On a short to medium term basis the trade balance isn’t looking to hot but the biggest driver of imports in May was from aircraft, which rose by more than £400m to around £1.2bn. They are big ticket items so it’s unlikely to last meaning we see the deficit shrink somewhat.
There’s good and bad news in the data concerning Europe. Exports to Europe fell 0.2% while imports increased 1.6%. It shows that buying by Europe is still weak yet they are selling, which is good from Europe’s point of view. I checked the aircraft data and the £400m is split roughly 50/50 between Europe and non-Europe so those imports are not solely down to that.
Overall UK exports were up 1.1% vs -2.7% in April and imports were +2.0% vs 0.1% prior.
On a 3 month average exports rose 1.6% from -0.1% and imports were +1.9% vs -1.1%.
The UK has always been net importers, as you can see from the chart below, even well before the crisis.
UK trade balance 10 07 2014
It’s something we really need to work on if we want to add to the recovery. Unfortunately our biggest trading partner, Europe, is the one who can really help us out but they are a long way from being in a position to do so.
The rise in exports also partially thumbs it’s nose to the value of the pound. People are quick to blame the currency when exports turn sour so there’s nothing they can say when they rise. Yes it will be having an effect but at the moment it doesn’t seem to be overly detrimental.
