Recovery hopes hit by export data
Thursday 12 April 2012
The UK's fragile economic recovery suffered a jolt today after figures revealed a sharp fall in exports to countries outside Europe.
In a sign of more pressure on the UK's first quarter GDP, the trade deficit on goods and services rose to £3.4 billion in February, up from £2.5 billion the previous month and bigger than the £2 billion expected by the City.
Despite the eurozone debt crisis, the trade deficit in goods with countries in the EU narrowed but there was a worrying 9% fall in exports to other countries, with fewer cars being sent to the US, Russia and China.
To add to the gloom, the Office for National Statistics (ONS) said the deficit in January was bigger than previously thought, dealing a blow to the Government's hopes for an export-led recovery.
Economists warned the figures could drag on the UK's economic growth in the first quarter of 2012.
The UK's economy shrank by 0.3% in the final quarter of 2011 and despite upbeat industry surveys in recent weeks fears remain that the economy contracted again in the first quarter of 2012.
That would mean the UK is back in recession, defined as two quarters in a row of contraction.
Alan Clarke, an economist at Scotiabank, said: "This doesn't bode too well for the preliminary estimate of first quarter GDP in around two weeks' time.
"We expect growth to be in positive territory, but we are no longer as optimistic as we once were, having previously looked for near 0.5% quarter-on-quarter growth."
The disappointing figures come as Prime Minister David Cameron visits Asia on a mission to drum up more trade with booming economies such as Indonesia.
The UK's goods trade deficit increased to £8.8 billion in February from £7.9 billion in January. The services surplus was £5.4 billion - the same as in January.
There was a rise in exports to the EU, with countries such as the Netherlands and France buying more UK oil and chemicals.
But Vicky Redwood, chief economist at Capital Economics, said the narrowing in the trade deficit with the EU was surprising and added that the weak performance of eurozone economies means that "export growth to Europe is likely to weaken soon too".
The overall figures were "pretty disappointing", she concluded.
However, Lee Hopley, chief economist at manufacturers' organisation EEF, believes UK firms will successfully secure more orders overseas.
She said: "Whilst the drop in exports in February was driven by weakness in non-EU demand, this contrasts with the underlying trend of strong growth to these markets over the past two years."
The prices of imported goods rose 0.7% between January and February, driven by rising oil prices.
This highlighted continued inflationary pressures and cast doubt on whether inflation will fall back to its target of 2% in coming months, as the Bank of England forecasts.
- 1 The black and blue dress: Makers considering a white and gold version
- 2 Man to be beheaded in Saudi Arabia after ripping up a Koran and hitting it with his shoe
- 3 Husband and wife die holding hands within hours of each other after 67 years of marriage
- 4 PornHub turns masturbation into energy in bid to save the planet
- 5 The remarkable archaeological underwater discovery that could open up a new chapter in the study of European and British prehistory
Stephen Hawking's wife Jane Wilde on their marriage breakdown: 'The family were left behind'
PornHub turns masturbation into energy in bid to save the planet
Boko Haram: Thousands march in Cameroon to protest against the Islamist terror movement
White and gold or blue and black – what colour is the dress? An eyewitness gives a definitive answer
Kelly Osbourne leaves Fashion Police after Zendaya dreadlocks racism row
New theory could prove how life began and disprove God
This is what it's like to be dead, according to a guy who died for a bit
'Cash for access' scandal: Sir Malcolm Rifkind says 'unrealistic' for MPs to live on £67,000 salary
'Jihadi John': CAGE representative storms off Sky News accusing Kay Burley of Islamophobia
Ukip would cut billions from Scottish budget to fund English tax cuts
Russia's roadmap for annexing eastern Ukraine 'leaked from Vladimir Putin's office'
iJobs Money & Business
£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...
£30000 - £37000 per annum: Recruitment Genius: Established in 1999, a highly r...
£250-£300 Day Rate: Jemma Gent: Are you a qualified accountant with strong exp...
£230 - £260 Day Rate: Jemma Gent: Do you want to stamp your footprint in histo...