Export figures have held up surprisingly well, but not enough to prevent GDP falling in Q4 - ITEM Club
Andrew Goodwin, senior economic advisor to the EY ITEM Club, comments on today’s UK trade figures:
- Some deterioration was always likely and the figures have held up surprisingly well
- Net trade should make a firm contribution to Q4 GDP growth, but not enough to prevent GDP falling
- The short-term outlook for key UK exports is challenging, highlighting the importance of penetrating emerging markets
“Trade data can be incredibly volatile from month-to-month and some deterioration was always likely after October’s surge, but the UK’s trade performance held up reasonably well in November. The trade deficit remains lower than it was for much of 2011 and, while export volumes slipped back from the October peaks, they remain surprisingly firm given the slowdown in the global economy in the second half of 2011.
“We are still on course for net trade to make a firm positive contribution to GDP growth in 2011Q4. Unfortunately, the weakness of the domestic economy is likely to mean that this won’t be enough to prevent GDP from falling in Q4.
“While exports held up well at the back end of last year, it would be a mistake to become complacent. The Eurozone crisis continues to cast a shadow over short-term prospects and we are reminded of the scale of the challenges ahead by Germany suggesting that its output is likely to have contracted in Q4. The UK is pinning much of its hopes on exports to power the recovery, but with our main markets struggling it’s imperative that exporters look to new, faster-growing, markets if they are to play their part. The UK lags well behind other developed economies, such as Germany, in its penetration of emerging markets, but with our traditional markets facing a long, hard struggle, the time is right for UK exporters to make that move.”