Fall in import prices keeps lid on trade gap

Britain's trade was not as far in the red as expected in December and January thanks to falling import prices. The figures sent the pound higher on the foreign exchanges, despite signs the strong currency has started to hold back export volumes.

Exports amounted to pounds 845m less than imports in December, compared with a November shortfall of more than pounds 1bn. Trade with the European Union showed the biggest improvement, more than halving to pounds 205m.

In 1996 as a whole, the trade gap widened slightly to pounds 12.5bn - the fifteenth successive annual deficit, as the Labour Party was swift to point out. The deficit with countries outside the EU narrowed from pounds 640m in December to pounds 398m last month, the lowest figure since March 1995.

Although yesterday's figures were far better than feared, analysts warned the underlying trends were unfavourable. The latest figures were flattered by an increase of more than pounds 200m in the surplus of oil exports over imports. This climbed to pounds 664m, its highest since the oil price collapsed in 1986.

Excluding oil and other erratic items, the whole world deficit increased by nearly pounds 300m to pounds 1.94bn in December. But the non-EU trade gap showed an improvement in January even excluding these items.

A second helpful factor to the trade gap was the contribution that the strong pound has made to falling import prices - a temporary phenomenon economists call the "J-curve effect". Import prices declined by 2.5 per cent in the final quarter of last year.

The trends in volumes of underlying imports and exports were not encouraging. Although both EU and non-EU exports climbed in the latest month, this followed a sharp decline the previous month. In the final quarter of last year the volume of exports was virtually unchanged while the volume of imports climbed by 1 per cent.

The Office for National Statistics said the erratic pattern made it hard to estimate the trend, but the whole-world deficit seemed to be narrowing. Some City economists were gloomier, in the light of recent business surveys indicating that export orders have dropped.

"While we might continue to get pleasant surprises in the trade figures through the first half of this year, a marked deterioration is in prospect in the second half," said Adam Cole of James Capel.

Companies ranging from Courtaulds yesterday to EMI, Glaxo Wellcome, ICI and British Steel in recent weeks have complained that the level of the pound has made business tougher.

Although yesterday's figures showed that exports have not yet started to decline, many economists think this is only a matter of time if sterling remains near its current level.

The pound climbed about two pfennigs against the mark yesterday, to end at DM2.7590.

Suggested Topics
News
A model of a Neanderthal man on display at the National Museum of Prehistory in Dordogne, France
science
News
Richard Dawkins dedicated his book 'The Greatest Show on Earth' to Josh Timonen
newsThat's Richard Dawkins on babies with Down Syndrome
Arts and Entertainment
Eye of the beholder? 'Concrete lasagne' Preston bus station
architectureWhich monstrosities should be nominated for the Dead Prize?
Extras
indybest
PROMOTED VIDEO
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

AIFMD Business Analyst / Consultant - Investment Management

£450 - £600 per day: Harrington Starr: AIFMD Business Analyst / Consultant - I...

Business Analyst Solvency II SME (Pillar 1, 2 & 3) Insurance

£450 - £600 per day: Harrington Starr: Business Analyst Solvency II SME (Pilla...

Manager - SAS - Data Warehouse - Banking

£350 - £365 per day: Orgtel: Manager, SAS, Data Warehouse, Banking, Bristol - ...

SQL DBA/Developer

£500 per day: Harrington Starr: SQL DBA/Developer
 SQL, C#, VBA, Linux, SQL Se...

Day In a Page

Middle East crisis: We know all too much about the cruelty of Isis – but all too little about who they are

We know all too much about the cruelty of Isis – but all too little about who they are

Now Obama has seen the next US reporter to be threatened with beheading, will he blink, asks Robert Fisk
Neanderthals lived alongside humans for centuries, latest study shows

Final resting place of our Neanderthal neighbours revealed

Bones dated to 40,000 years ago show species may have died out in Belgium species co-existed
Scottish independence: The new Scots who hold fate of the UK in their hands

The new Scots who hold fate of the UK in their hands

Scotland’s immigrants are as passionate about the future of their adopted nation as anyone else
Britain's ugliest buildings: Which monstrosities should be nominated for the Dead Prize?

Blight club: Britain's ugliest buildings

Following the architect Cameron Sinclair's introduction of the Dead Prize, an award for ugly buildings, John Rentoul reflects on some of the biggest blots on the UK landscape
Culture Minister Ed Vaizey: ‘lack of ethnic minority and black faces on TV is weird’

'Lack of ethnic minority and black faces on TV is weird'

Culture Minister Ed Vaizey calls for immediate action to address the problem
Josephine Dickinson: 'A cochlear implant helped me to discover a new world of sound'

Josephine Dickinson: 'How I discovered a new world of sound'

After going deaf as a child, musician and poet Josephine Dickinson made do with a hearing aid for five decades. Then she had a cochlear implant - and everything changed
Greggs Google fail: Was the bakery's response to its logo mishap a stroke of marketing genius?

Greggs gives lesson in crisis management

After a mishap with their logo, high street staple Greggs went viral this week. But, as Simon Usborne discovers, their social media response was anything but half baked
Matthew McConaughey has been singing the praises of bumbags (shame he doesn't know how to wear one)

Matthew McConaughey sings the praises of bumbags

Shame he doesn't know how to wear one. Harriet Walker explains the dos and don'ts of fanny packs
7 best quadcopters and drones

Flying fun: 7 best quadcopters and drones

From state of the art devices with stabilised cameras to mini gadgets that can soar around the home, we take some flying objects for a spin
Joey Barton: ‘I’ve been guilty of getting a bit irate’

Joey Barton: ‘I’ve been guilty of getting a bit irate’

The midfielder returned to the Premier League after two years last weekend. The controversial character had much to discuss after his first game back
Andy Murray: I quit while I’m ahead too often

Andy Murray: I quit while I’m ahead too often

British No 1 knows his consistency as well as his fitness needs working on as he prepares for the US Open after a ‘very, very up and down’ year
Ferguson: In the heartlands of America, a descent into madness

A descent into madness in America's heartlands

David Usborne arrived in Ferguson, Missouri to be greeted by a scene more redolent of Gaza and Afghanistan
BBC’s filming of raid at Sir Cliff’s home ‘may be result of corruption’

BBC faces corruption allegation over its Sir Cliff police raid coverage

Reporter’s relationship with police under scrutiny as DG is summoned by MPs to explain extensive live broadcast of swoop on singer’s home
Lauded therapist Harley Mille still in limbo as battle to stay in Britain drags on

Lauded therapist still in limbo as battle to stay in Britain drags on

Australian Harley Miller is as frustrated by court delays as she is with the idiosyncrasies of immigration law
Lewis Fry Richardson's weather forecasts changed the world. But could his predictions of war do the same?

Lewis Fry Richardson's weather forecasts changed the world...

But could his predictions of war do the same?