Encouraging start to Q2 says EY ITEM Club - Net trade set to make positive contribution to growth

7 June 2013

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  • A sharp narrowing of the goods deficit in April is encouraging, with net trade likely to contribute positively to growth in Q2
  • But the overall trade picture is still weak, with much of the improvement stemming from a fall in imports
  • Weak Eurozone demand is likely to continue to restrain UK exports in the near-term

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

“An encouraging start to the second quarter, with a sharp narrowing of the goods trade deficit. Export volumes in April are well above the Q1 average and import volumes are somewhat below, implying that net trade is on course to contribute positively to growth in Q2. These figures support our view that the economy will expand firmly in Q2, almost certainly stronger than the 0.3% growth seen in Q1.

Mark Gregory, EY’s chief economist added:

“However, the figures contain tell-tale signs of a weak overall trade picture. The improvement in the goods deficit was driven primarily by a fall in imports, rather than an increase in exports.
“The Eurozone is still our biggest export market and weak demand there is likely to continue to restrain UK exports in the near-term. And there is a risk that faltering growth in emerging nations, such as China, could constrain companies’ efforts to rebalance towards these markets.”