User consultation – Business Prices Jun 2017

  1. Overview

Office for National Statistics (ONS) is undertaking a programme of transformation. As part of this programme, we will improve the statistical and conceptual quality of ourbusiness price indices, the Producer Price Index (PPI) and Service Producer Price Index (SPPI).

Important components of this are improved sampling methodology across business prices surveys, more frequent updating of our weights via the introduction of annual chain linking, and a review of the coverage of important service sector price indices and improvements to simplify existing index structures. These improvements will reduce risks to quality, improve international comparability and streamline data available to UK users.

In addition, these improvements will also enable other elements of our transformation programme, such as providing improved deflators to allow the UK National Accounts development of annual, volume-based, balanced supply and use tables (SUT) using previous year’s prices (PYP).

Amendments to align witha new European regulation known as the Framework Regulation Integrating Business Statistics (FRIBS) will also be implemented. Adherence to this regulation will bring about important developments, which are vital for improving the UK National Accounts as well as ensuring that our reporting is consistent and comparable.

This user consultation aims to capture user views to help shape these improvements.

  1. The proposals

We are asking for your views on fiveproposed changes to the outputs produced for the Producer Price Index (PPI) and Services Producer Price Index (SPPI). These changes are:

  1. Removal of the net sector aggregate for both the PPI and SPPI.
  2. Aggregation and publication of PPI for domestic output, exports and total output prices.
  3. Inclusion of proxies in the aggregate SPPI to represent the whole service sector.
  4. Review the demand forseasonal adjustment in PPI and SPPI series’.
  5. Streamline data made available in PPI and SPPI statistical releases.

3.How to respond

The consultation will close on 8 August 2017. We will publish an initial summary of our findings within 12 weeks of the consultation closing date. Your response will be treated in accordance with our Privacy Policy. If you have any queries, .

  1. Net Sector Aggregates

Currently a net sector aggregate is calculated for both the Producer Price Index (PPI) and Services Producer Price Index (SPPI).This calculation uses a different weighting pattern to exclude the impact of sales fromtransactions within the same industry. The net sector aggregate was used as the headline figure for the SPPI until February 2014 when it was replaced by the gross sector aggregate, a decision made based on user demand. For the PPI, the net sector aggregate is still being used as the headline figure.

We are currently unaware of any other country that produces an aggregate on a net sector basis or whether there is any user demand for it. Data that are sent to and published by Eurostatare calculated on a gross sector basis;there are subtle differences between the data requested by Eurostat and the gross sector estimates that are published as part of the release in the UK.

There are small differences between the net and gross sector measures for SPPI, Figure 1 shows the weights of both net and gross sector output at the section level for Standard Industrial Classification 2007 (SIC 2007).

The difference is greater on PPI as food (SIC 10) and petroleum products (SIC 19.2) are volatile series and have a large weight.Figure 2 shows the weights of both net and gross sector output at the two-digit SIC 2007 level.

The proposal states that the gross sector aggregate will be used as the headline figure and the calculation of the net sector aggregate will cease.

  1. Do you currently use net sector estimates?

Yes No

  1. Will the change to the use of gross sector estimates have an impact on the way you use the indices?

Yes No

  1. Total output compared with domestic output

The current Producer Price Index (PPI)statistical bulletin only represents domestic sales, that is, those made to customers within the UK, althoughwe do collect information on goods exported out of the UK, using the monthly Export Price Inquiry (EPI) questionnaire. An aggregate for total PPI (including both domestic and export prices) is calculated and supplied to Eurostat for their publication but is not currently published in any ONS statistical releases. Any requests for such data are directed to Eurostat publications currently.

The EPI is used as a deflator in the compilation of the national accounts for the UK but is not routinely commented on in the statistical bulletin, although it may be of interest to users. Large movements in the EPI are often overlooked as they don’t have an impact on the headline measure of PPI.

Separate total, domestic and export measures of the PPI will be presented and commented on in the PPI statistical bulletin for further transparency and increased information for users.

The Services Producer Price Index (SPPI) currently represents UK business to business transactions with no current inclusion of any export data. We will be producing the SPPI on a business to all (B2A) basis to include consumer spending on services with similar separate domestic and export measures as PPI.

  1. Would publication and commentary on UK exports alongside domestic and total measures be of use and/or interest to you?

Yes No

  1. Would an exported service series for SPPI be of use and/or interest to you?

Yes No

  1. Coverage of the service sector

The currently published Services Producer Price Index (SPPI) aggregate has only partial coverage of the service sector, which is largely due to the inherent difficulties in developing price indices for services and due to historic ad hoc development. These prices are collected via the SPPI survey and administrative data, and no attempt is currently made to impute the gaps.

The UK National Accounts estimate their own measures of price change for those gaps for deflation purposes. These measures need to be submitted to Eurostat by the end of 2018 alongside the existing SPPI estimate to give an overall price index for the service sector. We are currently looking for user’s feedback to gauge their interest in these measures being published alongside the current SPPI estimates and used in the calculation of additional top-level and low-level aggregates SPPI.

  1. Would these additional indices compiled from UK National Accounts estimates be beneficial to your organisation, if published?

Yes No

  1. Seasonally adjusted series

Currently we publish one seasonally adjusted index within the Producer Price Index (PPI), that is, the all manufacturing excluding food, beverages, tobacco, petroleum including climate change levy.There are other indices present in the PPI and Services Producer Price Index (SPPI) that display seasonality but these are not seasonally adjusted at present.

  1. Do you use the current seasonally adjusted series?

Yes No

  1. Would you be interested in any other series being seasonally adjusted? (If yes, please specify)

Yes No

  1. Publication tables

Within the Producer Price Index (PPI) Statistical Bulletin, there are various tables of data available under the “View all data used in this statistical publication” tab. These include:

  • Aerospace and electronic cost indices
  • Aerospace and Electronics Cost Indices time series dataset
  • MM22 UK producer price inflation
  • Producer Price Index – Statistical bulletin time series dataset
  • Producer Price Index time series dataset
  • UK producer price inflation
  • UK producer price inflation records
  • Revision triangle tables

There is a lot of repetition within these tables, with some indices being present in all tables. There is a need to streamline these tables, to ensure that we are not duplicating information but equally to make them as user friendly as possible. Where possible, ONS publishes the PPI and Services Producer Price Index (SPPI) in a consistent manner.

From 2019 we will look to publish PPI and SPPI on a Classification by Product Activity (CPA) basis instead of SIC. CPA is focussed on the product classification instead of the industry in which the product/service is produced.

We are proposing to publish all indices at four-digit CPA level; this will apply a consistent approach across all the indices within the surveys. For example, the bold line of the following aggregation is the level we will publish at:

10. Food products.

10.1 Preserved meat and meat products.

10.11 Processed and preserved meat.

10.11.1 Meat of bovine animals, swine, sheep, goats, horses and other equines, fresh or chilled.

10.11.11. Meat of bovine animals, fresh or chilled.

Currently the SPPI indices are published at four-digit level, but there are some PPI indices that are published at six-digit level on a regular basis, mainly within the MM22 UK Producer Price Inflation table.

  1. Would there be a significant impact on your organisation if we streamlined the tables?

Yes No

  1. Would publishing at four-digit level for the PPI indices have an impact on you?

Yes No

  1. Which of the six-digit indices do you use?

Yes No