Producer price inflation, UK: February 2022

• The headline rate of output prices showed positive growth of 10.1% on the year to February 2022, up from 9.9% in January 2022.

• The headline rate of input prices showed positive growth of 14.7% on the year to February 2022, up from 14.2% in January 2022.

• Food products and metals and non-metallic minerals provided the largest upward contributions to the annual rates of output and input inflation, respectively.

• This month's Producer Price Inflation (PPI) is being published using updated sales data in line with the annual chain-linking methodology (see Section 5).

Output prices

On the month, the rate of output inflation was 0.8% in February 2022, down from 1.2% in January 2022 (Table 1).

Of the 10 product groups, nine displayed upward contributions to the annual rate in February 2022. Food products provided the largest upward contribution of 2.37 percentage points to the annual rate (Figure 2) and had annual price growth of 6.2% in February 2022 (Table 2). This is the highest that the rate has been since December 2017, and the increase was mainly driven by preserved meat and meat products for domestic market.

Tobacco and alcohol was the only product group to display a downward contribution to the annual rate. Despite showing positive annual growth, it provided a downward contribution because of the reduction in weight between 2021 and 2022. You can find out more about how these rates are calculated in Section 5.

Output – change in the annual rate

The annual rate of output inflation increased by 0.2 percentage points from 9.9% in January 2022 to 10.1% in February 2022. This is the highest that the rate has been since September 2008.

Of the 10 product groups, six displayed upward contributions to the change in the annual rate, with transport equipment and other manufactured products providing the largest, at 0.13 and 0.12 percentage points, respectively (Figure 3).

Input prices

On the month, the rate of input inflation was 1.4% in February 2022, down from 1.5% in January 2022 (Table 3).

The annual rate of imported inputs was 9.2% in February 2022, up from 7.0% in January 2022 (Table 4). This is the highest that the rate has been since May 2017.

The largest upward contribution to the annual input inflation rate came from metals and non-metallic minerals, which contributed 3.41 percentage points (Figure 4) and had positive annual price growth of 18.0% in February 2022 (Table 5). This was mainly driven by basic iron and steel and of ferro-alloys for domestic market.

Input – change in the annual rate

The annual rate of input inflation increased by 0.5 percentage points from 14.2% in January 2022 to 14.7% in February 2022.

Of the 10 product groups, five displayed upward contributions to the change in the annual rate. Crude oil displayed the largest, at 0.31 percentage points (Figure 5). The monthly rate of 9.0% between January 2022 and February 2022 for this product group is higher than the 6.0% between the same months a year ago; this has pulled the annual rate up by 4.2 percentage points from 53.1% in January 2022 to 57.3% in February 2022.

Weight

This is the importance of the price of interest relative to other prices collected. With annual chain linking, this is updated every year using business turnover data.

Index value

This is the price level in a specific basket of goods.

Annual growth rate

The annual inflation rate.

Link factor

A smoothing factor applied to create a continuous series following a weights change.

Contribution

A measure of influence that the index has on the overall growth rate. This depends on both the magnitude of the weight and the inflation rate. A positive contribution is an index that is driving a change in the annual growth rate value. Where the contribution is positive but the growth is negative, this indicates that the index is reducing the annual growth rate (for example, the growth rate would be higher if this index had a lower weight).

Producer price inflation

Changes in the prices of goods bought and sold by UK manufacturers, including price indices of materials and fuels purchased (input prices) and factory gate prices (output prices).

Output prices

The factory gate price (output price) is the amount received by UK producers for the goods that they sell to the domestic market. It includes the margin that businesses make on goods, in addition to costs such as labour, raw materials and energy, as well as site or building maintenance, rent, or interest on loans.

Input prices

The input price measures the price of materials and fuels bought by UK manufacturers for processing. It includes materials and fuels that are both imported or sourced within the domestic market. It is not limited to materials used in the final product but includes what is required by businesses in their normal day-to-day running, such as fuels.

Services producer price inflation

Quarterly estimates monitoring the changes in prices charged for services provided to UK-based customers for a range of industries.

Producer Price Inflation (PPI) uses contributions to identify how indices influence the overall inflation rate. This section gives additional information on the calculation and how to interpret it.

Weights

This month's Producer Price Inflation (PPI) is being published with updated sales data in line with the annual chain-linking methodology. New 2022 weights are used to calculate indices from December 2021, which is the link period. To avoid weights being affected adversely by coronavirus (COVID-19) pandemic data, we use 2019 sales data with the price updated to December 2021 as the weights source. Further details on the methodology are available in our Chain-linking in business prices article.

Example scenarios

The following gives examples of how weight and inflation rate changes most commonly affect the contribution. In PPI, the weights usually have greater influence on the contribution as these tend to show greater change than the annual inflation rate.

• Decrease in weight and in inflation rate - contribution is negative.
• Decrease in weight and increase in inflation rate - contribution is usually negative.
• No change in weight or inflation rate - no change.
• No change in weight and increase in inflation rate - no change.
• Increase in weight and decrease in inflation rate - contribution is usually positive.
• Increase in weight and no change in inflation rate - contribution is positive.
• Increase in weight and increase in inflation rate - contribution is positive.

Contributions are calculated using the following formula:

Quality and methodology information on strengths, limitations, appropriate uses, and how the data were created is available in the Producer Price Index (PPI) Quality and Methodology Information (QMI) report and the Services Producer Price Indices (SPPI) QMI report.

Other useful documentation for the PPI and the SPPI are:

• Producer Price Indices methods changes
• Chain-linking in business prices
• Producer price weight changes
• Services producer price weight changes
• Guidance on using indices in indexation clauses (PDF, 197KB)
• PPI methods and guidance (PDF, 1.14MB)
• SPPI user guidance and methodology article
• PPI standard errors article
• SPPI standard errors article

Sterling effective exchange rate

The sterling effective exchange rate measures changes in the strength of sterling relative to a basket of other currencies. The sterling effective exchange rate is only indicative of the rates applied to producer prices. This is because the sterling effective exchange rate is a trade weighted index that represents all UK trade, whereas producer prices reflect transactions in the manufacturing sector.

Strengths

• These data provide users with valuable insight into the changes in the process of goods and services bought and sold by UK manufacturers.

• Our data are very comprehensive, covering many products at a much greater level of detail than other surveys.

Limitations

• Some products are produced by only a small number of manufacturers, meaning that there may not be enough manufacturers for a detailed and robust analysis and the sector may be volatile, requiring some estimation.

• The data can be revised for 12 months.

• The data for the latest two months of the Producer Price Index (PPI) and two quarters of the Services Producer Price Index (SPPI) are provisional.

Coronavirus (COVID-19) in February 2022

Response rates for the domestic PPI, Import Price Index (IPI) and Export Price Index (EPI) all show an increase between January 2022 and February 2022 (Table 8).

Links to additional ONS sources of coronavirus (COVID-19) information

Various articles have been published that help describe the Office for National Statistics’ (ONS) response to how coronavirus might be seen in our estimates:

• Coronavirus and the effects on UK prices (published 6 May 2020)

• Coronavirus and the impact on output in the UK economy: August 2021 (published 13 October 2021)

• Meeting the challenge of measuring the economy through the COVID-19 pandemic (published 6 May 2020)

• Coronavirus and the effects on UK GDP (published 6 May 2020)

• Real-time turning point indicators: a UK focus (published 27 April 2020)

• Communicating gross domestic product (published 27 April 2020)

Our latest data and analysis on the impact of coronavirus on the UK economy and population are also available.

The ONS has released a public statement on coronavirus and the production of statistics. If you have any specific queries on this, you can email the Media Relations Office.

Economic statistics governance after EU exit

Following the UK’s exit from the EU, new governance arrangements are being put in place that will support the adoption and implementation of high-quality standards for UK economic statistics. These governance arrangements will promote international comparability and add to the credibility and independence of the UK’s statistical system.

At the centre of this new governance framework will be the new National Statistician's Committee for Advice on Standards for Economic Statistics (NSCASE). The NSCASE will support the UK by ensuring its processes for influencing and adopting international statistical standards are world leading. The advice that the NSCASE provides to the National Statistician will span the full range of domains in economic statistics. This includes the National Accounts, fiscal statistics, prices, trade, the balance of payments, and labour market statistics.