Some good news on trade – but handle with care
Let’s start off with the reasons for welcoming these figures for trade in August:
- Total UK balance of trade in August was – £1.9 billion, down from – £2.3 billion in July and – £3.6 billion in August 2010.
- The deficit in goods was £7.8 billion, down from £8.2 billion in both July 2011 and August 2010.
- The surplus in services was £5.9 billion, unchanged from July and up from £4.6 billion in August 2010.
This is good news – it gives some hope for the prospects of an export-led recovery, and it is what we should expect, given the fact that sterling is much more competitive than it was pre-recession. But if you break down those figures, you can see reasons for worry.
That’s because our improved trade is with other EU member states and, of them, those that are in the Eurozone:(*)
As you can see, for non-EU countries and (though less markedly) EU countries outside the Euro, imports have grown more than exports over the past 12 months. You get a similar picture if you use the less volatile figures for three month periods; comparing the latest 3 months wityh the same period last year:
- Exports to EMU members rose 16.4 per cent, while imports only rose 7.6 per cent.
- Exports to non-EU members rose 5.5 per cent, but imports rose 8.9 per cent.
We shouldn’t be surprised that our trade performance has improved more with Euro members than other countries, that currency has, after all, appreciated particularly strongly. (And if they didn’t have other things on their minds, our partners in the Eurozone would be complaining more loudly about this.)
What is worrying is the extent to which our trade prospects are bound up with the future of the Eurozone. This is, of course, true in any case, given the involvement of the City in Eurozone finance, but there is an added danger in the degree to which our trade depends on Eurozone countries being able to purchase our goods.
(*) Balance of payments basis, ‘EU (non-EMU)’ figures are calculated by me from data in the ONS release.