Index of Services, UK: November 2018

• In the three months to November 2018, services output increased by 0.3% compared with the three months ending August 2018.

• The professional, scientific and technical activities sector made the largest contribution to this growth, contributing 0.17 percentage points.

• The Index of Services increased by 0.3% between October 2018 and November 2018.

• The wholesale, retail and motor trade sector made the largest contribution to the month-on-month growth, contributing 0.15 percentage points.

• In the three months to November 2018, services output increased by 1.8% compared with the three months ending November 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 (11 January 2019) is the GDP monthly estimate, UK: November 2018.

This November 2018 release contains revisions from January 2017 onwards, and is consistent with the National Accounts Revisions Policy. The revisions up to September 2018 are consistent with those published in the Quarterly national accounts on 21 December 2018. These revised data now include Value Added Tax (VAT) data for the first time in Quarter 2 (Apr to June) 2018.

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 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 November 2018, services output increased by 0.3% compared with the three months ending August 2018.

The professional, scientific and technical activities sector was the largest contributor to growth in the three months to November 2018. It increased by 1.7% and contributed 0.17 percentage points.

This sector has grown at a faster rate than total Index of Services (IoS) since January 2015 and has seen positive growth in each consecutive month since the three months to June 2017.

Figure 1 shows the three-month on three-month IoS and the professional, scientific and technical activities seasonally adjusted index from January 2015 to November 2018.

Figure 2 shows the three-month on three-month contribution of the professional, scientific and technical activities sector along with the other IoS sectors for November 2018.

Within the professional, scientific and technical activities sector, the accounting and auditing activities industry contributed the most. It increased by 4.3% and contributed 0.07 percentage points. This industry has seen positive three-month on three-month growth since December 2017 and is driven by the largest businesses within the industry.

There was widespread three-month on three-month growth within this sector and in addition to accounting and auditing, the other industries contributing to growth were:

• other professional, scientific and technical activities, which increased by 6.9%, contributing 0.06 percentage points

• activities of head offices, which increased by 3.1%, contributing 0.05 percentage points

The wholesale, retail and motor trade sector increased by 0.2% in the three months to November 2018, contributing 0.02 percentage points. Wholesale trade was the largest contributing industry within this sector, increasing by 0.9% and contributing 0.04 percentage points. However, this was offset by a fall in the motor trade industry, which decreased by 1.8%, contributing negative 0.04 percentage points. This was due, in part, to the impact of the worldwide harmonised light vehicle test procedure (WLTP), for more information see Section 5 on the motor trade industry.

After seeing strong contributions over the summer months due mainly to the retail trade industry, the wholesale, retail and motor trade sector is now seeing more subdued growth. The 0.2% growth in the three months to November 2018 is the lowest since the three months to March 2018. In comparison, the sector saw growth of 2.2%, contributing 0.28 percentage points in the three months to July 2018.

Services output increased by 0.3% in November 2018, following a rise of 0.2% in October 2018.

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

Growth was widespread in November 2018 with 8 of the 14 sectors increasing, while there were falls in four sectors and two sectors showed no growth.

The wholesale, retail and motor trade sector contributed the most to the monthly increase. It grew by 1.2% and contributed 0.15 percentage points. Within this sector, the retail trade industry was mainly responsible for this increase and contributed the most to month-on-month services. The industry increased by 1.4% and contributed 0.09 percentage points.

Retailers reported strong growth on the month due to Black Friday promotions, with non-food stores making the largest contribution, for more information please see Retail sales, Great Britain: November 2018. There was also growth within this sector for the wholesale trade industry, which increased by 0.9% and contributed 0.04 percentage points.

The information and communication sector also contributed to the month-on-month rise. It increased by 0.9% and contributed 0.07 percentage points. The industries behind this rise were:

• publishing activities, which increased by 4.0%, contributing 0.03 percentage points

• computer programming, which increased by 0.6%, contributing 0.02 percentage points

• information services, which increased by 3.6%, contributing 0.02 percentage points

Software and computer game publishing were behind the growth in publishing activities. Computer consultancy was the main driver behind the increase in the computer programming industry and large businesses were responsible for the rise in information services.

There was also strength in several industries within the professional, scientific and technical activities sector. These were:

• activities of head offices, which increased by 2.3%, contributing 0.04 percentage points

• other professional, scientific and technical activities, which increased by 3.5%, contributing 0.03 percentage points

• architectural and engineering, which increased by 1.4%, contributing 0.03 percentage points

However, these rises were offset by falls in the accounting and auditing activities, and legal activities industries. They fell by 3.3% and 2.5% and contributed negative 0.05 and negative 0.04 percentage points respectively.

The wholesale and retail trade and repair of motor vehicles and motor cycles industry (UK Standard Industrial Classification 2007: SIC 2007), referred to as the motor trade industry, has an Index of Services (IoS) weight of 23.7 parts per thousand. The industry comprises four parts:

• sale of motor vehicles, which includes the sale of new and used cars

• maintenance and repair of motor vehicles

• sale of motor vehicle parts and accessories

• motorcycle sales, repair and parts

Data for this industry are collected via the Monthly Business Survey and have a sample of approximately 1,200 businesses. The largest proportion of turnover comes from the sale of motor vehicles.

Figure 4 shows the seasonally adjusted month-on-month and three-month on three-month index for the motor trade industry from January 2015 to November 2018.

The motor trade industry has seen a general rise in its index figures until the end of 2016 but has then flattened in 2017 and weakened in 2018. The exception to this was in March 2017 where the industry saw a large rise before the changes to Vehicle Excise Duty (VED) rates, which took place in April 2017. The Society of Motor Manufacturers and Traders (SMMT) also publish statistics on the motor industry. Their new car market publications have also highlighted a decline in the industry with the demand for diesel-fuelled cars a large factor behind this.

More recently the motor trade industry has been impacted by the worldwide harmonised light vehicle test procedure (WLTP). This was applied to all new car registrations starting from September 2018. These tests are part of new regulations that are used to measure fuel consumption and CO2 emissions from passenger cars, as well as their pollutant emissions. Figure 5 shows the monthly turnover for the motor trade industry since August 2017. The Monthly Business Survey turnover in services industries dataset is published alongside this release.

Motor trade businesses reported a significant impact due to the WLTP. The changes impacted the sale of new cars component within the industry, with businesses reporting that testing affected supply. The industry still saw a rise in the non-seasonally adjusted monthly turnover, which is traditional for September due to the new car registrations (Figure 5). However, the industry saw a fall in turnover when compared with September 2017 as businesses had fewer models available to sell. This resulted in a large decrease for the industry in September 2018 (Figure 4).

Businesses have also reported that as the WLTP created delivery backlogs in September 2018, this stock came through later resulting in some displaced activity to October 2018. October still saw a fall in monthly turnover, which is normal, however, this was less of a fall than in previous years.

The impact from the introduction of the WLTP was also reported in the Society of Motor Manufacturers and Traders (SMMT) September 2018 publication, which measures the new car market.

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

In the three months to November 2018, services output increased by 1.8% compared with the three months ending November 2017. This is the largest growth since the three months to September 2017, which grew by 2.1%. It is also the highest the three month on a year ago growth has been in 2018, which has strengthened since the 1.4% growth in the three months to April 2018.

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 (11 January 2019).

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.

We welcome your feedback on this bulletin via our short survey.

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 June 2018. 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: November 2018, published on 20 December 2018.

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

This November 2018 release contains revisions from January 2017 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