Producer price inflation, UK: July 2024

• Producer input prices rose by 0.4% in the year to July 2024, compared with a revised annual growth rate of 0.0% in June 2024.

• Producer output (factory gate) prices rose by 0.8% in the year to July 2024, down from a revised increase of 1.0% in the year to June 2024.

• On a monthly basis, producer input prices fell by 0.1%, while output (factory gate) prices saw no change in July 2024.

Producer input prices rose by 0.4% in the year to July 2024, compared with a revised annual growth rate of 0.0% in June 2024. Monthly input prices fell by 0.1% in July 2024, following a revised fall of 0.4% in June (Table 1).

Producer output (factory gate) prices rose by 0.8% in the year to July 2024. This is down from a revised increase of 1.0% in the year to June. Monthly output prices saw no movement in July 2024. This is up from a revised fall of 0.7% in June (Table 1).

Estimates for both June and July 2024 are provisional. Figures for the latest 12 months are subject to revisions as additional survey data are returned and validated. Effective response rates at the time of first publishing can be found in Section 7: Data sources and quality.

Because of rounding, inflation rates in this bulletin may not correspond to index value changes and contributions to the rate may not add up to the rate exactly.

Of the 10 product groups for the input Producer Price Index (PPI), 6 made upward contributions to the annual inflation rate in July 2024. The largest of these came from inputs of "Crude petroleum and natural gas; metal ores", and "Food (domestic)", which contributed 0.63 and 0.48 percentage points, respectively (Figure 2).

Prices for "Crude petroleum and natural gas; metal ores" rose by 10.7% in the year to July 2024, which is down from a rise of 11.1% in the year to June (Table 2). The main contribution to this rise came from "Crude petroleum for the domestic market", which rose by 11.7% in the year to July 2024.

Domestic food prices rose by 1.9% in the year to July 2024, which is unchanged from June. The main contribution to this rise came from non-perennial crops, with potato prices increasing because of bad weather and short supplies.

In comparison, the largest offsetting downward contributions came from inputs of "Other parts and equipment" and fuel inputs, which detracted 0.53 and 0.51 percentage points, respectively. Despite making the largest downward contribution to the annual rate, prices for "Other parts and equipment" increased by 1.8% in the year to July 2024 (Table 2). This downward contribution was caused by the weight changes introduced to the PPI in February. For worked examples, see the scenarios in Section 7: Data sources and quality.

Fuel input prices fell by 10.6% in the year to July 2024. The main contribution came from "Electricity for the domestic market".

Inputs of chemicals provided the largest contribution to the change in the annual inflation rate between June and July 2024, with an upward contribution of 0.24 percentage points. The annual inflation rate for this product group fell by 1.8% in July 2024, from a 2.6% decline in June (Table 2).

The prices of materials and fuels imported by UK manufacturers rose by 0.4% in the year to July 2024, up from a revised fall of 0.3% in the year to June. Prices saw no movement between June and July 2024, compared with a revised fall of 0.4% between May and June (Table 3).

Of the 10 product groups for the output Producer Price Index (PPI), 7 made upward contributions to the annual inflation rate in July 2024. The largest of these came from "Coke and refined petroleum" products and "Other outputs", which contributed 1.70 and 0.86 percentage points, respectively (Figure 3).

"Coke and refined petroleum" prices rose by 4.0% in the year to July 2024, down from 8.5% in the year to June (Table 4). Prices for "Other outputs" rose by 1.2% in the year to July 2024, down from a rise of 1.7% in the year to June.

In comparison, offsetting downward contributions came from chemicals and paper products, detracting 1.31 and 1.09 percentage points, respectively. Chemical prices fell by 2.5% in the year to July 2024 (Table 4). This decrease was mainly caused by "paints, varnishes and similar coatings, printing ink, and mastics for the domestic market".

"Coke and refined petroleum" products made the largest contribution to the change in the annual inflation rate in July 2024, with a downward contribution of 0.28 percentage points.

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

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

As the aggregate producer prices indices are built up from individual product indices, it is possible to decompose overall inflation into contributions from different products. Those contributions reflect both the inflation rates for each product and their weight in the index. For more worked examples, see the scenarios in Section 7: Data sources and quality.

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).

If the producer price inflation rate is a positive value, this indicates that prices have risen, while a negative value indicates that prices have fallen.

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 either imported or sourced from 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.

Output prices

The output price (also known as the factory gate 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 interest on loans, site or building maintenance, or rent.

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 prices development plan

The Office for Statistics Regulation (OSR) quality report of the Producer Price Indices (PPI) was published in July 2023. The report notes the excellent progress made recently with bringing PPI in line with methodological best practice, but also highlights areas that need to be improved.

Our Producer prices development plan was published in October 2023, detailing the work that will be undertaken over the next year to improve the quality of PPI data and continue to meet user needs.

The Producer Price Index

The Producer Price Index (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.

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 to the annual rate, as these tend to show greater change than the annual inflation rate:

• decrease in weight, decrease in inflation rate - contribution is negative

• decrease in weight, no change in inflation rate - contribution is negative

• decrease in weight, increase in inflation rate - contribution is usually negative

• no change in weight, decrease in inflation rate - contribution is usually negative

• no change in weight or inflation rate - no change

• no change in weight, increase in inflation rate - contribution is usually positive

• increase in weight, decrease in inflation rate - contribution is usually positive

• increase in weight, no change in inflation rate - contribution is positive

• increase in weight, increase in inflation rate - contribution is positive

Contributions are calculated using the following formula:

Quality and methodology information (QMI) on strengths, limitations, appropriate uses, and how the data were created is available in our Producer price indices QMI and our Services Producer Price Inflation QMI.

Other useful documentation from the Office for National Statistics (ONS) for the PPI and the Services Producer Price Index (SPPI) are:

• Producer Price Indices methods changes article

• Chain-linking in business prices article

• Producer price weight changes article

• Services producer price weight changes article

• Guidance on using indices in Indexation Clauses (PDF, 197KB)

• PPI methods and guidance (PDF, 1.18MB)

• SPPI user guidance and methodology

• PPI standard errors: 2017 datasets

• UK SPPI standard errors: 2016 to 2017 article

Sterling effective exchange rate

The sterling effective exchange rate measures the level of sterling relative to a basket of other currencies. The weights in the basket reflect all UK trade, and June therefore be different from those for manufactured goods, which are most relevant for producer prices.

Data revisions policy

Figures for the latest two months are provisional, and the latest 12 months are subject to revisions because of late and revised respondent data. The PPI revision policy is now in line with that of the national accounts. Published information on our revisions policy and revisions triangles shows how estimates are revised over time.

Strengths

These data:

• provide users with valuable insight into the changes in the prices of goods and services bought and sold by UK manufacturers

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

• are internationally comparable with any country using the classification by product activity (CPA) or the central product classification (CPC) systems

• are created using a rotational sampling method to enable many new products and new respondents to be included

• are chain-linked annually to improve results in deflation by reducing substitution bias

Limitations

The limitations are that:

• some products are produced by only a small number of manufacturers, meaning that there June not be enough manufacturers for a detailed and robust analysis, 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

Response rates in July 2024

In July 2024, the response rate for the domestic PPI was higher than it was in July 2023, though the response rates for the Import Price Index (IPI) and Export Price Index (EPI) were lower (Table 5).

Accredited official statistics

These accredited official statistics were independently reviewed by the Office for Statistics Regulation in July 2010. They comply with the standards of trustworthiness, quality and value in the Code of Practice for Statistics and should be labelled "accredited official statistics".