Good news on exports
The value of UK goods’ exports rose for the fourth consecutive month to the highest in more than two years. Shipments to both the European Union and non-EU regions of the world gained ground, backing up recent signs that Europe’s economic recovery is gaining momentum and global growth may be starting to turn a cover. Yet it’s possible that the recent weakness of Sterling may be providing some support for exporters.
Trade deficit improves
The trade gap narrowed as the pickup in exports was larger than that of imports. The value of imports rose to the highest in more than a year, suggesting that domestic demand remained firm. Imports excluding crude oil were also higher, signalling that - even though the UK is a net oil importer - the recent gradual rise in the oil price isn’t to blame. Nevertheless, the trade gap remains relatively large.
The bottom line
Overall, April’s trade data is generally in line with the results of Manufacturing Outlook survey for 2016q2. The survey showed that export orders are gradually improving but still subdued. Also, more manufacturers reported positive demand conditions in Europe than in 2016q1. At the same time, fewer saw no notable pickup in demand from any region of the world than previously, signalling that the worst may be over for global growth.
While the trade data is a step in the right direction, there’s still a long way to go to reach the government’s export target of £1 trillion annually by 2020, and for the economy to rebalance away from its heavy reliance on private consumption.