Trade balance figures are 'as bad as we feared' says ITEM Club, and are unlikely to recover anytime soon

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Nida Ali, economic advisor to the EY ITEM Club, comments on today’s trade balance figures:

  • Today’s trade figures are very disappointing
  • And net trade is expected to subtract from growth in Q3
  • Further rounds of QE expected, although we remain sceptical about its effectiveness in boosting growth   

“These figures are every bit as bad as we feared they might be. With exports to EU countries down by about 3% on the month in September, adverse developments in the Eurozone are clearly taking their toll on export growth which has decisively faltered. The rise in imports is surprising, given the weak state of domestic demand, but it casts doubt on the reliability of the data.

“With the volume of exports in Q3 remaining below the Q2 average and the volume of imports higher, net trade probably subtracted from growth in Q3. Given the numerous headwinds buffeting UK trade, the trade position is unlikely to recover in the months ahead. Domestic demand, as a result of fiscal austerity and declining real wages is very downbeat. The weaker outlook for net trade suggests that the economy is heading for another soft patch.

“We expect the economy to post negligible growth in the fourth quarter. In response to faltering growth prospects, the Bank of England is likely to announce further rounds of QE, although we have our doubts about the extent to which this will help boost the economy.”

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