View from City Road: Bad news in the whole world

For the next few months Britain's balance of payments figures should be taken with a bucketload of salt - they exclude more than half the country's imports and exports. Information on trade within the European Community will not be available until July because customs declarations were abolished at the end of last year with the completion of the single market.

In the meantime, figures for trade with the rest of the world are being published. In theory, it should be possible to estimate the full picture from the partial one by looking at past relationships. But in practice the task is virtually impossible on a month-to-month basis. Patterns emerge over a period of six months or so, but by then we will have the full figures again.

Nevertheless, the non-EC figures give some hints. Import volumes continue to rise strongly, despite the rise in the sterling price of imports due to devaluation. The value of imports rose 21 per cent between September and February, with higher prices and higher volumes each accounting for roughly half the rise.

The continued strength of import growth cuts two ways. It does not bode well for a reduction in the trade deficit, although it may be a little early to look for an improvement. In the long run, it promises problems. But it does provide more evidence for the recovery. The strong growth in raw material and semi-manufactured import volumes suggests that domestic manufacturers may be preparing to step up production. This is consistent with expectations of rising output among manufacturers surveyed by the Confederation of British Industry.

The value of exports has risen by a less dramatic 14 per cent since September, accounting for the widening trade gap. Like imports, the increase is explained in equal measure by higher prices and higher volumes. Exporters are using much of the boost to their competitiveness from the lower pound to raise margins rather than fight for market share.

The partial export figures may be particularly misleading about the whole picture, as the EC's economies are weaker than the 'rest of the world'. The US recovery is well under way and the volume of British exports there has risen almost 40 per cent since September. Exporters to the EC may be facing slower volume growth and more difficulty raising their prices. When the 'whole world' figures are released in July, this may be where the bad news will lie.