Better exports to rescue industry from recession

Britain's export performance last year was better than at first thought, the Office for National Statistics said yesterday, writes Diane Coyle. Revisions to earlier figures will raise the economy's estimated growth rate last year, rescuing manufacturing industry from recession.

New figures show Britain's trade deficit narrowed in March to pounds 802m from pounds 1.33bn in February, but the April shortfall in trade with non-EU countries widened to pounds 868m from pounds 676m in March.

The trade news helped sterling remain near a 15-month high against the mark. It closed at DM2.35 last night, up a quarter of a pfennig.

Traders said that, in a break with tradition, overseas investors were shrugging off the Government's war on Europe and starting to look forward to the stability of a Labour government after the election.

New data for export and import prices mean the ONS has revised up estimated growth in export volumes in 1995. Analysts said this was likely to raise last year's GDP growth from 2.5 to 2.6 per cent. The new price figures also imply that the published fall in manufacturing output in the fourth quarter will be revised away.

Jonathan Loynes, an analyst at HSBC Markets, said: "This will turn what was previously a pretty flat trend in manufacturing output throughout last year into a gently rising trend."

The trend in the visible trade deficit is broadly flat, according to official statisticians. Excluding oil and erratic items, the underlying deficit widened to pounds 5.2bn in the first quarter of this year from pounds 4.7bn in the final quarter of last year.

Erratic items flattered the March global deficit, with precious stones accounting for half the month's increase in exports. But half of April's jump in imports from non-EU countries was due to aircraft.