upward trend following the economic downturn. Growth was more pronounced from the beginning of 2010, as the economy recovered, before a slight downturn during 2012. Since then, both production and manufacturing output have steadily risen but remain well below the pre-downturn peak.

The monthly estimate of total production increased by 2.1% in November 2016 (Table 2). This followed a decrease of 1.1% in the previous month. The increase in total production was mainly due to increased oil and gas output, with the Buzzard oil field coming back online after a prolonged shutdown, along with increased output from the other fields. In addition, pharmaceuticals (which can be highly erratic) also saw large growth. The increase of 1.9% in electric power generation, transmission and distribution also provided an upward contribution to total production and was due to the lower than average temperature in November 2016.

Table 3 shows that in November 2016 compared with November 2015, total production output increased by 2.0% on a year ago. The biggest contributions to growth came from pharmaceuticals, transport equipment, and rubber and plastic products. Increased exports were highlighted as a contributing factor to the increases in pharmaceuticals and motor vehicles, trailers and semi-trailers within transport equipment, when compared with a year ago. We publish non-seasonally adjusted export proportions in current prices as part of this release.

The corresponding price indices used to deflate the Index of Production 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), estimates are in current prices, unlike the chained volume measures published in the IoP release.

The Index of Production follows the Eurostat Short Term Statistics (STS) regulation for measuring output in production. The latest release of output in production and output in manufacturing are available from Eurostat and 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 2010 = 100 basis, while UK data are calculated on a 2013 = 100 basis.

Outside of the EU, the US Census Bureau release Manufacturing and Trade Inventories and Sales. Accurate comparisons cannot be made between our publication and the US Census Bureau release as the UK data are calculated at chained volume indices which takes into account price changes, while the US publication is not adjusted for price changes.

This is the first Index of Production statistical bulletin released as part of the short term indicators theme day. As such this bulletin now follows a more streamlined format and some tables such as response rates table, previously found in the background notes, can now be found in the main reference tables. For direct links to additional content published as part of this release, see section 8, quality and methodology.

Please provide us with your feedback on our new style statistical bulletin in our short online survey.

Short term indicators economic commentary was published alongside this release, presenting new information on economic conditions in November 2016, with data available for output in production, construction and the trade balance.

The majority of data used to compile the manufacturing sector, and thus the Index of Production, is collected via the Monthly Business Survey (MBS). The MBS samples around 6,000 businesses every month. The data collected are turnover excluding Value Added Tax (VAT) and exports for some applicable industries. This data is then deflated using Producer Price Indices (PPI). Within the manufacturing sector we also receive direct volume data from: Department for Business, Energy and Industrial Strategy (BEIS) for fuel industries and the International Steel Statistics Bureau (ISSB) for steel industries.

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

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 3-monthly revisions
• Export proportions for manufacturing industries
• Index of Production weights 2013 equals 100
• Index of Production and sectors to 4 decimal places

The Turnover in Production and Services Industries (TOPSI) is published alongside this release, providing current price estimates for industries collected by the Monthly Business Survey.

The Index of Production Quality and Methodology Information document contains important information on:

• the strengths and limitations of the data
• the quality of the output: including the accuracy of the data and how it compares with related data
• uses and users
• how the output was created

A revised version of this document is available this month.