In Economic Prospects – our mid-year economic review, which we will publish later this week – we lay out where we expect growth in the UK economy will come from in the latter half of 2011.
Yesterday I said that net trade should add to growth across 2011, though it was unlikely to make the same contribution that we saw in the first quarter.
Data released today by ONS sheds some light on that.
In May exports in goods and services rose to hit record levels (in terms of value).
The problem is that imports for goods and services also hit record levels. This means that the trade deficit widened in May – not great news if net exports are going to add to growth in this quarter
However, there are a couple things to note:
1) Trade figures are notoriously volatile, and subject to revision, so it can be helpful to examine them over a slightly longer period: in the three months to May the trade deficit narrowed.2) Fast import growth suggests that there is at least strong economic activity. Imports of consumer goods rose, which might imply that consumer demand is holding up.
Clearly, though, consistent improvements in the trade balance will be needed to ensure the UK economy rebalances. Partly, this depends on the health of the international economy, so, over the rest of this week we will be blogging about the international economy, and the risks around global growth.