PPI Output MoM

PPI Output MoM (Producer Price Index for UK factory gate prices) tracks goods UK manufacturers make and sell on the domestic market. It records the amount makers receive, including margin, labour, materials, energy, interest, maintenance and rent. It uses about 6,750 price quotes across foods, fuels, metals, machinery, vehicles and other outputs, with 2015 as index base equal to 100.

It excludes VAT (a sales tax); headline readings also leave out excise duty (a tax on alcohol, tobacco and fuels). It leaves out services, imports, exports and materials bought, and takes no seasonal adjustment. A positive rate means prices rose and a negative rate means prices fell, but a yearly fall does not restore old price levels.

Responses cover transactions on or near the 1st of each month, while price changes after that point count in the following month. Forms go out around the 1st working day with returns due by the 10th, and ONS publishes results 2-3 weeks after the reference month. Releases arrive at 7am, and any change to the timetable is announced with reasons.

Each release covers input, output, import and export indices. Tables carry no seasonal adjustment, use 2015 as base equal to 100, and follow the products classification. The 2 newest figures stay provisional, and the latest 12 months stay open to revision on late and revised data, tracked in revision triangles.

Output change reflects 10 product groups weighted by domestic sales value, with weights updated yearly.

• Food products, 25.2%: factory gate prices for manufactured foods such as dairy, meat and bakery.
• Other outputs from manufacturing, 22.5%: all other factory outputs including repair and installation of machinery.
• Motor vehicles and other transport equipment, 14.6%: factory prices for vehicles, trailers and other transport gear.
• Basic metals, fabricated metal products and machinery, 12.8%: steel, metal parts and machinery output prices.
• Coke and refined petroleum products, 7.5%: refinery output prices, the most volatile driver of headline moves.
• Mixed light and chemical products (alcohol and tobacco, textiles, paper, chemicals and medicines, computers), 17.3%: drinks, tobacco, fabrics, paper, chemicals, medicines and electronics prices.

In July 2023 the index stood at 135.1 on a 2015 base of 100, up 0.1% on the month after a 0.2% fall in June. The annual rate was minus 0.8% after plus 0.3%, the first negative reading since December 2020 and the twelfth slowdown in a row. Petroleum led the fall, down 40.0% on the year with a 4.74 point drag, though up 1.1% on the month.

Food rose 6.4% and other outputs 5.7%, adding 1.42 and 1.37 points, while metals rose 2.1% yet dragged for a lower weight. Levels stayed far above 2021 values, so base effects turned the annual rate down, and the June and July figures were provisional.

1. Collect prices: Take about 6,750 statutory (legally required) quotes for deals on or near the 1st, plus matching agency prices. Record only pure change for fixed quality, masking quality shifts and excluding VAT and duty, under the Statistics of Trade Act 1947.
2. Build weights: Give each product a weight equal to its share of domestic sales value, using ProdCom sales minus HMRC-measured exports. Price-uprate older sales (scale by index growth) to estimate the prior year, which serves as base period.
3. Aggregate with chain linking: Combine weights and price relatives (current price divided by base price) in a Laspeyres index (weighted average of relatives). Link each yearly base into one chain so weights and base prices stay fresh.
4. Rates and contributions: Take levels with 2015 equal to 100; monthly compares with the prior month, annual with 12 months earlier. For example, 135.1 over 135.0 gives about 0.1% monthly, while 135.1 over 136.2 gives about minus 0.8% yearly. Split the annual rate by weight times price change with smoothing across updates; weights often matter more than moves. Rounding can stop parts adding exactly.