Index of Services, UK: July 2018

• In the three months to July 2018, services output increased 0.6% compared with the three months ending April 2018; this is the largest growth since the three months to January 2017.

• The wholesale, retail and motor trade sector made the largest contribution to the three-month on three-month growth for the third consecutive month, contributing 0.23 percentage points.

• The Index of Services increased by 0.3% between June 2018 and July 2018.

• Growth in the professional, scientific and technical activities sector was the main reason behind the monthly growth, with the sector contributing 0.15 percentage points.

• In the three months to July 2018, services output increased by 1.5% compared with the three months ending July 2017.

The monthly Index of Services (IoS) provides a timely indicator of growth in the output of the services industries. It is the largest contributor to the output approach to the measurement of gross domestic product (GDP), accounting for 79.6% of UK GDP in 2016. Also published today (10 September 2018) is the GDP monthly estimate, UK: July 2018.

This July 2018 release contains no revisions and is consistent with the National Accounts Revisions Policy. Further to this release, the Quarterly national accounts published on 28 September 2018 will include revised services data from January 2017 to June 2018. This revised data will also include Value Added Tax (VAT) data for the first time in Quarter 1 (Jan to Mar) 2018.

On 15 June 2017, we announced that automatic pre-release access to official statistics would end from 1 July 2017 and would only be considered in exceptional circumstances, where denying such access would significantly impede the taking of action in the public interest. In accordance with this, exceptional pre-release access for the Bank of England has been granted for data related to this release.

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 services industries dataset, which was published alongside this release. Note that the MBS turnover in services industries dataset does not contain data from Value Added Tax (VAT) returns, which have been included in the IoS.

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.

The IoS is an important economic indicator and one of the earliest short-term measures of economic activity. It is used in the compilation of the national accounts and widely used by private and public sector institutions, particularly by the Bank of England and Her Majesty’s Treasury to assist in informed decision- and policy-making.

The UK Index of Services has been designated by the UK Statistics Authority as National Statistics, in accordance with the Statistics and Registration Service Act 2007 and signifying compliance with the Code of Practice for Statistics.

In the three months to July 2018, services output increased by 0.6% compared with the three months ending April 2018.

Figure 1 shows the three-month on three-month Index of Services (IoS) and the wholesale, retail and motor trade seasonally adjusted index from January 2015 to July 2018.

The Index of Services (IoS) continues to grow, with growth of 0.6% in the three months to July 2018. This is the largest growth since the three months to January 2017, which grew by the same percentage. The wholesale, retail and motor trade sector made the largest contribution to growth in the three months to July 2018, contributing 0.23 percentage points. Since the three months to January 2015, this sector has grown at a faster rate when compared with the total Index of Services. From the start of 2017, the growth in the sector slowed but has then seen a further increase in growth since the three months to April 2018.

Figure 2 shows the three-month on three-month contribution of the wholesale, retail and motor trade sector along with the other IoS sectors for July 2018.

There was widespread growth in the three months to July 2018, with 9 of the 14 sectors increasing, while only four saw falls and one remained flat. The wholesale, retail and motor trade sector increased by 1.8% and contributed 0.23 percentage points. Within this sector, retail trade contributed the most and was also the largest contributing industry to IoS. It increased by 2.1% and contributed 0.14 percentage points. Growth in May 2018 and July 2018 was responsible for the three-month on three-month increase in the industry. Good weather in the latest three months was suggested by retailers as the reason for increased spending in food and household goods, while online retailing also grew.

Wholesale trade was also responsible for the rise in this sector in the three months to July 2018, increasing by 1.6% and contributing 0.07 percentage points. Similar to retail trade, growth in May 2018 and July 2018 was behind the three-month on three-month rise.

The other sectors to make a large contribution to the growth in this period were information and communication, and transportation and storage. The information and communication sector increased by 1.2% and contributed 0.10 percentage points. The industries responsible for this rise were:

• computer programming, which increased by 1.4%, contributing 0.05 percentage points

• motion pictures, which increased by 4.1%, contributing 0.04 percentage points

The transportation and storage sector increased by 1.6% and contributed 0.09 percentage points. The industries responsible for this rise were:

• warehousing and support activities, which increased by 3.3%, contributing 0.04 percentage points

• air transport, which increased by 3.4%, contributing 0.02 percentage points

Services output increased by 0.3% in July 2018, following no growth to one decimal place in June 2018.

Figure 3 shows the month-on-month contributions of each of the Index of Services sectors for July 2018.

Professional, scientific and technical activities was the largest contributing sector to the month-on-month growth, following a fall in June 2018. It increased by 1.5% and contributed 0.15 percentage points. The industries responsible for this rise were:

• architectural and engineering activities, which increased by 4.4%, contributing 0.09 percentage points

• accounting and auditing activities, which increased by 3.8%, contributing 0.06 percentage points

Both these industries saw bouncebacks in July 2018 after falls in the previous month, with large engineering, accounting and auditing businesses contributing to the monthly movement.

The other notable sector increases were wholesale, retail and motor trade, and accommodation and food activities. The industries driving these sector movements were:

• retail trade, which increased by 0.7%, contributing 0.05 percentage points; please see the Retail Sales, Great Britain: July 2018 release for more information

• wholesale trade, which increased by 0.9%, contributing 0.04 percentage points

• accommodation, which increased by 3.4%, contributing 0.03 percentage points

• food and beverage services, which increased by 0.8%, contributing 0.02 percentage points

Growth in online sales contributed to the rise in retail trade along with continued growth in food sales due to the World Cup and hot weather. The wholesale of fuel component was the main driver behind the month-on-month increase in wholesale trade. Hotels, camping grounds and trailer parks were responsible for growth in the accommodation industry, while pubs and licenced restaurants contributed to the rise in the food and beverage services industry.

Offsetting some of this growth was the information and communication sector, which decreased by 0.7%, contributing negative 0.06 percentage points. Within this sector, the motion pictures industry decreased by 8.3% and contributed negative 0.08 percentage points. This decrease followed strong growth in the previous month for this industry. There was also a fall back in the computer programming industry, which decreased by 0.6%, contributing negative 0.02 percentage points.

Figure 4 shows the three-month on a year ago Index of Services (IoS) growth rates for each year since 2015.

In the three months to July 2018, services output increased by 1.5% compared with the three months ending July 2017. This is equal to the growth in the three months to June 2018 and is the largest growth since the three months to September 2017, which grew by 1.7%.

The three-month on a year growth has strengthened in 2018 since the 1.2% growth in the three months to March 2018, which was the lowest since December 2011. However, 2018 is still weaker than the previous years, with the weakening throughout 2015 followed by a further slowdown in the latter half of 2017.

Alongside this publication we publish the Index of Production (IoP) and Construction output in Great Britain, allowing for an estimate of monthly gross domestic product (GDP), which is also published today (10 September 2018).

International comparisons

International comparison with the Index of Services (IoS) is difficult, as most comparable economies do not produce equivalent estimates. Eurostat turnover in services estimates are not comparable with the IoS, as they exclude the wholesale and retail trade; furthermore, most of the estimates are only available quarterly. The US Bureau of Economic Analysis also produces services output estimates, but only on a quarterly basis, with a four-month lag time. Japan has a direct equivalent of the IoS, but the estimates are not seasonally adjusted. The closest equivalent estimates are from Canada, which produces a monthly output estimate of GDP with a breakdown by industry (including an aggregate for services). There are also comparable quarterly estimates from Sweden and Ireland.

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The monthly Index of Services (IoS) was developed to provide a timely indicator of growth in the output of services industries, at constant prices for the UK. The IoS is an important component of monthly output (gross domestic product output approach (GDP(O)), representing about 79.6% of UK gross domestic product (GDP) as of 2016. The IoS shares the exact same industry coverage as the corresponding quarterly series within GDP(O).

These data are used to produce seasonally adjusted estimates of output at chained volume measures (removing the effect of price changes). Unless otherwise stated, all estimates included in this release are based on seasonally adjusted data.

The IoS is compiled using data from several different sources (Table 1), this is detailed further in the GDP(O) source catalogue. In addition, we include Value Added Tax (VAT) data across 42 services industries for small- and medium-sized businesses. These have been used to supplement data from the Monthly Business Survey (MBS) for the period January 2016 to December 2017. Further information on the use of VAT data was published in the VAT turnover data in National Accounts: background and methodology update.

The GDP(O) methods and sources pages provide more information on the data that underpin these statistics; of particular note is the GDP(O) source catalogue.

Notes:

1. The Monthly Business Survey (MBS) data is published alongside this release in MBS Turnover in services industries.
   

2. Data relating to the retail industry are broadly comparable with Retail sales, Great Britain: July 2018, published on 16 August 2018.
   

3. For further information on what’s included within Other, please see GDP(O) source catalogue.
   

This July 2018 release contains no revisions and is consistent with the National Accounts Revisions Policy. Revisions 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

• Her Majesty’s Revenue and Customs (HMRC) VAT returns replacing MBS data for small- and medium-sized businesses when VAT estimates become available every quarter

Published alongside this release, the Index of Services datasets contain additional material, including:

• MBS response rates (current and historic)

• IoS and main component and sector indices to four decimal places

• publication tables

• revisions triangles

• lower-level time series data

• MBS turnover of services industries

The Index of Services 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