Trade Gap Widens as Experts Struggle

UK imports increased 2.4 per cent while exports remained constant.

UK imports increased 2.4 per cent while exports remained constant.

Great Britain’s trade gap widened in May, hitting a 2 year high of 3.86 billion pounds versus 3.5 billion pounds in the previous month.  This confirmed the frailty in the economic recovery.

The trade gap in goods, without services, also rose from 7.41 billion to 8.06 billion pounds in May.  Imports increased 2.4 per cent while exports remained constant.

There was also favorable news from the factory numbers.  The official data showed that producer prices fell for the first time since 2008.  Economists were concerned because the figures appeared to call into question hopes of a recovery led by exports.

Philip Shaw, Chief Economist at Investec, expressed surprise saying, “Surveys have been saying order books are up but there is nothing in the export data to show this has been the case.”

Howard Archer, at IHS Global Insight, said it was “another month, another set of disappointing trade data.”  He added: “Exports are just not picking up as much as has been hoped for.  Indeed, they are lagging behind the growth in imports.  Instead of helping the economy re-balance and being a contributor to growth, net trade has remained definitely negative.”

As a result of sluggish growth in the eurozone, concerns remain high that experts will take a beating.

UK experts of traded goods fell by 0.6 per cent from April to May.  Domestic demand improved, but this could prove to be a mirage as tax hikes and spending imposed by the Government to manage the public sector deficit begin to bite.

Vicky Redwood, senior UK economist at Capital Economics, said: “The chances of a significant trade boost in the near-term are looking less and less promising.

“At least June’s producer prices figures provide further evidence of an easing in price pressures at the start of the inflation pipeline.  We still think consumer price index inflation is set to fall sharply as the temporary factors that pushed it up start to fade.”

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