Index of Services, UK: March 2019

• Services output increased by 0.3% in Quarter 1 (Jan to Mar) 2019 compared with Quarter 4 (Oct to Dec) 2018, following growth of 0.5% for Quarter 4 2018.

• The wholesale, retail and motor trade sector made the largest contribution to the quarter-on-quarter growth, contributing 0.15 percentage points, with the retail trade industry the main factor behind this.

• The Index of Services fell by 0.1% between February 2019 and March 2019.

• The information and communication sector was the main contributor to the month-on-month decrease, contributing negative 0.08 percentage points.

• In the three months to March 2019, services output increased by 2.0% compared with the three months ending March 2018.

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 May 2019) is the GDP first quarterly estimate, UK: January to March 2019.

This March 2019 release publishes updated and revised estimates from January 2019 onwards, and is consistent with the National Accounts Revisions Policy.

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

On the 11 April 2019, we published 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.

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.

During Quarter 1 (Jan to Mar) 2019, services output increased by 0.3%, weakening from growth of 0.5% in Quarter 4 (Oct to Dec) 2018.

Wholesale, retail and motor trade was the largest contributing sector to growth in Quarter 1 2019. It increased by 1.2% and contributed 0.15 percentage points. Figure 1 shows the quarter-on-quarter Index of Services (IoS) and the wholesale, retail and motor trade sector seasonally adjusted index from Quarter 1 2015 to Quarter 1 2019.

Growth in this sector has outperformed total IoS from Quarter 1 2015 but slowed from the start of 2017 until Quarter 2 (Apr to June) 2018; from that point it saw large increases over the summer months, due mainly to retail and wholesale trade. In the latest quarter, the retail trade industry was the largest contributor to growth in the sector.

Figure 2 shows the quarter-on-quarter contribution of the wholesale, retail and motor trade sector along with the other IoS sectors for Quarter 1 2019.

The main factor for the rise in the wholesale, retail and motor trade sector was the retail trade industry. It increased by 1.6% and contributed 0.10 percentage points (of the 0.15 percentage point increase), following sustained growth throughout the first three months of the year. All store types except department stores and household goods stores increased in the latest quarter; for more information please see Retail sales, Great Britain: March 2019.

The information and communication sector also saw a large rise in Quarter 1 2019. The sector increased by 1.5% and contributed 0.13 percentage points. Computer programming was a large part of this rise. The industry grew by 2.1% and contributed 0.08 percentage points. Growth in large computer consultancy businesses was behind this increase.

Services growth in Quarter 1 2019 has weakened from Quarter 4 2018. The sector largely responsible for this weakening is the professional, scientific and technical activities sector (Figure 3). After consistent large contributions to services growth throughout 2018 the sector fell in Quarter 1 2019, the first time since Quarter 1 2016.

Professional, scientific and technical activities was the largest decreasing sector in the latest quarter. It decreased by 0.6% and contributed negative 0.06 percentage points. Within the sector the industries responsible for this fall were:

• head offices and management consultancy, which decreased by 2.0%, contributing negative 0.04 percentage points

• other professional, scientific and technical activities, which decreased by 3.9%, contributing negative 0.03 percentage points

The financial and insurance activities sector fell again in the latest quarter; it decreased by 0.4% and contributed negative 0.03 percentage points. All industries within this sector have seen negative growth over this period (the majority of data for this sector are forecast for Quarter 1 2019). This sector has not seen positive growth since Quarter 1 2017; the longest period without a rise since Quarter 1 2009 to Quarter 4 2010.

There has been no observable overall impact due to stockpiling on the Index of Services in Quarter 1 2019. We have seen evidence at a business level within certain industries to suggest some stockpiling. Conversely, other businesses have reported they are not stockpiling within those same industries. When aggregated to the industry-level, fluctuations in business returns offset the impact from stockpiling.

Small numbers of businesses within the wholesale trade industry have reported they increased their stocks. This impact is limited when compared with the more significant movement of fuel wholesalers and the impact of rising oil prices between December 2018 and March 2019. The motor trade industry has also seen some evidence of stockpiling but with minimal impact overall.

Warehousing and support activities for transportation has not seen any observable impact and saw a decrease in Quarter 1 2019, falling by 2.0% and contributing negative 0.03 percentage points. This industry includes operating of transport infrastructure (for example, airports, harbours, tunnels, bridges and so on), the activities of transport agencies and cargo handling.

The owned and leased real estate industry has seen strong growth over the last two quarters. One component of this industry that has been a large contributor to these rises is the letting of industrial property (which includes warehouses). We have no evidence to explain this increase, but it is possible that this reflects heightened demand for warehousing.

Services output decreased by 0.1% in March 2019, following a rise of 0.2% in February 2019.

Figure 4 shows the month-on-month Index of Services (IoS) growth rates since January 2012 and Figure 5 shows the month-on-month contributions of each of the IoS sectors for March 2019.

The IoS has not seen monthly growth larger than 0.3% since December 2016 (Figure 4), while the month-on-month decreases since January 2018 are the most seen over a similar period since 2013. Care should be taken when using the month-on-month growth rates as data can often be volatile.

The information and communication sector was the largest contributor to the monthly decrease. It fell by 0.9% and contributed negative 0.08 percentage points. Computer programming was predominantly behind this fall, decreasing by 2.3% and contributing negative 0.09 percentage points. Falls from large businesses within the computer programming and consultancy components was the main reason for this fall. This follows a very strong January 2019 with the industry falling back in March 2019 to levels last seen in December 2018.

Widespread decreases across the rest of services was the other factor behind the 0.1% decrease in March 2019. Out of the 51 industries that make up services 33 saw negative growth while only 16 saw increases.

Offsetting some of this fall were:

• retail trade, which increased by 1.1%, contributing 0.07 percentage points

• owned or leased real estate, which increased by 1.0%, contributing 0.05 percentage points

• accounting and auditing activities, which increased by 2.6%, contributing 0.04 percentage points

Figure 6 shows the three-month on a year ago Index of Services (IoS) growth rates since January 2015.

In the three months to March 2019, services output increased by 2.0% compared with the three months ending March 2018. This was equal to the increase in the three months to February 2019. The three-month on a year growth rate has seen little change recently after weakening from 2.5% in the three months to July 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 May 2019) as part of the GDP first quarterly estimate, UK: January to March 2019.

On 26 March 2019, we published Services sector performance, UK: 2008 to 2018. The article details the changes that have taken place in the UK services sector from 2008 to 2018. It also looks at the differences between public sector-dominated sectors and the rest of the Index of Services (IoS) and compares the growth of individual IoS sectors in more detail.

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.

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 Standard Industrial Classifications (SICs) 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 September 2018. Further information on the use of VAT data was published in the VAT turnover data in National Accounts: background and methodology.

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 are published alongside this release in the MBS turnover of services industries dataset.
   
2. Data relating to the retail industry are broadly comparable with Retail sales, Great Britain: March 2019, published on 18 April 2019.
   
3. For further information on what’s included within Other, please see the GDP(O) source catalogue.

This March 2019 release contains revisions from January 2019 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