Surging exports halve Britain's trade deficit

Exports are still showing no signs of being held back by the strong pound, according to official figures. Unless export growth slows soon, interest rates are likely to rise again, reports Diane Coyle, Economics Editor.

Britain's trade balance improved sharply in July thanks to a surge in exports. The deficit more than halved during the month, falling by pounds 500m to pounds 450m, while the value of exports hit a new record.

"Despite the chorus of gloom and doom from industry, exports are holding up well to say the least. Even if they start to slow, I would be amazed if we do not get another rise in interest rates," said Michael Dicks, UK economist at investment bank Lehman Brothers.

Figures for trade with countries outside the European Union in August showed that the shortfall rose to pounds 359m from an unusually low pounds 62m in July, but it remained well below its average during the previous few months.

Taking out erratic items such as oil rigs and precious stones, the picture was less favourable, with the underlying deficit climbing by nearly pounds 300m to pounds 1.2bn in July. Even so, underlying growth in export volumes has continued to outstrip import growth.

In the latest three months exports have climbed 3.5 per cent and imports only 1.8 per cent. Both exports and imports are at near-record levels in underlying terms.

Most economists have been predicting that the strong pound would worsen the trade position enough to slow down the economy's overall growth and avert the need for the Bank of England to raise borrowing costs again. But with figures earlier this week showing that growth last quarter was higher than first estimated, yesterday's trade figures suggest the economy could also expand more than expected this quarter.

Even experts who reckon talk of a booming economy has been overdone admit that the latest trade position increases the risk that the Bank of England will take more action. "There is just not that much evidence of the strong pound hitting exports. You can't yet signal the all-clear on interest rates," said Eric Fishwick of Nikko Europe.

The pound rose as a result yesterday. It gained more than a pfennig to just under DM2.88, while its index against a range of currencies rose 0.8 to 101.1.

However, the surprisingly good news does not mean Britain's export performance will not suffer as a result of the 17 per cent rise in the pound in the past year. "Exporters are not cutting prices fast enough to prevent some weakening in the trend in the months ahead," said Kevin Darlington of ABN-Amro.

Voices
Hunted: A stag lies dead on Jura, where David Cameron holidays and has himself stalked deer
voicesThe Scotland I know is becoming a playground for the rich
News
newsMcKamey Manor says 'there is no escape until the tour is completed'
News
people'When I see people who look totally different, it brings me back to that time in my life'
Arts and Entertainment
Soul singer Sam Smith cleared up at the Mobo awards this week
newsSam Smith’s Mobo triumph is just the latest example of a trend
PROMOTED VIDEO
News
ebooksAn unforgettable anthology of contemporary reportage
News
news
News
people

Britain First criticised for using actress's memory to draw attention to their 'hate-filled home page'

Arts and Entertainment
A photograph taken by David Redferm of Sonny Rollins
people
News
news

Emergency call 'started off dumb, but got pretty serious'

Extras
indybest
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

Compensation and Benefits Manager - Brentwood - Circa £60,000

£60000 per annum: Ashdown Group: Compensation and Benefits Manager - Compensat...

Data Analyst/Planning and Performance – Surrey – Up to £35k

£30000 - £35000 Per Annum plus excellent benefits: Clearwater People Solutions...

IT Systems Business Analyst - Watford - £28k + bonus + benefits

£24000 - £28000 per annum + bonus & benefits: Ashdown Group: IT Business Syste...

Markit EDM (CADIS) Developer

£50000 - £90000 per annum + benefits: Ampersand Consulting LLP: Markit EDM (CA...

Day In a Page

Wilko Johnson, now the bad news: musician splits with manager after police investigate assault claims

Wilko Johnson, now the bad news

Former Dr Feelgood splits with manager after police investigate assault claims
Mark Udall: The Democrat Senator with a fight on his hands ahead of the US midterm elections

Mark Udall: The Democrat Senator with a fight on his hands

The Senator for Colorado is for gay rights, for abortion rights – and in the Republicans’ sights as they threaten to take control of the Senate next month
New discoveries show more contact between far-flung prehistoric humans than had been thought

New discoveries show more contact between far-flung prehistoric humans than had been thought

Evidence found of contact between Easter Islanders and South America
Cerys Matthews reveals how her uncle taped 150 interviews for a biography of Dylan Thomas

Cerys Matthews on Dylan Thomas

The singer reveals how her uncle taped 150 interviews for a biography of the famous Welsh poet
DIY is not fun and we've finally realised this as a nation

Homebase closures: 'DIY is not fun'

Homebase has announced the closure of one in four of its stores. Nick Harding, who never did know his awl from his elbow, is glad to see the back of DIY
The Battle of the Five Armies: Air New Zealand releases new Hobbit-inspired in-flight video

Air New Zealand's wizard in-flight video

The airline has released a new Hobbit-inspired clip dubbed "The most epic safety video ever made"
Pumpkin spice is the flavour of the month - but can you stomach the sweetness?

Pumpkin spice is the flavour of the month

The combination of cinnamon, clove, nutmeg (and no actual pumpkin), now flavours everything from lattes to cream cheese in the US
11 best sonic skincare brushes

11 best sonic skincare brushes

Forget the flannel - take skincare to the next level by using your favourite cleanser with a sonic facial brush
Paul Scholes column: I'm not worried about Manchester United's defence - Chelsea test can be the making of Phil Jones and Marcos Rojo

Paul Scholes column

I'm not worried about Manchester United's defence - Chelsea test can be the making of Jones and Rojo
Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

While other sports are stalked by corruption, we are an easy target for the critics
Jamie Roberts exclusive interview: 'I'm a man of my word – I'll stay in Paris'

Jamie Roberts: 'I'm a man of my word – I'll stay in Paris'

Wales centre says he’s not coming home but is looking to establish himself at Racing Métro
How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?

A crime that reveals London's dark heart

How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?
Meet 'Porridge' and 'Vampire': Chinese state TV is offering advice for citizens picking a Western moniker

Lost in translation: Western monikers

Chinese state TV is offering advice for citizens picking a Western moniker. Simon Usborne, who met a 'Porridge' and a 'Vampire' while in China, can see the problem
Handy hacks that make life easier: New book reveals how to rid your inbox of spam, protect your passwords and amplify your iPhone

Handy hacks that make life easier

New book reveals how to rid your email inbox of spam, protect your passwords and amplify your iPhone with a loo-roll
KidZania lets children try their hands at being a firefighter, doctor or factory worker for the day

KidZania: It's a small world

The new 'educational entertainment experience' in London's Shepherd's Bush will allow children to try out the jobs that are usually undertaken by adults, including firefighter, doctor or factory worker