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Statistical bulletin: Services Producer Price Indices - Quarter 3 (Jul to Sep) 2015 This product is designated as National Statistics

Released: 25 November 2015 Download PDF

Main points

  • The price of services sold by UK companies, as estimated by the aggregate Services Producer Price Index (SPPI), increased 0.5% in the year to quarter 3 of 2015, compared with an increase of 0.6% in the year to quarter 2 of 2015.
  • Between quarters 2 and 3 of 2015, the aggregate SPPI rose by 0.1%, compared with an increase of 0.3% between quarters 1 and 2 of 2015.
  • Professional, scientific and technical activities, transportation and storage, and real estate activities provided the greatest upward contributions to the annual rate of inflation. This was partially offset by a fall in prices for water supply, sewerage and waste management services.
  • Real estate activities continued to show the largest rise in prices, with prices increasing by 3.3% in the year to quarter 3 of 2015.
  • Water supply, sewerage and waste management services showed the largest fall in prices, decreasing by 7.7% in the year to quarter 3 of 2015.

What is Services Producer Price Inflation?

The Services Producer Price Index (SPPI) provides a measure of inflation for the UK service sector. It is constructed from a statutory quarterly survey, which measures changes in the price received for selected services provided by UK businesses to other UK businesses and government. Individual SPPIs are available; these provide information on price change for a selection of service industries. These individual price indices are also aggregated together to create a service industry SPPI with limited coverage (it does not provide full coverage of the “service sector”).

The primary use of the SPPI is as a deflator in the UK National Accounts. However, it is also important as an inflationary measure to inform monetary policy and to account for inflation in long-term service procurement contracts. For more information on the uses of SPPI please see the separate document Users of Services Producer Price Indices data (67.2 Kb Pdf) .

The figures presented in this statistical bulletin are considered provisional for the latest 2 quarters (quarter 2 and quarter 3 of 2015) and may be revised as late data is received.

None of the indices presented in this bulletin are seasonally adjusted.

Coverage of SPPI

The service sector currently accounts for around 78% of the UK economy based on its weight in Gross Domestic Product (GDP). We do not currently produce an SPPI for every industry in the service sector and so the aggregate SPPI is a partial, best estimate, of the overall inflation to UK businesses in the service sector. Currently, we estimate that the SPPIs presented in this statistical bulletin represent 59% of the total service sector at industry level. The SPPI's coverage of the service sector at Standard Industrial Classification (SIC) class, division and section level is available in the SPPI coverage document (113 Kb Excel sheet) . As resources allow, we will continue to review the existing SPPIs and expand coverage through developing SPPIs for new industries. As such, the composition of aggregate SPPI will sometimes change, but will always remain our best estimate of inflation in the UK service sector. The fact that coverage may change over time should be considered by users when deciding which indices best meet their needs.

Newly developed SPPIs

A development project to increase the industrial coverage of the SPPI took place between 2009 and 2012, which resulted in the development of 8 new SPPIs. These are:

  • accountancy services

  • legal services

  • architectural services

  • engineering services

  • cargo handling services

  • advertising services

  • business management consultancy

  • storage and warehousing

Since their development, these indices have been published as experimental series. Since the quarter 4 2013 release, these indices are no longer published separately, but are instead included in this release and make up part of the aggregate SPPI. The inclusion of these new indices has changed the composition of the aggregate SPPI, increasing the coverage of the service industry and improving the measure. Further information about the impact of adding these new indices to the aggregate can be found in the quarter 4 2013 SPPI statistical bulletin.

All of the statistics contained in this release are official statistics. However, since these newly developed series have not yet undergone a full assessment against the Code of Practice for Official Statistics by the UK Statistics Authority they cannot currently be labelled as National Statistics.

Summary

Between mid-2005 and mid-2008, the annual rate of inflation in the service sector, as estimated by the aggregate Services Producer Price Index (SPPI), rose steadily from an annual rate of 1.3% in quarter 2 of 2005 to a peak of 3.7% during quarters 1 and 2 of 2008. At the end of 2008, the rate of inflation fell rapidly, from annual inflation of 3.6% in quarter 3 of 2008 to deflation (prices lower than they were in the same quarter of the previous year) of 1.6% in quarter 3 of 2009.

The annual rate of inflation began to increase at the end of 2009, reaching its post-economic downturn high of 1.8% in quarter 2 of 2010. Since mid-2010, inflation has tended to remain relatively steady at around 1%. In quarter 3 of 2015, prices increased by 0.5%.

Looking at the latest estimates (Table A) of the aggregate SPPI for quarter 3 of 2015, the main movements were:

  • prices received by UK service providers increased 0.5% in the year to quarter 3 of 2015, down slightly from an increase of 0.6% in quarter 2 of 2015

  • the main upward contributions to the annual rate came from increases in the prices charged for professional, scientific and technical activities, transportation and storage, and real estate activities, however, these were partially offset by a fall in the price of water supply, sewerage and waste management services

  • service prices rose 0.1% between quarter 2 and 3 of 2015, down from an increase of 0.3% between quarter 1 and 2 of 2015

  • the main upward contribution to the quarterly rate of inflation came from real estate activities

  • Water supply, sewerage and waste management services showed the greatest decrease in the quarterly rate of inflation with prices falling 2.1% in the year to quarter 3 of 2015 compared with an increase of 0.5% in the year to quarter 2 of 2015

Table A: Output prices (gross sector) - aggregate Services Producer Price Index

Quarter 3 (July to Sept) 2015, United Kingdom

Percentage change
    Year   Quarter
2011 Q1 1.0 0.3
Q2 1.1 1.0
Q3 1.1 -0.5
Q4 1.2 0.4
2012 Q1 1.3 0.4
Q2 0.8 0.5
Q3 1.5 0.2
Q4 1.5 0.4
2013 Q1 1.5 0.4
Q2 0.8 -0.2
Q3 0.8 0.2
Q4 1.3 0.9
2014 Q1 0.9 0.0
Q2 1.5 0.4
Q3 1.5 0.2
Q4 0.7 0.1
2015 Q1 0.7 0.0
Q2 0.6 0.3
  Q3 0.5   0.1

Table source: Office for National Statistics

Table notes:

  1. The aggregate SPPI is calculated on a gross sector basis.

  2. The aggregate SPPI is an aggregate of the individual industry level SPPIs (excluding financial intermediation) published in the SPPI Statistical Bulletin. It does not provide full coverage of the service sector.

  3. Not all of the industry level SPPIs used to construct the aggregate SPPI are National Statistics.

  4. Q1 refers to Quarter 1 (January to March), Q2 refers to Quarter 2 (April to June), Q3 refers to Quarter 3 (July to September) and Q4 refers to Quarter 4 (October to December).

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Figure A: Aggregate Services Producer Price Index

Quarter 3 (July to Sept) 2005 to Quarter 3 (July to Sept) 2015, United Kingdom

Figure A: Aggregate Services Producer Price Index
Source: Services Producer Price Index (SPPI) - Office for National Statistics

Notes:

  1. The aggregate SPPI is calculated on a gross sector basis.
  2. The aggregate SPPI is an aggregate of the individual industry level SPPIs (excluding financial intermediation) published in the SPPI Statistical Bulletin. It does not provide full coverage of the service sector.
  3. Not all of the industry level SPPIs used to construct the aggregate SPPI are National Statistics.
  4. Q1 refers to Quarter 1 (January to March), Q2 refers to Quarter 2 (April to June), Q3 refers to Quarter 3 (July to September) and Q4 refers to Quarter 4 (October to December).

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Annual inflation

The aggregate Services Producer Price Index (SPPI) rose by 0.5% in the year to quarter 3 of 2015, down slightly from an increase of 0.6% in the year to quarter 2 of 2015. Of the 10 sections (as defined by the 2007 Standard Industrial Classification) that are combined to form the aggregate SPPI, 7 showed price increases.

The main upward contributions to the annual rate of the aggregate SPPI came from professional, scientific and technical activities, which increased 0.6% in the year to quarter 3 of 2015 (down from an increase of 0.9% in the year to quarter 2 of 2015). Transportation and storage and real estate activities also had notable contributions to the increase of the aggregate in the year to quarter 3 of 2015, increasing by 0.9% and 3.3%, respectively. These increases were partially offset by a fall in the price of water supply, sewerage and waste management services, where prices fell by 7.7% in the year to quarter 3 of 2015 (compared to a decrease of 6.7% in the year to quarter 2 of 2015) (Table B and Figure B).

Table B: Annual growth in SPPI (percentage change, latest quarter on corresponding quarter of previous year)

Quarter 3 (July to Sept) 2015, United Kingdom

Section Annual percentage change
Water Supply, Sewerage and Waste Management -7.7
Repair and Maintenance of Motor Vehicles 1.9
Transportation & Storage 0.9
Accommodation and Food -0.6
Information & Communication -0.1
Real Estate Activities 3.3
Professional, Scientific and Technical Activities 0.6
Administrative and Support Services 0.1
Education 0.3
Other Services 1.6
Aggregate SPPI 0.5

Table source: Office for National Statistics

Table notes:

  1. The section level SPPIs are an aggregate of individual industry level SPPIs (excluding financial intermediation) published in the SPPI Statistical Bulletin. They do not provide full coverage of the service sector.

  2. Not all of the industry level SPPIs used to construct the section level SPPIs are National Statistics.

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Figure B: Contribution to annual growth rate (0.5%)

Quarter 3 (July to Sept) 2015, United Kingdom

Figure B: Contribution to annual growth rate (0.5%)

Notes:

  1. The section level SPPIs are an aggregate of the individual industry level SPPIs (excluding Financial Intermediation) published in the SPPI Statistical Bulletin. They do not provide full coverage of the section listed.
  2. Not all of the industry level SPPIs used to construct the section-level SPPIs are National Statistics.

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Increases in price for professional, scientific and technical activities, transportation and storage, and real estate activities, provided the main contributions to the rise in the aggregate SPPI in the year to quarter 3 of 2015.

Professional, scientific and technical activities prices increased by 0.6% in the year to quarter 3 of 2015. This was mainly caused by a rise in the prices in accountancy and legal services.

Accountancy prices increased by 2.5% in the year to quarter 3 of 2015, compared with an increase of 3.4% in the year to quarter 2 of 2015. This rise is mainly a result of increases in the prices of audit/assurance services and tax consultancy where prices have risen by 2.1% and 3.7% respectively in the year to quarter 3 of 2015.

Legal service prices increased by 3.0% in the year to quarter 3 of 2015, up from an increase of 2.2% in the year to quarter 2 of 2015. This increase is mainly due to the prices for business and commercial legal services rising by 3.0%.

Transportation and storage prices increased by 0.9% in the year to quarter 3 of 2015, unchanged from the year to quarter 2 of 2015. This increase was due to a rise in the prices for business airfares and sea and coastal water freight.

In the year to quarter 3 of 2015 business airfares prices increased by 4.7%, up slightly from an increase of 4.6% in the year to quarter 2 of 2015. There has been an increase in prices for all fare types.

Sea and coastal water freight prices increased by 10.1% in the year to quarter 3 of 2015, a significant rise compared to an increase of 5.8% in the year to quarter 2 of 2015, as a result of increases in coastal, European and global freight prices.

Real estate activity continued to make a notable upward contribution to the annual rate of inflation. Prices increased by 3.3% in the year to quarter 3 of 2015, down slightly from an increase of 3.4% in the year to quarter 2 of 2015. This was mainly due to an increase in the price of estate agencies, where prices increased by 8.0% in the year to quarter 3 of 2015, down from an increase of 8.5% in the year to quarter 2 of 2015. The increase in the estate agent index has been driven by significant rises in the value of commercial properties, not by the percentage fees that estate agents receive, which have remained stable.

The increases seen in professional, scientific and technical activities, transportation and storage, and real estate activities were partially offset by a fall in the prices charged for water supply, sewerage and waste management services, where prices fell 7.7% in the year to quarter 3 of 2015, compared to a decrease of 6.7% in the year to quarter 2 of 2015. This is mainly a result of the decrease in prices for sorted recovered materials services, where prices fell 21.9% in the year to quarter 3 of 2015. The fall in prices of sorted recovered materials services mirrors the decline seen in the world metal industry.

Figure C shows the SPPI sorted recovered materials services index. The main driver behind the price reductions seen in this index is weak demand from the Chinese manufacturing sector. This reduced demand has pushed down the value of the majority of metals, which has led to contributors to the SPPI reporting that they have to charge less for the materials when they are recovered. This is also being exacerbated by the increase in cheap exports from China, leading to demand being far lower than supply.

Figure C: Service Producer Price Index for sorted recovered materials services

Quarter 3 (July to Sept) 2010 to Quarter 3 (July to Sept) 2015, United Kingdom

Figure C: Service Producer Price Index for sorted recovered materials services

Notes:

  1. Q1 refers to Quarter 1 (January to March), Q2 refers to Quarter 2 (April to June), Q3 refers to Quarter 3 (July to September) and Q4 refers to Quarter 4 (October to December).

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Figure D: Contribution to the change in the 12 month growth rate between quarter 2 (Apr to June) and quarter 3 (July to Sept) 2015 (0.1 %)

United Kingdom

Figure D: Contribution to the change in the 12 month growth rate between quarter 2 (Apr to June) and quarter 3 (July to Sept) 2015 (0.1 %)

Notes:

  1. The section level SPPIs are an aggregate of the individual industry level SPPIs (excluding Financial Intermediation) published in the SPPI Statistical Bulletin. They do not provide full coverage of the section listed.
  2. Not all of the industry level SPPIs used to construct the section-level SPPIs are National Statistics.
  3. Q1 refers to Quarter 1 (January to March), Q2 refers to Quarter 2 (April to June), Q3 refers to Quarter 3 (July to September) and Q4 refers to Quarter 4 (October to December).

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The aggregate SPPI increased 0.5% in the year to quarter 3 of 2015, compared with an increase of 0.6% in the year to quarter 2 of 2015. Figure D shows how the SPPI sections have contributed towards this 0.1 percentage point reduction. The main contribution to the change came from falling prices for information and communication, but this was partially offset by increases in administrative and support services.

Figure E : Services Producer Price Index by section

United Kingdom

Figure E : Services Producer Price Index by section

Notes:

  1. Q1 refers to Quarter 1 (January to March), Q2 refers to Quarter 2 (April to June), Q3 refers to Quarter 3 (July to September) and Q4 refers to Quarter 4 (October to December).

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Examining inflation for each of the sections that contribute to the aggregate SPPI reveals a diverse set of trends. Figure E shows both the range of annual inflation rates experienced by each of the sections since quarter 3 of 2011 and the annual rates of inflation for the 2 most recent quarters. The 10 sections were split evenly between those which saw an increase in inflation relative to the last quarter and those which experienced a fall. There was a slight decline in the aggregate inflation rate over this period.

SPPI prices for water supply, sewerage and waste management currently stands at a 5-year low, continuing a downward trend. The inflation rate has fallen from 8.3% at the beginning of 2010 to -7.7% in the most recent quarter.

One notable difference between each section is the range of inflation rates that have been experienced since 2010. Education, accommodation and food, and water supply, sewerage, and waste management have experienced a relatively wide range of inflation rates over this period. Although all sections have experienced some variance in inflation, certain industries have experienced inflation consistently higher than others. Wholesale, retail trade and repair of motor vehicles and motorcycles has not experienced inflation lower than 1.7% at any point in the past 5 years, while administrative and support services, and information and communication have not experienced inflation higher than 1.5%.

Quarterly inflation

Prices received for the services included in the aggregate Services Producer Price Index (SPPI) rose 0.1% between quarters 2 and 3 of 2015, compared to an increase of 0.3% between quarters 1 and 2 of 2015. Of the 10 sections that make up the aggregate SPPI, 7 sections showed increases in prices between quarters 2 and 3 of 2015.

The largest increases in the quarterly rate came from education and real estate activities, which increased by 1.1% and 1.0%, respectively between quarters 2 and 3 of 2015. The remaining increases were small, ranging from 0.1% to 0.3%. (Table C and Figure F).

Table C: Quarterly growth in SPPI (percentage change, latest quarter on previous quarter)

Quarter 3 (July to Sept) 2015, United Kingdom

Section Quarterly percentage change
Water Supply, Sewerage and Waste Management -2.1
Repair and Maintenance of Motor Vehicles 0.3
Transportation and Storage 0.2
Accommodation and Food 0.2
Information and Communication 0.1
Real Estate Activities 1.0
Professional, Scientific and Technical Activities -0.1
Administrative and Support Services -0.1
Education 1.1
Other Services 0.1
Aggregate SPPI 0.1

Table source: Office for National Statistics

Table notes:

  1. The section level SPPIs are an aggregate of individual industry level SPPIs (excluding financial intermediation) published in the SPPI Statistical Bulletin. They do not provide full coverage of the service sector.

  2. Not all of the industry level SPPIs used to construct the section level SPPIs are National Statistics.

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Figure F: Contribution to quarterly growth rate (0.1%)

Quarter 3 (July to Sept) 2011 to Quarter 3 (July to Sept) 2015, United Kingdom

Figure F: Contribution to quarterly growth rate (0.1%)

Notes:

  1. The section-level SPPIs are an aggregate of the individual industry-level SPPIs (excluding financial intermediation) published in the SPPI Statistical Bulletin. They do not provide full coverage of the section listed.
  2. Not all of the industry-level SPPIs used to construct the section-level SPPIs are National Statistics.

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Real estate activities showed the largest contribution to the SPPI aggregate rate between quarters 2 and 3 of 2015 with prices rising by 1.0%, compared with an increase of 0.7% between quarters 1 and 2 of 2015. The main contribution to this increase was from estate agent prices, which increased by 2.1% between quarters 2 and 3 of 2015. This is compared with an increase of 1.7% between quarters 1 and 2 of 2015. This increase has been driven by letting of properties outside of London.

In quarter 2 of 2015 we produced a short story on the SPPI estate agents index, our findings showed that the percentage fees that estate agents received have remained stable; however as the value of commercial properties have increase significantly the estate agents revenue has increased. Between quarters 2 and 3 of 2015 this trend has continued. (Figure G).

Figure G: Service Producer Price Index for estate agent activities

Quarter 3 (July to Sept) 2010 to Quarter 3 (July to Sept) 2015, United Kingdom

Figure G: Service Producer Price Index for estate agent activities

Notes:

  1. Q1 refers to Quarter 1 (January to March), Q2 refers to Quarter 2 (April to June), Q3 refers to Quarter 3 (July to September) and Q4 refers to Quarter 4 (October to December).

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Economic context

Comparison with Average Weekly Earnings

The aggregate Services Producer Price Index (SPPI) captures changes in the prices received by UK business for the provision of a selection of services to other UK businesses and the public sector. For many services, the cost of manpower is the largest component of the price charged by businesses for providing the service, rather than the cost of goods or fuels. As a result, it is expected that the price charged for services should move in a similar way to the wages received by the UK workforce. Figure H shows a comparison of the annual percentage change of the fees received by UK businesses for the provision of services, as estimated by the aggregate SPPI, with an indicator of salaries received by the UK workforce who are employed in the service sector, as estimated by the Average Weekly Earnings (AWE) ‘services’ pay index excluding bonuses.

Figure H: Services Producer Price Index and 'services' Average Weekly Earnings Index

Quarter 3 (July to Sept) 2002 to Quarter 3 (July to Sept) 2015, United Kingdom

Figure H: Services Producer Price Index and 'services' Average Weekly Earnings Index

Notes:

  1. The aggregate SPPI includes the water supply; sewerage and waste management sector not included in the AWE.
  2. The AWE index includes financial and insurance activities, public administration and defence: compulsory social security, human health and social work activities and arts, entertainment & recreation sectors not included in the SPPI.
  3. Q1 refers to Quarter 1 (January to March), Q2 refers to Quarter 2 (April to June), Q3 refers to Quarter 3 (July to September) and Q4 refers to Quarter 4 (October to December).

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As would be expected, the annual percentage change for AWE services follows a broadly similar pattern to the SPPI. From 2001 to late 2008, both the AWE for services and the aggregate SPPI show similar trends, although AWE growth was significantly stronger. During the economic downturn in 2008 to 2009, the rate of growth in both wages and service prices slowed dramatically. However, while prices received for services started to fall in 2009, wages continued to grow compared with a year earlier, albeit at a much lower rate. Since quarter 4 of 2010 both AWE and the aggregate SPPI have shown lower growth than before the economic downturn. In the last 2 years the AWE services and SPPI indices have both shown growth of around 1%. However, in the last 3 quarters the AWE services index has shown stronger growth than SPPI. The rises in the AWE services index have been driven by a large increase in the retail and repair sector, which is not measured in the SPPI.

Comparison with Consumer Price Index

While the SPPI measures the amount received by a company for services they’ve provided to other businesses, the prices paid by households is estimated by the Consumer Prices Index (CPI). While the costs associated with providing services to both businesses and households will be broadly similar, there may be different costs associated with providing services to different customers. Figure I shows a comparison with the ‘all services’ sector of the Consumer Prices Index (CPI) which measures the prices paid for services by households.

Figure I: Comparison of Services Producer Price Index and 'all services' Consumer Prices Index aggregate

Quarter 3 (July to Sept) 2002 to Quarter 3 (July to Sept) 2015, United Kingdom

Figure I: Comparison of Services Producer Price Index and 'all services' Consumer Prices Index aggregate

Notes:

  1. SPPI measures changes in the price received by a company, CPI measures changes in the price paid by a consumer. Therefore CPI figures may include taxes and fees that are not retained by the service provider.
  2. SPPI measures the price received for services provided by UK based suppliers only, excluding imports from non-UK suppliers. CPI aims to measure the price paid by consumers in the UK, who may use non-UK based suppliers.
  3. SPPI uses Standard Industrial Classification 2007 (SIC 07) to produce its aggregate, CPI uses Classification of Individual Consumption according to Purpose (COICOP), This means that the structure of each index may not always correlate at more detailed levels.
  4. Q1 refers to Quarter 1 (January to March), Q2 refers to Quarter 2 (April to June), Q3 refers to Quarter 3 (July to September) and Q4 refers to Quarter 4 (October to December).

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Generally inflation in the CPI ‘all services’ index runs at a higher rate than the SPPI. Between late 2005 and 2008 the gap between the SPPI and CPI all services annual rate of inflation narrowed before widening again from 2009 to present. During the economic downturn in 2008 to 2009, the annual rate of inflation for both indices decreased, with prices falling by as much as 1.6% for services sold by UK businesses, while the prices paid by households continued to grow, although at a much lower rate, reaching a low of 2.4% in quarter 4 of 2009. Since quarter 4 of 2010 both indices have shown growth however the SPPI has shown significantly lower growth than CPI.

Other measures of service sector inflation

There are other measures of service sector inflation available, such as the Chartered Institute of Procurement and Supply (CIPS) purchasing managers’ index and the Confederation of British Industry (CBI) service sector survey. There are significant methodological differences between these surveys and SPPI, therefore direct comparisons cannot be made.

International comparison

All countries within the European Union are required to produce a measure of producer price inflation for the services sector under the Short Term Statistics Regulation. Figure J shows the growth rates of service producer prices for a selection of EU countries since quarter 2 of 2010. The United Kingdom and Sweden recorded largely stable service producer price indices, growing by 2.1% and 4.6% respectively over the total period, whereas Austrian prices increased more rapidly. These experiences contrast with France and Spain, where SPPI inflation has been negative since quarter 1 of 2013 for France and quarter 3 of 2011 in the case of Spain, although SPPI inflation for Spain has returned to a positive level in quarter 2 of 2015.

Figure J: Services Producer Price Indices international comparison

Quarter 2 (Apr to June) 2010 to Quarter 2 (Apr to June) 2015, United Kingdom

Figure J: Services Producer Price Indices international comparison

Notes:

  1. The UK growth in this chart does not match that published as the Aggregate Gross Sector SPPI. This is because the indices shown in this comparison only include sections G to N, as per the Standard Industrial Classification 2007 (SIC 07). The aggregate Gross Sector SPPI also includes industries classified to Sections E and G of SIC 07. A full list of all SIC codes included can be found in the SPPI Coverage document.
  2. Q1 refers to Quarter 1 (January to March), Q2 refers to Quarter 2 (April to June), Q3 refers to Quarter 3 (July to September) and Q4 refers to Quarter 4 (October to December).

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However, in recent quarters the range of inflation rates experienced by these countries has narrowed, as the countries with the lowest inflation rates (France and Spain) saw an increase, and the country with the highest rate (Austria) saw a decrease in inflation. Austria’s inflation rate was the lowest since 2011 in the latest available data, and Spain’s was the highest since 2012.

Net sector aggregate

At the aggregate level, both a net and gross sector Services Producer Price Index (SPPI) is produced. The prices used to construct both of these indices are the same, but different weights are used to construct the net sector index compared with the gross sector.

Summary of net sector movements

In quarter 3 of 2015, movements in the net sector aggregate SPPI were:

  • annual inflation rose 0.5%, down from 0.7% in quarter 2 of 2015

  • between quarter 2 and quarter 3 of 2015, quarterly inflation stood at 0.0%, down from an increase of 0.4% between quarters 1 and 2 of 2015

Generally, the movements of the net sector aggregate SPPI are similar to those of the gross sector indices with the net sector aggregate tending to inflate at a slightly higher rate than the gross sector indices (Figure K).

Figure K: Aggregate net sector and gross sector SPPI

Quarter 3 (July to Sept) 2010 to Quarter 3 (July to Sept) 2015, United Kingdom

Figure K: Aggregate net sector and gross sector SPPI

Notes:

  1. The aggregate SPPIs is an aggregate of the individual industry-level SPPIs (excluding financial intermediation) published in the SPPI Statistical Bulletin. It does not provide full coverage of the service sector.
  2. Not all of the industry level SPPIs used to construct the aggregate SPPI are National Statistics.
  3. Q1 refers to Quarter 1 (January to March), Q2 refers to Quarter 2 (April to June), Q3 refers to Quarter 3 (July to September) and Q4 refers to Quarter 4 (October to December).

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Background notes

  1. How are we doing?

    We are constantly seeking to improve this release and welcome feedback from our users to help us achieve this. If you have any comments on the format, layout or content of this release please let us know. We would also be interested in knowing how you use these data. Please email us: sppi@ons.gsi.gov.uk.

  2. Analysis of Service Producer Price Indices using standard errors

    To help users quantify the uncertainty around the estimates of service sector inflation, we plan to calculate standard errors for SPPI. We will present the results of our analysis in an article published as soon as possible.

  3. Coverage of SPPI

    The SPPI is a measure of inflation for the UK service sector; however prices are not collected from Northern Ireland for any of the service industries, which are collected as part of the quarterly survey. This is because the Statistics of Trade Act, which makes the SPPI survey mandatory, does not extend to Northern Ireland. The omission of prices from Northern Ireland means that the SPPI makes the assumption that prices received by companies in Northern Ireland change at the same rate as prices in the rest of the UK.

  4. Re-assessment by the UK Statistics Authority

    SPPI has recently undergone a routine re-assessment by the UK Statistics Authority against the Code of Practice for Official Statistics. The final SPPI assessment report is now available.

  5. Finding SPPI data

    All of the data included in this statistical bulletin, alongside data for the full range of SPPIs, is available in the associated Reference Table (445 Kb Excel sheet) or can be downloaded from the Time Series Dataset for SPPI. Each SPPI has 2 unique identifiers: a 10-digit index number which relates to the Standard Industrial Classification code appropriate to the index, and a 4-character alpha-numeric code, which can be used to find series when using the Time Series Dataset for SPPI. SPPI records (76 Kb Excel sheet) which show higher, lower or equal to movements, are also available to view or download.

  6. Article about rebasing the PPI and SPPI onto 2010=100

    As previously announced, we have been taking forward the rebasing of PPI and SPPI onto a 2010=100 basis. SPPI has been published on a 2010=100 basis, which was first released on 26 February 2014. A parallel run has been conducted to compare 2010=100 index values with 2005=100, analysing trends in the process. This parallel run will form an assessment of the impact of rebasing. An article Services Producer Price Index Rebasing (2010=100) describing the results of this assessment is published alongside this release. If you have any questions or queries regarding the impact of rebasing on SPPI data, please contact SPPI.

  7. Quality and methods

    A Quality and Methodology Information (QMI) report is available for the SPPI which describes how the statistics presented in this statistical bulletin are produced and provides information on the quality of the statistics. Detailed information on the methods used to compile the SPPI is available in the SPPI Manual (456.4 Kb Pdf) .

  8. Guidance for users

    The SPPI is calculated on a ‘business to business’ basis. This means that only transactions between UK businesses and other UK businesses or government are included. Sales made to customers outside of the UK or to members of the public are excluded.

    Index numbers shown in this statistical bulletin are on a gross sector basis, unless otherwise stated. This means that they include transactions between UK service sector businesses and all other UK businesses and government.

    Indices relate to average prices per quarter. The full effect of a price change occurring within a quarter will only be reflected in the index for the following quarter. All index numbers exclude VAT and are not seasonally adjusted. Since SPPIs exclude VAT, they are not affected by the increase in the standard rate of VAT to 20% from 4 January 2011.

  9. Definitions

    Gross and net sector series

    All figures presented in this statistical bulletin are calculated on a gross sector basis unless otherwise stated.

    Gross sector output (GSO) series - calculated using weights based on sales to UK businesses and government from all transactions within the UK. This index reflects the “service sector” inflation experienced by all UK businesses.

    Net sector output (NSO) series - calculated using weights based on sales to UK businesses and government outside of the service sector. For example, sales of legal services to a UK manufacturing company would be included, but sales to an accountancy company (another service provider) would be excluded. This index gives a measure of inflation that is specific to non-service sector businesses.

    GSO weights - for most industries, sales from the Services Turnover Survey (STS) are used to determine their weight into the aggregate SPPI. Where STS data is unavailable, data from the Annual Business Survey is used as a proxy. In order to make the ABS data more comparable to the STS data, an adjustment factor is applied to remove sales attributed to non-service provision. These sales values are then used to calculate the industry weights.

    NSO weights - net sector weights are calculated by taking the gross sector sales data and adjusting them to represent only sales to businesses outside the service sector. This adjustment is made using data from the National Accounts Supply and Use Tables. These tables allow for the calculation of a ratio for each industry that approximates the proportion of sales to non-service sector businesses. This ratio is applied to the gross sector sales to give an approximation of the net sector sales. The resulting calculated sales are then used to weight the industries into the net sector aggregate SPPI.

    Reporting periods - Throughout this release quarter 1 refers to January to March, quarter 2 refers to April to June, quarter 3 refers to July to September and quarter 4 refers to October to December.

  10. Data sources

    The SPPI is compiled using the results of a mandatory survey carried out under the Statistics of Trade Act (1947). To keep the burden on respondents to a minimum, alternative data sources are used to compile the indices wherever possible. Currently 6 SPPIs are compiled using external data sources, these data sources are:

    • property rental payments - Investment Property Databank (IPD)

    • financial Intermediation (Banks) - Bank of England (BoE)

  11. SPPI Coverage

    We do not produce an SPPI for every industry in the service sector and so the aggregate SPPI is a partial, best estimate, of the overall inflation to UK businesses from the service sector. Similarly, the indices published at section level do not provide full coverage and are the best estimate that can be made of those particular service activities using the data available. As resources allow, we will continue to review the existing SPPIs and expand coverage through developing SPPIs for new industries. As such, the aggregate SPPI will change composition from time to time, but will always remain our best estimate of overall inflation to UK businesses from the service sector. The fact that coverage may change over time should be considered by users when deciding which indices best meet their needs.

  12. Revisions

    SPPI follows our policy for revisions and corrections and will show significant revisions, but suppress minor changes to avoid unnecessary inconvenience to users. Indices for the most recent 2 quarters are regarded as provisional and may be revised as later data become available.

    For this statistical bulletin, Reference Table 1R (445 Kb Excel sheet) highlights revisions to movements in price indices previously published in last quarter's statistical bulletin.

  13. European comparability 

    The UK is required to produce a number of the SPPIs included in this statistical bulletin under the Short-Term Statistics Regulation. As a result, all EU countries must publish equivalent series on a comparable basis. Further information about SPPI at an EU level, and access to data for all EU countries is available on the Eurostat website.

  14. Publication policy

    The complete run of data in the tables of this bulletin are also available to view and download in other electronic formats free of charge using our National Statistics Datasets and Reference Table service (the data associated with this bulletin is available via the Download data link in this release). Users can download the complete release in a choice of zipped formats or view and download their own selections of individual series.

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    National Statistics are produced to high professional standards set out in the Code of Practice for Official Statistics. They undergo regular quality assurance reviews to ensure that they meet customer needs. They are produced free from any political interference.

    © Crown copyright 2015.
    Next publication:
    24 February 2016
    Media contact:
    Tel: Luke Croydon +44 (0)845 6041858
    Emergency on-call +44 (0)7867 906553
    Email: media.relations@ons.gsi.gov.uk

    Statistical contact:

    Tel: Kat Pegler on +44 (0) 1633 456468
    Email: sppi@ons.gsi.gov.uk
    Business Prices Enquiries:
    Tel +44 (0) 1633 455723 or +44 (0) 1633 456705

  16. Details of the policy governing the release of new data are available by visiting www.statisticsauthority.gov.uk/assessment/code-of-practice/index.html or from the Media Relations Office email: media.relations@ons.gsi.gov.uk

    These National Statistics are produced to high professional standards and released according to the arrangements approved by the UK Statistics Authority.

Statistical contacts

Name Phone Department Email
Kat Peglar +44 (0)1633 456468 Business Prices sppi@ons.gsi.gov.uk
Get all the tables for this publication in the data section of this publication .
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