Fall in import prices keeps lid on trade gap
Thursday 27 February 1997
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.
- 1 Which country would be hardest to invade?
- 2 The man who filmed the Freddie Gray video has been arrested at gunpoint
- 4 How the language you speak changes your view of the world
- 5 Royal baby girl born: Duchess of Cambridge's second child will be a princess thanks to Queen
Over 50,000 families shipped out of London boroughs in the past three years due to welfare cuts and soaring rents
EU asylum policy is 'a direct threat to our civilisation', says Nigel Farage
The Rothschild Libel: Why has it taken 200 years for an anti-Semitic slur that emerged from the Battle of Waterloo to be dismissed?
General Election 2015: SNP and its activists 'openly racist' towards the English, Farage says
General Election 2015: UK will be 'run for the wealthy and powerful' if Tories retain power, Labour warns
Schools forced to act as 'miniature welfare states' with teachers buying underwear and even haircuts for poor pupils
iJobs Money & Business
£16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...
£24000 - £28000 per annum: Recruitment Genius: A Senior SEO Executive is requi...
£16000 - £18000 per annum: Recruitment Genius: An Online customer Service Admi...
£18000 - £22000 per annum: Recruitment Genius: This global, industry leading, ...