This month’s trade figures don’t look good. Exports are down. Imports are up. The trade deficit in goods (or “visible exports”) is the largest on record.
So what’s going on with exports?
Firstly, it is the export of goods (not services) that has fallen, and this has fallen even after excluding erratic items which tend to skew statistics.
The volume and the price of goods traded have fallen. The fact that prices have fallen (and have been falling since March) is worrying because it suggests that exporters have not been able to take advantage of the exchange rate and increase their margins.
Visible exports to both E.U. and non-E.U. countries have fallen, but it is interesting to look at the breakdown of these. Outside of the E.U. the largest fall in exports went to the U.S. where exports fell by 6.4% over the month. It is likely that the still shaky economic outlook is dampening U.S. consumers’ and businesses’ demands for U.K. goods. Conversely, U.K. exports to high-growth China and South Korea have risen notably.
A similar picture is notable in Europe, where the largest falls in exports were to Spain and Italy, in both cases falling by over 10%. This suggests, then, that weaknesses in the economies of export partners might be behind this month’s disappointing statistics.*
This does mean, though, that the fact that the UK’s imports have increased isn’t necessarily a bad thing. If imports are growing that is because domestic demand for imports is growing, which suggests that consumers and businesses have become more confident.
*Although this doesn’t explain the fall in exports to Germany, which was also quite significant.