Rise in exports helps to ease fears over future of economy
Published 11/08/2010 | 08:00
Upbeat trade figures have allayed worries over the UK economy after the country cut its global goods deficit to a lower than expected £7.4bn in June.
Most of the £600m fall was accounted for by the European Union - the UK's biggest trading partner - where the gap narrowed £400m after a £100m rise in exports and a £300m import slide.
Total exports jumped £900m or 4.3% to £22.4bn over the month, against a £300m or 1% rise in imports.
The figures offer some cheer after the Royal Institution of Chartered Surveyors said house prices fell for the first time in a year in July and the British Retail Consortium reported a sharp slowdown in sales growth.
They also offer some hope that the UK is moving towards its much-vaunted rebalancing away from imports and spending.
Howard Archer, chief economist with IHS Global Insight, said: "The hope must be that UK exporters are finally starting to benefit from sterling's weakness and that this will help prop up growth over the coming months."
The goods trade gap with the EU - which now stands at £3.1bn - last fell by more in October 2008, the Office for National Statistics said.
But worries remain over prospects for Europe following the recent sovereign debt crisis and Greek bail-out, with several countries hacking back deficits.
The competitive stance of UK firms will also be adversely affected by a recently strengthening pound.
The latest manufacturing survey for July from the Chartered Institute of Purchasing and Supply (CIPS) detected a slowdown in export sales to Europe despite a better performance in Asia and the United States.
Vicky Redwood, senior UK economist with Capital Economics, said: "The more forward-looking survey measures of export orders fell again in July and are now pointing to a renewed downturn in export growth within the next few months.
"Admittedly, the recent news on the eurozone, the UK's main trading partner, has been more positive.
"But domestic demand in the region is still weak and we continue to expect growth there to slow again next year."