Index of Production, UK: October 2017

• In the three months to October 2017, the Index of Production was estimated to have increased by 1.2% compared with the three months to July 2017, due mainly to a rise of 1.2% in manufacturing.

• The largest contribution to the rise in manufacturing in the three months to October 2017 came from transport equipment, which rose by 2.5% followed by other manufacturing and repair, which rose by 2.8%.

• In October 2017, total production was estimated to have remained flat at 0.0% compared with September 2017; energy supply provided the largest downward contribution, decreasing by 3.3%, mainly because of unseasonably warm temperatures in October 2017, whilst the other three main sectors provided upward contributions, of which mining and quarrying was the largest.

• In October 2017, car production grew by 4.6% compared with September 2017 to match the record index level reached in July 2017.

• Total production output for October 2017 compared with October 2016 increased by 3.6%, with manufacturing providing the largest upward contribution, increasing by 3.9%; this was supported by a 14.0% increase in mining and quarrying.

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 14.0% of the output approach to the measurement of GDP.

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 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 current price non-seasonally adjusted estimates of industries collected by the MBS can be found in the MBS production industries dataset, which was published alongside this release.

The MBS 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 a number of 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” section of the UK trade release.

This release is not open to revisions. This is in line with the standard National Accounts Revisions Policy. 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

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.

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

Figures 1 and 2 show that both the Index of Production (IoP) and Index of Manufacturing (IoM) followed a broadly upward trend following the economic downturn. Growth was more pronounced from the beginning of 2010, as the economy recovered, before a downturn during 2012. Since then, both production and manufacturing output have risen but remain below their level reached in the pre-downturn gross domestic product (GDP) peak in Quarter 1 (Jan to Mar) 2008, by 6.1% and 2.1% respectively in the three months to October 2017.

Table 1 shows the growth rates and contributions for the IoP and main sectors for October 2017. The monthly estimate of total production remained flat at 0.0%. There were rises in three of the four main sectors, with energy supply providing the largest downward contribution, decreasing by 3.3%. This was partially offset by mining and quarrying, which rose by 2.7%.

The three months-on-previous three months estimate of total production rose by 1.2% in October 2017, with rises in three of the four main sectors. Manufacturing provided the largest upward contribution, increasing by 1.2% and was supported by rises in mining and quarrying and water and waste.

In the three months‐on‐previous three months to October 2017, total production was estimated to have increased by 1.2% (Table 2) and follows an increase of 1.1% in the three months to September 2017. This is the fourth consecutive three month on three month increase.

Manufacturing provided the largest upward contribution to total production, rising by 1.2%, due mainly to broad-based strength throughout the sector following an increase of 1.1% in the three months to September 2017. Within this sector, transport equipment provided the largest contribution, rising by 2.5%, due mainly to an increase of 3.2% in motor vehicles, trailers and semi-trailers following an increase of 4.2% in the three months to September 2017. The index level for motor vehicles, trailers and semi-trailers averaged 107.1 in the three months to October 2017 due to a strong increase in exports during October 2017, compared with 103.8 in the three months to July 2017, due mainly to a weak June 2017 (Figure 3).

The monthly estimate of total production remained flat at 0.0% in October 2017 (Table 3). There were rises in three of the four main sectors.

Energy supply provided the largest downward contribution, decreasing by 3.3%. Within this sector, gas distribution and supply fell by 7.6%, the warmer than average temperature in October 2017 contributed to this fall. The Met Office reported that the provisional UK mean temperature was 11.3 degrees Celsius, which was 1.8 degrees Celsius above the 1981 to 2010 long-term average.

The fall in energy supply was partially offset by an increase of 2.7% in mining and quarrying, with a rise of 3.6% in oil and gas extraction. Increased oil and gas extraction in October 2017 was due largely to a return to full output, following maintenance during August and September 2017. In addition, new oilfields, which came on line in June 2017 and have been increasing production, contributed to the rise.

Total production increased by 3.6% in October 2017 compared with October 2016; three of the four main sectors provided upwards contributions (Table 4).

The largest upward contribution came from manufacturing, which increased by 3.9%. There was broad-based strength throughout the sector, with 11 of the 13 sub-sectors increasing.

Within manufacturing, the largest upward contribution came from transport equipment, which rose by 9.3%. Within this sub-sector, air and spacecraft and related machinery increased by 11.5%, continuing the prolonged month-on-same-month a year ago strength for this sub-industry since November 2014.

Motor vehicles, trailers and semi-trailers provided a similar contribution and rose by 6.3%. An increase in export turnover of 20.7% was reported by this sub-industry compared with October 2016; this was published in the MBS production industries dataset alongside this release. Figure 4 shows a steady improvement in export turnover over a longer time span, in comparison with domestic turnover, which remains relatively subdued. Within the MBS production industries dataset, the value of exports for the motor vehicle, trailers and semi-trailers were at a record level in October 2017, exceeding £4 billion for the first time. However, it is important to note that this dataset is based on current prices and does not reflect the impact of prices, and is not seasonally adjusted.

The mining and quarrying sector increased by 14.0%; within this sector, oil and gas extraction rose by 17.9%, due mainly to maintenance that took place in October 2016. In addition, production has increased with new oilfields coming on line in 2017.

Total production increased by 2.6% in the three months to October 2017, compared with the same three months to October 2016. This is the 19th consecutive increase since March 2016.

The largest upwards contribution came from manufacturing, which increased by 3.1%, showing broad-based strength, with 10 of the 13 sub-sectors increasing. This was supported by increases in the mining and quarrying, and water and waste sectors, both increasing by 3.2%.

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 2010 equals 100 basis, while UK data are calculated on a 2015 equals 100 basis.

Outside the EU, the US Census Bureau releases Manufacturing and Trade Inventories and Sales reports. 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 take into account price changes, while the US publication is not adjusted for price changes.

We announced in our August 2017 bulletin that we were planning to stop the publication of Turnover in Production and Services Industries (TOPSI), which was based on the Monthly Business Survey (MBS). The final release of TOPSI was on 10 November 2017.

In this release of Index of Production (IoP), we have included two additional datasets containing Monthly Business Survey (MBS) turnover in production industries and Export proportions for manufacturing industries, which contain the MBS data for the production industries. We have also included these series within the IoP time series dataset.

We published the Short-term indicators economic commentary alongside this release, presenting new information on economic conditions in October 2017, with data available for output in production, construction and the trade balance.

We published the Monthly economic commentary: November 2017 on 23 November 2017, presenting analysis of the latest estimate of gross domestic product and economic commentary for prices, short-term indicators and labour market indicators to complement theme day economic commentary.

VAT turnover implementation into National Accounts: November update was published on 20 November 2017, detailing the methods used and the industry size bands that will be selected for Value Added Tax (VAT).

On 10 January 2018, the next bulletin will reflect the inclusion of Value Added Tax (VAT) data alongside Monthly Business Survey (MBS) data for the first time. In advance of this, on 22 December 2017, the Quarterly national accounts publication will include VAT estimates, as outlined in the latest VAT article, and include consequential revisions to the Index of Services, Index of Construction and Index of Production.

It should be noted that the Index of Production data released on 8 December 2017 will not necessarily be consistent with the data used in the next Quarterly national accounts publication on 22 December 2017.

The majority of data used to compile the manufacturing sector, and thus the Index of Production (IoP), are 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. These data are then deflated using Producer Price Indices (PPI). Within the manufacturing sector we also receive direct volume data from the Department for Business, Energy and Industrial Strategy (BEIS) for fuel industries and 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.

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 2015 equals 100
• Index of Production and sectors to four decimal places
• Monthly Business Survey (MBS) 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