Britain's exports recovered in June, helping to narrow the country's trade deficit and boosting hopes that overseas business will help at least partly offset lacklustre spending at home.
Exports rose at four times the pace of imports in June, leaving the trade in goods deficit at a smaller than expected £7.4bn, according to the Office for National Statistics. It was the lowest gap since February and compared with £8bn in May and forecasts for £7.8bn.
The improvement in Britain's trade position will bring some respite to the coalition government as it attempts to rebalance the economy towards exports and the private sector and away from the public sector and domestic spending. In recent days there have been a slew of reports suggesting public sector cuts are already hampering growth in some key sectors of the UK economy with the bulk of the budget reductions still to come. A growing number of companies have also warned that the cuts are starting to bite.
Economists' reactions to the June export news were mixed, however.
"At last some better news on the trade front for the UK economy, which is exactly what it needs as concerns mount that domestic demand could be slowing," said Howard Archer at IHS Global Insight.
"One swallow does not make a summer, but 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."
But Vicky Redwood at Capital Economics was more downbeat.
"It's hard to get too excited. The narrowing did little more than reverse May's sharp widening in the deficit. And the more forward-looking survey measures of export orders fell again in July. Accordingly, we continue to doubt that any trade boost will be big enough in the near-term to offset the effects of the severe fiscal squeeze on consumers and the domestic economy," she said.
Business surveys have largely suggested that UK companies expect export growth and demand at home to slow in the coming months. Many report ongoing worries about the financial crisis in the eurozone – Britain's biggest export market – and the area's own austerity measures.
The British Chambers of Commerce described today's data as "good news" but said there was no room for complacency.
"The UK is still running a large trade deficit and the challenges facing exporters are substantial," said the group's chief economist, David Kern.
"A big improvement in our trading position in the years ahead remains a key element in any successful deficit-reduction strategy. With public spending cuts likely to dampen domestic demand, the economy risks declines without a significant improvement in our net exports.
"British exporters must diversify into faster growing emerging markets, notably in Asia."
Comments in chronological order (Total 13 comments)
10 August 2010 1:26PM
I agree. We must increase our exports of:
cars - oh! we don't make any.
trains - oh! we don't make any.
tvs - oh! we don't make any.
PCs and laptops - oh! we don't make any.
mobile phones - oh! we don't make any
clothing to fill supermarkets with jeans for £4.99 - oh! we don't make any.
shoes to fill the shelves of M&S - oh! we don't make any.
etc, etc, etc.
10 August 2010 1:40PM
So the UK trade deficit is only around £100 billion. In addition to the much higher budget deficit. Mmmmh. Good news. The UK only needs an annual £250 billion capital inflow.
Spinning this as good news is simply absurd.
10 August 2010 1:42PM
We make loads of cars - seventh biggest producer in the world.
10 August 2010 1:54PM
Stop reading only mainstream newspaper for access to economic news.
10 August 2010 2:22PM
Well done the coalition. A step in the right direction.
10 August 2010 3:05PM
Except nothing the coalition has done would be having much effect as early as this - except for depressing the economy in advance of much touted and needlessly severe cuts.
Well done Labour. It's a pity the caolition are forcing us into a whole load of steps in the wrong direction.
10 August 2010 3:37PM
Well done gmseed for demonstrating how little you actually know about the UK economy at large.
10 August 2010 4:30PM
Suggesting the UK has no manufacturing industry is tosh, we just don't make low-end junk that can be done on the cheap in Asia.
We also need more virtual exportation - consulting services, online resource and on-screen products etc.
For example, I created a new website which entailed using free templates and then paying a small monthly subscription fee. The US is releasing tons of these types of products that can be used internationally, we need to use our innovative background to step up in this type of sector.
10 August 2010 4:38PM
You can' have it both ways Surrendermonkey. Either the coalition's energies can have an effect this early or they can't.
You can't just choose willy nilly.
10 August 2010 4:54PM
we exported more cars in the past decade then any other in the UK's history, yes it dropped off a bit in 2008 and 2009 but nothing compared to other car exporting countries.
10 August 2010 6:19PM
Don't get hung up on 'stuff. We export plenty - just not the same things as before. Now its 'knowledge' and services and technical innovation. Not bloody widgets. We've moved on. We are a post-industrial country. New exports can grow. The economy can recover. Have faith people.
10 August 2010 6:33PM
That's too pessimistic, even for the Guardian.
A good proportion of the government deficit is financed from domestic investors. Also you are quoting the figures for the goods deficit not the trade deficit. We run a 40 or 50 billion pound annual surplus on services. In large part thanks to those "parasites" in the City.
11 August 2010 9:25AM
@James911:
Ok. So the trade deficit is only 50-60 billion then. You still need a capital inflow of £200 billion or money is withdrawn from the private sector. Of course the latter is happening too through local investors, but the large double deficit is still worrying.
Don't make me a lefty. I know how important banking is for Britain.