UK trade got off to a good start in the final quarter of the year, building on the strong momentum seen in Q3.
- Between September and October 2016, the deficit on trade in goods narrowed by £4.1 billion to £9.7 billion.
- This narrowing reflected a £2.1 billion (8.7%) increase in exports to £26.8 billion and a £2.0 billion (5.2%) decrease in imports to £36.5 billion.
- Exports of goods to EU countries increased by £0.2 billion (1.5%) to £12.4 billion. Conversely imports of goods from the EU decreased by £0.3 billion (1.3%) to £20.5 billion.
- Exports of goods to non-EU countries increased by £2.0 billion (15.7%) to a record £14.4 billion.
Manufacturing reflected a similar story, with exports up and imports down.
The boost in export demand is somewhat due to brightening demand conditions in international markets, illustrated through strong manufacturing PMIs across Europe.
The effect of the depreciation of the pound is also likely to have filtered through into more commoditised sectors, bringing with it a boost in competitiveness and exports. We expect this trend to continue as the effects spread through into more high value sectors over the coming months.
However the fall in the pound is also likely to have contributed to the fall in imports, with rising input prices of concern to import-intensive manufacturers heading into the New Year.