Producer price inflation, UK: May 2021

• The headline rate of output prices showed positive growth of 4.6% on the year to May 2021, up from positive growth of 4.0% in April 2021.

• The headline rate of input prices showed positive growth of 10.7% on the year to May 2021, up from positive growth of 10.0% in April 2021; this is the highest the rate has been since September 2011.

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

On the month, the rate of output inflation was 0.5% in May 2021, up from 0.4% in April 2021 (Table 1).

Transport equipment provided the largest upward contribution of 1.80 percentage points to the annual rate (Figure 2) and had positive annual price growth of 0.3% in May 2021 (Table 2).

The upward contribution is driven by weight changes in 2021. A 15.6% increase in weight for this category has resulted in a large upward contribution to the headline rate.

The annual rate of output inflation increased by 0.6 percentage points from 4.0% in April 2021 to 4.6% in May 2021. Petroleum products had the highest annual growth rate of any component of output prices in May 2021, at 67.0% (Table 2). This was mainly driven by a base effect as there was only a relatively small price movement of 3.3% on the month. In May 2020, prices for petroleum products fell by 6.1% as there was a fall in demand in the market. More recently, prices have stabilised, and annual growth rates are higher than in recent months as they are now being compared with the exceptionally low prices at the beginning of the coronavirus (COVID-19) pandemic.

On the month, the rate of input inflation slowed to 1.1% in May 2021, down from 1.2% in April 2021 (Table 3).

The annual rate of imported inputs was 5.2% in May 2021 (Table 4), down from 5.5% in April 2021.

The largest upward contribution to the annual input inflation rate came from metals and non-metallic minerals, which contributed 4.36 percentage points (Figure 4) and had positive annual price growth of 18.5% in May 2021 (Table 5).

The annual input inflation rate increased by 0.7 percentage points from 10.0% in April 2021 to 10.7% in May 2021.

Home food materials provided the largest upward contribution, at 0.41 percentage points.

Crude oil had the highest annual growth rate of any component of input prices in May 2021, at 109.2%, but had a downward contribution to the change in the annual rate as it fell from 128.4% in April. These annual growth rates reflect a base effect, where we saw exceptionally low crude oil prices at the beginning of the pandemic.

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 interest on loans, site or building maintenance, or rent.

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.

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 report and the Services Producer Price Indices (SPPI) Quality and Methodology information report.

Other useful documentation for the Producer Price Index (PPI) and the Services Producer Price Index (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

• PPI methods and guidance

• SPPI user guidance and methodology article

• PPI standard errors article and SPPI standard errors article

Office for Statistics Regulation (OSR) publishing review

The Office for Statistics Regulation (OSR) is undertaking a review into whether the 9:30am release time stated in the Code of Practice for Statistics meets the needs of users. During the pandemic, exemptions were granted to allow the release of market sensitive statistics at 7:00am. The OSR welcomes views about the release time of official statistics by Friday 25 June 2021, please send comments to: regulation@statistics.gov.uk.

Sterling effective exchange rate

The sterling effective exchange rate measure s changes in the strength of sterling relative to 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 transaction in the manufacture sector.

End of EU exit transition period 

As the UK enters into a new Trade and Co-operation Agreement with the EU, the UK statistical system will continue to produce and publish our wide range of economic and social statistics and analysis. We are committed to continued alignment with the highest international statistical standards, enabling comparability both over time and internationally, and ensuring the general public, statistical users and decision-makers have the data they need to be informed.

As the shape of the UK's future statistical relationship with the EU becomes clearer over the coming period, the ONS is making preparations to assume responsibilities that as part of our membership of the EU, and during the transition period, were delegated to the statistical office of the EU, Eurostat. This includes responsibilities relating to international comparability of economic statistics, deciding what international statistical guidance to apply in the UK context and to provide further scrutiny of our statistics and sector classification decisions.

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 is 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 in May 2021

Response rates for the domestic Producer Price Index (PPI) show a decrease between April 2021 and May 2021, whereas the response rates for the export (Export Price Index (EPI)) and import (Import Price Index (IPI)) show an increase between April 2021 and May 2021 (Table 6).

Effective response rates exclude items permanently not available for collection.

Links to additional ONS sources of coronavirus information

Various articles have been published that help describe the ONS response to how the 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, UK: March 2021 (published 12 May 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 the coronavirus on the UK economy and population are also available.

The ONS has released a public statement on the coronavirus and the production of statistics, and any specific queries on this can be directed to the Media Relations Office.