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UK goods exports suffer worst month in nearly five years UK goods exports suffer worst month in nearly five years
(about 7 hours later)
Britain’s goods exporters suffered their worst month for almost five years in July, and output from the key manufacturing sector fell sharply, in the first evidence that the fragile global economy may be taking its toll on the recovery. Fears are growing about the strength of Britain’s economic recovery, after sharp falls in exports and manufacturing output offered the first evidence the global slowdown may be taking its toll.
The monthly overall trade deficit in goods and services widened to £3.4bn in July, from £2.6bn in June, according to the Office for National Statistics (ONS). Britain’s overall trade deficit in goods and services widened to £3.4bn in July, from £2.6bn in June, according to the Office for National Statistics (ONS).
Related: UK manufacturing hit by turmoil in China The deterioration was driven by a drop in goods exports, which decreased by £2.3bn to £22.8bn in July 2015 – the lowest level since September 2010.
While exports of services such as banking and consultancy held up, the deterioration in Britain’s trade performance was driven by a drop in goods exports, which decreased by £2.3bn to £22.8bn in July 2015 – the lowest export figure since September 2010. Measured over a three-month period, the overall trade deficit narrowed, but analysts said the deterioration in the latest month was concerning.
Measured over a three-month period, the deficit narrowed; but analysts said the deterioration in the latest month was concerning. At the same time, the manufacturing sector – which the chancellor, George Osborne, has said he would like to spearhead a “march of the makers” –reported a 0.8% decline in output in July, taking production to 0.5% below the level of a year ago.
At the same time, the manufacturing sector, of which the chancellor, George Osborne, has said he would like to spearhead a “march of the makers”, reported a 0.8% decline in output in July, taking production to 0.5% below the level of a year ago. Joe Grice, the chief economist at the ONS, said: “The biggest single factor in the fall in manufacturing output was motor vehicle production, with the summer shutdowns appearing to start earlier than usual, along with anecdotal evidence showing a slowdown in exports. There has also been a fallback in the manufacture of weapons, following a big rise in June.”
Joe Grice, chief economist at the ONS, said: “The biggest single factor in the fall in manufacturing output was motor vehicle production, with the summer shutdowns appearing to start earlier than usual, along with anecdotal evidence showing a slowdown in exports. There has also been a fallback in the manufacture of weapons, following a big rise in June.”
Overall, industrial production – which includes mining and energy, as well as manufacturing – fell by 0.4% in July.Overall, industrial production – which includes mining and energy, as well as manufacturing – fell by 0.4% in July.
“July’s industrial production and trade figures highlight that the strength of the pound and weakness in demand in key export markets held back the recovery in the manufacturing sector at the beginning of the third quarter,” said Paul Hollingsworth, UK economist at consultancy Capital Economics. Frances O’Grady, the general secretary of the TUC, said the data suggested the economic recovery would be vulnerable to the fresh round of spending cuts planned by the chancellor.
“The sharp falls in manufacturing and exports suggest that the economy is entering tougher times. And with the failure to fix long-term problems, like Britain’s low rate of investment and innovation, the government’s severe spending cuts will put the recovery at even greater risk”.
The chancellor confirmed yesterday that he will deliver his autumn statement, including new forecasts for the economy, on 25 November, alongside the Treasury’s spending review, which will detail which departments will bear the brunt of the latest round of austerity.
“July’s industrial production and trade figures highlight that the strength of the pound and weakness in demand in key export markets held back the recovery in the manufacturing sector at the beginning of the third quarter,” said Paul Hollingsworth, UK economist at the consultancy Capital Economics.
Related: UK manufacturing hit by turmoil in China
The strength of sterling – which makes the UK’s exports less competitive in global markets – has been one reason the Bank of England has so far delayed lifting interest rates from their record low of 0.5%. The Bank’s nine-member monetary policy committee will announce its latest decision on Thursday but is widely expected to leave rates on hold.The strength of sterling – which makes the UK’s exports less competitive in global markets – has been one reason the Bank of England has so far delayed lifting interest rates from their record low of 0.5%. The Bank’s nine-member monetary policy committee will announce its latest decision on Thursday but is widely expected to leave rates on hold.
City analysts said the two weak readings – the first official indications of how the economy performed in July – suggested GDP growth could be set to slow in the third quarter of the year, from its healthy 0.7% pace from April to June. City analysts said the two weak readings – the first official indications of how the economy performed in July – suggested GDP growth could be set to slow in the third quarter of the year, from the healthy 0.7% pace recorded from April to June.
Howard Archer, of consultancy IHS Global Insight, described the data as “a double whammy of bad news for the UK economy that does not bode at all well for GDP growth in the third quarter”. The National Institute for Economic and Social Research said the decline in industrial output suggested the economy had expanded by 0.5% in the three months to August.
Howard Archer, of the consultancy IHS Global Insight, described the data as “a double whammy of bad news for the UK economy that does not bode at all well for GDP growth in the third quarter”.
“We had expected GDP growth to moderate from 0.7% quarter-on-quarter in the second quarter to 0.6% in the third quarter, but there is now a serious risk that growth could dip to 0.5% quarter-on-quarter or even lower,” he added.“We had expected GDP growth to moderate from 0.7% quarter-on-quarter in the second quarter to 0.6% in the third quarter, but there is now a serious risk that growth could dip to 0.5% quarter-on-quarter or even lower,” he added.
The UK’s trade deficit with both EU and non-EU countries widened in July, according to the ONS, suggesting that demand may have slowed both in the eurozone and in major emerging markets such as China. Britain’s exports to the EU fell by 5.2% in July, to £11bn, and exports to non-EU countries by 12.6%, to £11.7bn.The UK’s trade deficit with both EU and non-EU countries widened in July, according to the ONS, suggesting that demand may have slowed both in the eurozone and in major emerging markets such as China. Britain’s exports to the EU fell by 5.2% in July, to £11bn, and exports to non-EU countries by 12.6%, to £11.7bn.
Chris Leslie, Labour’s shadow chancellor, said: “Britain needs a serious strategy to help exporters – this means redoubling efforts to boost productivity, tackling infrastructure obstacles, addressing the skills deficit and ensuring innovators can access the capital they need.”