The EU trade deficit widened from pounds 543m in November to pounds 903m in December, the biggest since July 1990. Including previously published non-EU trade figures, the whole-world deficit grew by almost pounds 300m in December to pounds 1.6bn - much larger than City forecasts and the biggest for 12 months. The CSO said the trade gap was widening on a trend basis, having said last month that the trend was flat.
The CSO also announced that Britain's import bill from the rest of the EU in the first 11 months of 1993 was pounds 750m bigger than it thought last month, while exports were revised up by only pounds 40m. This took the whole-world trade deficit for 1993 to pounds 13.4bn, almost pounds 2bn more than the Treasury predicted in November's Budget but barely changed on the previous year.
The revisions further intensified fears in the City of a 'black hole' in the trade figures, in which the value of imports from Europe may have been substantially under-recorded.
Imports from the EU rose by 5.3 per cent last year, but by 18.6 per cent from outside the EU. This is the biggest difference between the growth rates of imports from inside and outside the EU since oil prices fell dramatically in 1986.
The CSO and Customs and Excise are investigating the divergence in the EU and non-EU import figures and expect to report in the next few months. The import figures began to diverge at the beginning of last year when trade flows within the EU were first measured through VAT registrations rather than customs declarations, which were abolished with the advent of the European single market.
The CSO believes that between pounds 100m and pounds 150m a month of the disparity is explained by the fact that goods imported from outside the EU via the entrepot port of Rotterdam are being counted as imports from their country of origin rather than from the Netherlands as under the old system. But this leaves a large part of the divergence unexplained.
Britain's trade deficit with the whole world barely changed in 1993 over 1992, reflecting largely offsetting rises of 13 per cent in the value of exports and 11.5 per cent in imports. Devaluation of the pound in September 1992 increased the sterling cost of imports from abroad. Import prices rose by 4.5 per cent last year, with the physical volume of goods bought from producers abroad up 7 per cent.
Exporters, meanwhile, appear to have largely ignored pleas from the Treasury and the Bank of England to use the boost from competitiveness from devaluation to expand their market share rather than increase prices. Export prices rose by 9.5 per cent in 1993 while export volumes rose by only 2 per cent.
The CSO said export volumes were now falling at a trend rate of 1.5 per cent a month, excluding oil and erratic items such as ships and precious stones. Import volumes on the same basis are rising by 0.5 per cent a month. Export volumes to the EU were almost 10 per cent lower in the fourth quarter of 1993 than in the third.
Simon Briscoe, of Warburg Securities, described the December trade figures as terrible, warning that they would put pressure on the pound. He said the rise in imports was 'good news for the recovery but the inability to satisfy the demand domestically is a real worry'.
The markets showed little reaction to the figures, with the pound suffering a little against a strong mark. The FT-SE index of 100 leading London shares ended the day 42 points lower at 3,191.9, suffering in sympathy with Wall Street and the US government debt market.
The announcement of a 1.5 per cent rise in US retail sales last month raised fears of an early increase in US interest rates, while a warning from the Governor of the Bank of England, Eddie George, against an artificial stimulus to economic growth tempered hopes of lower base rates in Britain.Reuse content