Producer price inflation, UK: March 2015

• The price of goods bought and sold by UK manufacturers, as estimated by the Producer Price Index, continued to fall in the year to March 2015

• The output price index for goods produced by UK manufacturers (factory gate prices) fell 1.7% in the year to March 2015, unchanged from last month

• Factory gate prices rose 0.2% between February and March 2015, unchanged from last month

• Core factory gate prices, which exclude the more volatile food, beverages, tobacco and petroleum products, rose 0.1% in the year to March 2015, down from a rise of 0.3% in the year to February 2015

• The overall price of materials and fuels bought by UK manufacturers for processing (total input prices) fell 13.0% in the year to March 2015, up from a fall of 13.5% in the year to February 2015

• Total input prices rose 0.3% between February and March 2015, compared with a rise of 0.1% between January and February 2015

The Producer Price Index (PPI) is a monthly survey that measures the price changes of goods bought and sold by UK manufacturers and provides a key measure of inflation, alongside other indicators such as the Consumer Price Index (CPI) and Services Producer Price Index (SPPI). This statistical bulletin contains a comprehensive selection of data on input and output index series and also contains producer price indices of materials and fuels purchased and output of manufacturing industry by broad sector.

The output price indices measure change in the prices of goods produced by UK manufacturers (these are often called "factory gate prices").

The input price indices measure change in the prices of materials and fuels bought by UK manufacturers for processing. These are not limited to materials used in the final product, but also include what is required by the company in its normal day-to-day running.

Imported Price Indices (IPIs) are a series of economic indicators that measure change in the prices of goods and raw materials imported into the UK. IPIs are a key component of input price indices.

Exported Price Indices (EPIs) are a series of economic indicators that measure change in the prices of goods manufactured in the UK but destined for export markets.

The factory gate price (the output price) reflects the total price received by the manufacturer for a particular product. It includes costs such as labour, raw materials and energy, as well as interest on loans, site and building maintenance or rent.

Core factory gate inflation excludes price movements from food, beverage, tobacco and alcohol, and petroleum products, which tend to have volatile price movements. It should give a better indication of the underlying output inflation rates.

The input price is the cost of goods bought by UK manufacturers for use in manufacturing, such as the actual cost of materials and fuels bought for processing.

Core input inflation strips out purchases from the more volatile food, beverage, tobacco and alcohol, and petroleum industries to give an indication of the underlying input inflation pressures facing the UK manufacturing sector.

Factory gate inflation fell 1.7% in the year to March 2015, unchanged from last month. This is the ninth consecutive fall in the annual rate of output inflation, although the rate of deflation has appeared to slow.

The rate of both total output and core inflation has generally been reducing since autumn 2011 when output inflation reached its post-economic downturn high of 5.3% in September 2011. During this period, core factory gate inflation has tended to run at a lower rate and show a smaller degree of volatility than total output. However, since January 2014, core output price inflation has been running at a slightly higher rate: a result of the downward pressures from petroleum which is excluded from the core measure of inflation (Figure A).

Looking at the latest estimates (Table A), movements in factory gate prices over the 12 months to March 2015 were as follows:

• Factory gate prices fell 1.7%, unchanged from last month

• Core factory gate prices rose 0.1%, down slightly from a rise of 0.3% in February 2015

• Factory gate inflation excluding excise duty fell 1.4%, unchanged since January 2015

Between February and March 2015:

• Factory gate prices rose 0.2%, unchanged from last month

• Core factory gate prices showed no change, also unchanged from last month

Table B shows the annual percentage change in price across all product groups and Figure B shows their contribution to the annual factory gate inflation rate. Table C and Figure C show the same information, but for the monthly factory gate inflation rate.

Factory gate prices fell 1.7% in the year to March 2015, unchanged from last month: the ninth consecutive fall on the index. Prior to July 2014, there has been no fall in the annual rate since October 2009, when it fell 0.1%. The main contributions to the annual rate for March 2015 came from a fall in the price of petroleum and food products (Figure B).

The price index between February and March 2015 rose 0.2%, also unchanged from last month. The main upward contribution in the month came from an increase in petroleum product prices (Figure C).

Petroleum product prices fell 16.7% in the year to March 2015, up from a fall of 19.2% in the year to February 2015. The main contributions to the fall in the annual rate came from diesel and gas oil and unleaded petrol where prices have been falling over the last 12 months. Diesel and gas oil prices fell by 15.3% in the year to March 2015 with unleaded petrol prices falling by 14.3%.

Although petroleum product prices were lower in March 2015 than they were a year ago, prices have increased during the last 2 months. Prices rose 1.7% between January and February 2015 and rose 2.4% between February and March 2015. The current monthly rate of 2.4%, which is the highest rate of inflation for petroleum products since February 2013, is mainly due to an increase in unleaded petrol prices. Unleaded petrol prices rose by 3.3% between February and March 2015, up from a fall of 1.1% last month.

Food product prices fell 2.8% in the year to March 2015, up from a fall of 3.3% in the year to February 2015. This was mainly due to a fall in the price of dairy products, which fell 16.0% in the year to March 2015, down from a fall of 15.8% in the year to February 2015. This is a record fall for dairy product prices (data back to 1997) and is caused by a fall in processed liquid milk prices, which fell by 25.4% in the year to March 2015.

Core factory gate inflation

Core factory gate prices, which exclude the more volatile food, beverages, tobacco and petroleum product prices, giving a measure of the underlying factory gate inflation, rose 0.1% in the year to March 2015. Between February and March 2015, the index showed no change.

Since autumn 2011, the inflation price of materials and fuels purchased by UK manufacturing industry (input prices) fell quite rapidly, from annual inflation of around 16% to deflation (prices lower than they were in the same month of the previous year) of around 2% in the middle of 2012 (Figure D). Input price inflation showed a steady but fairly slow increase from October 2012 to July 2013, when it reached 4.7%. From November 2013, prices started to fall, with input prices currently falling by 13.0%. Over this period, core input inflation (purchases by manufacturing industries other than the more volatile food, beverage, tobacco and petroleum industries) fell at similar levels.

Looking at the latest data (Table D), the main movements in the year to March 2015 were as follows:

• The total input price index fell 13.0%, compared with a fall of 13.5% in the year to February 2015

• The core input price index saw a fall of 4.5%, compared with a fall of 4.1% last month

• The price of imported materials as a whole (including crude oil) fell 12.2%, up from a fall of 12.9% last month

Between February and March 2015:

• The total input price index rose 0.3%, up from a rise of 0.1% last month (Table D)

• In seasonally adjusted terms, (see Table D) the input price index for the manufacturing industry excluding the food, beverage, tobacco and petroleum industries fell 0.7%, up from a fall of 1.6% last month

Notes for input prices: summary

1. These indices include the Climate Change Levy (CCL) which was introduced in April 2001

2. These indices include the Aggregates Levy which was introduced in April 2002

Table E and Figure E show the percentage change in the price of the main commodities groups over the year and their contributions to the total input index. Table F and Figure F show the same for the monthly input prices.

The overall input index for all manufacturing, that is, the price of materials and fuels purchased by manufacturers, fell 13.0% in the year to March 2015, compared with a fall of 13.5% in the year to February 2015. The main downward contributions to the index came from crude oil (down 40.8% in the year to March 2015) and home-produced food (down 11.7% in the year to March 2015).

The input index rose 0.3% between February and March 2015, up from a rise of 0.1% last month. This rise was caused by an increase in the price of crude oil, which rose by 4.3% between February and March 2015 (see Table F and Figure F).

Crude oil prices fell 40.8% in the year to March 2015, up from a fall of 44.2% last month, 18th consecutive fall in the annual rate. Despite prices falling overall in the last 12 months, crude oil prices increased by 7.9% between January and February 2015 and by 4.3% between February and March 2015. These recent increases in oil prices are a result of disruptions to production and exports from Libya and Iraq.

Home-produced food prices fell to 11.7% in the year to March 2015, up slightly from a fall of 11.8% in the year to February 2015. The annual contribution came from crop and animal production; hunting and related services, which fell 12.3%, compared to a fall of 11.3% in the year to February 2015.

Core input price index (excluding purchases from the food, beverage, tobacco and petroleum industries)

The core input price index, in seasonally adjusted terms, fell 0.7% between February and March 2015. The unadjusted index fell 0.2% between February and March 2015, compared with a fall of 1.4% last month.

For this bulletin Reference tables 8R and 9R (229 Kb Excel sheet) highlight revisions to movements in price indices previously published in last month’s statistical bulletin. Revisions are generally a result of changes to the most recent estimates, as more price quotes are received, and revisions to seasonal adjustment factors, which are re-estimated every month.

The headline figures have small revisions which were mainly caused by late data. For more information about the ONS revisions policy see our website.

Revisions to data provide one indication of the reliability of key indicators. Table G shows summary information on the size and direction of the revisions which have been made to the data, covering a 5-year period. A statistical test has been applied to the average revision to find out if it is statistically significantly different from zero. An asterisk (*) shows that the test is significant.

The table presents a summary of the differences between the first estimates, published between December 2007 and January 2015, and the estimates published 12 months later. These numbers include the effect of the reclassification onto SIC 2007.

Spreadsheets giving revisions triangles of estimates for all months from January 1998 through to January 2015 and the calculations behind the averages in the table, are available in the reference table area of our website:

• Revision triangle for total output (12 months) (2.31 Mb Excel sheet)

• Revision triangle for total output (1 month) (2.27 Mb Excel sheet)

• Revision triangle for total input (12 months) (2.32 Mb Excel sheet)

• Revision triangle for total input (1 month) (2.31 Mb Excel sheet)