Behind the mixed headline figures lie a worsening trade balance with non-EU countries but an improvement in EU trade, published a month later. Fears that growing consumer demand will suck in imports have so far proved unfounded, while exports to other EU members have grown unexpectedly despite the economic slowdown on the Continent.
The global trade balance narrowed from pounds 1.4bn to pounds 985m in May. A drop in the EU deficit from pounds 564m to pounds 171m explained the improvement. Excluding oil and erratic items such as aircraft and precious stones, the underlying volume of exports to the EU grew by 9.3 per cent in the year to May, compared with growth of just 0.3 per cent in import volumes.
However, the non-EU shortfall widened from pounds 814m in May to pounds 1.1bn in June. This was the biggest gap since February 1993.
Half of a 6.5 per cent drop in non-EU exports in June was due to a decline in shipments of oil and erratic items. The underlying growth of export volumes slowed to 8.3 per cent in the year to June from 9.6 per cent the previous month. Import volumes expanded by 13.9 per cent, slightly faster than the previous month.
Taking both components together, the trend in exports improved in the three months to June. They rose a whopping 16.3 per cent at an annualised rate. Imports slowed down, rising at an annual 7.5 per cent rate.
The ups and downs of the trade deficit during the past 12 months mean financial markets rarely react to a single month's figure. City economists were divided yesterday about Britain's trade prospects.Reuse content