SLG
Born Again..........and still Scottish!
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 Posted: Wed Apr 12, 2006 9:04 am Post subject: Record UK global goods trade deficit |
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Is this sustainable?
| Quote: | Record UK global goods trade deficit
IAN McCONNELL
The UK's global goods trade deficit hit an all-time monthly high of £6.54bn in January, it emerged yesterday in revised official data, and it stayed near this record level in February.
Economists were wrongfooted by the trade figures, which could weigh on the pound.
Sterling fell in the immediate wake of the numbers, but later recovered, amid warnings about the longer-term impact on the currency of funding such a yawning trade deficit.
The UK's January goods trade deficit was yesterday revised up by £811m to £6.54bn. A £430m deficit on oil trade was a big factor in this record deficit.
Even though oil swung back to an £86m surplus in February, the overall goods trade deficit for that month edged down only marginally from the upwardly-revised January figure to £6.48bn. Analysts had predicted a February goods trade deficit of £5.7bn.
The UK's underlying global goods trade deficit, excluding oil and large "erratic" items such as aircraft, leapt to an all-time monthly high of £6.34bn in February from an upwardly-revised £5.74bn in January.
National Statistics attributed the massive revision of the overall January goods trade deficit number to "later data for oil exports" and "trade associated with VAT MTIC (missing trader intra-community) fraud". The UK's January goods imports number was hiked from £24.5bn to £25.6bn in the revised data.
This VAT fraud has caused particular difficulties for formulation of trade figures in recent months.
John Butler, UK economist at HSBC, described the trade figures as "pretty poor".
"I think what is worrying about it is the UK's trade deficit continues to deteriorate even though the UK's domestic demand picture has softened relative to what we have seen in the eurozone, suggesting the UK's trade deficit is structural and will eventually put downward pressure on sterling."
Lucy O'Carroll, director of research at HBOS's treasury services division, also viewed the trade figures as negative for the pound: "There are signs that the deficit we saw last year, which is the biggest for 16 years, might not just be a weak overseas growth story. There might be something a bit more structural to it.
"In that case, there could well be some downward pressure on sterling, as markets absorb this information and process it … That raises issues for the monetary policy committee because it could potentially mean upward inflation pressures."
Butler, estimating the downward impact of trade on first-quarter UK growth at 0.3 percentage points, said: "Within the detail, it looks like net trade or net exports provided another drag on the economy in the first quarter of the year."
He said the business surveys suggested first-quarter growth of about 0.7%. However, with retail sales looking to have contracted in the first quarter and net trade proving a drag, it looked as if a lot of the growth in the first three months may have come from the likes of stock-building.
Butler highlighted a seeming loss of domestic market share by UK manufacturers.
He pointed out that, while this would help keep consumer prices inflation down in the near term, it posed problems for the future in terms of manufacturing capacity.
Butler said: "I think the big trend that seems to be going on is manufacturers' exports are up 16% year on year, yet manufacturing output as a whole is … 2% lower. The real pressure is not in the export markets. It is in domestic markets. The UK producer seems to be losing market share faster than it has in the last couple of years."
Asked about the importance of the loss of domestic market share, he replied: "I think it is a concern … Even in a very strong global environment, UK manufacturing is still seeing output lower.
"Shorter term, I think that has been good news in that it has meant UK manufacturers haven't been able to pass through higher costs into their own prices … The bad news is we are rapidly (losing) our domestic base."
Including the surplus on services, UK total global trade deficit rose from an upwardly-revised £4.58bn in January to £4.81bn in February. The surplus on services trade shrank from £1.96bn in January to £1.66bn in February. |
http://www.theherald.co.uk/business/59953.html
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