There was better news in the latest trade figures, which showed that the first surplus in oil trade for five years helped to narrow Britain's May deficit with countries outside the European Community by pounds 132m to pounds 769m.
The monthly Gallup poll conducted on behalf of the European Commission showed that 30 per cent of those surveyed expected the economy to improve while 31 per cent thought it would deteriorate.
The negative balance of 1 per cent contrasted with a positive 21 per cent in May and took Gallup by surprise. 'Confidence is clearly very volatile at present, with people reacting strongly to current events,' Gallup said.
The survey showed that the balance of respondents who thought this was a good time to make a large purchase was only marginally lower, at 11 per cent. The balance of those surveyed who thought the financial position of their households was improving sank to minus 8 per cent, but this was slightly better than the April result.
The slight improvement on the trade front came after trade in oil excluding the Community swung from a deficit of pounds 85m in April to a surplus of pounds 5m. The rest of the improvement was due to a favourable swing in trade in erratic goods such as ships, aircraft and precious stones.
Since sterling's sharp depreciation last September the deficit in trade outside the EC has shrunk steadily in value terms from a December peak of pounds 1.344bn, suggesting that the impact of devaluation was taking effect.
A similar trend emerged from the trade volume figures, which strip out the effect of currency fluctuations and changes in prices. The volume of exports, excluding oil and erratic goods, rose by 6 per cent in the three months to May and was 12 per cent higher than the comparable 1992 period.
In contrast, the volume of imports edged up by 2.5 per cent in the three months to May and was 14 per cent higher than a year earlier. During May both export and import volumes rose by about 1 per cent.
The latest figures for trade excluding the Community follow the CSO's estimate that in the first quarter Britain's global trade shortfall widened by pounds 150m to pounds 4.5bn. In what may be a rough proxy for trade with the EC in subsequent months, yesterday's figures showed that the trade deficit with Western Europe excluding the EC narrowed to pounds 436m in May compared with a 1993 high point of pounds 725m reached in March.
Since the advent of the single market and the abolition of internal EC customs borders, trade with the EC is being assessed on VAT returns by importers and exporters. This system is inevitably slower than the traditional customs basis, which still applies to trade outside the Community.
Last month's figures showed that the sharp rise in both import and export prices, expressed in sterling terms, appears to be levelling out for the first time since Black Wednesday.
In the latest three months, export and import prices for goods other than oil rose by 2 per cent.Reuse content