Good news on trade

 

Britain's trade figures in July were much better than they were the month before. Thank goodness, because the June figures were truly horrible.

The turnaround in the monthly deficit number shows, yet again, just how volatile the trade figures can be.

In June, there was a record £4.3bn gap between the value of goods and services that Britain bought from the rest of the world and those that it sold - the highest monthly deficit since comparable records began. Now the July figures show that deficit falling right back to £1.5bn, the smallest in 17 months.

Goods exports rose by more than 9% - with exports to non-European nations reaching a record high.

If you look past the ups and downs - made even larger, no doubt, by the extra bank holidays in June - the picture for UK exporters is a bit brighter than it has been for anyone focused solely on the home market. But I'm afraid there's little in the trade numbers from the past few months to suggest we're about to export our way out of economic stagnation.

Taking the past three months together, total exports were 0.8% higher than in the previous three months. Within that, goods exports have risen by a less than amazing 0.3%.

Many City economists see more evidence in these figures that the British economy will get back to positive growth in the third quarter - with net trade finally making a positive contribution, albeit not a very exciting one.

The latest estimate from the National Institute for Economic and Social Research, released on 7 September, suggested that output grew by 0.2% in the three months ending in August. That's a little slower than their estimate for the three months ending in July, but at least it's positive.

As the Centre for Economics and Business Research has pointed out, July marks the third consecutive month in which the UK has exported more to markets outside Europe than to countries in the EU. Taking the three months together, exports to non-EU countries were nearly 4% or £1.4bn higher.

That is almost certainly where the big opportunities for UK exporters are going to lie in the future. Alas, it is not what is driving the rise in the non-EU share right now: that owes more to the enfeebled state of Europe than a boom in trade to the Brics (though exports to China did rise again in July).

Similarly, if trade with other countries does help pull the UK out of recession next month, that will speak to British exporters' determination to build sales, in a tough global economic environment. But it will also tell you quite a lot about the even weaker state of demand here at home.

 
Stephanie Flanders, Economics editor Article written by Stephanie Flanders Stephanie Flanders Former economics editor

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  • rate this
    0

    Comment number 89.

    85. fbl

    I 'like' Fisher's work on Debt Deflation - not all that he stood for! I 'like' it because of the historical observation of how excess debt is deflated in bubble corrections and how this leads to the possibility of recovery. The 1930's was quick the 1870's was slow and 2008's hasn't started.(but all the runes indicated as slow as the 1870's due to the similar nature of the debt.)

  • rate this
    0

    Comment number 88.

    86

    There is a sharp difference between theory and reality. You end up barking dogma. In theory you may be right but where is the polical plan to get from here to there? There isn't one, is there?

    Also please stop reading meaning into my words which are not there. The political reality is that whoever does what has to take the public with them. Or are we all just going to be given our orders?

  • rate this
    0

    Comment number 87.

    83.fallingTP
    51 Minutes ago
    "shift away from moral hazard "

    I think you describe a moral hazard; not a "shift away from moral hazard"
    -
    "Moral hazard" is a phrase now used to describe a principle.

  • rate this
    0

    Comment number 86.

    84. And I said that low rates are not imposs particularly if the Govt had the sense to reform the tax system, broaden its base and they were serious about cutting spending/reducign size of the state which I believe they aren't

    Re politics that is possibly my point but your faith in the political classes to make wise investment decisions (free of desire to buy votes) is touching.

  • rate this
    0

    Comment number 85.

    66 JFH - wierd set of top trumps - Marx, 2 marxists, a neoclassical economist, & 2 utilitarians. Not of one suit ?. Marx ok on cylical debt crises but labour thoery of value - no. Fischer essentially a neoclassical equilibrist = wrong. Hume, Smith & Bentham much more to my taste despite the implied moral vacuum. Preferable in my mind to the inevitable facism of equality politics.

  • rate this
    +1

    Comment number 84.

    81

    I said low taxation was impossible given our current circumstances. This is high fiscal indebtedness. There is no way out from under this.

    You may argue that the economics are with you but the politics are not. Whoever eventually pulls the country round has to take the electorate with them. Even Mrs.T worked that one out.

  • rate this
    0

    Comment number 83.

    "shift away from moral hazard "

    I think you describe a moral hazard; not a "shift away from moral hazard"

  • rate this
    0

    Comment number 82.

    71

    John

    I understand entirely but we have to do something. Perhaps we should end up with two currencies a real one and a dummy called sterling.

  • rate this
    0

    Comment number 81.

    Low taxation is not impossible, particularly if you broaden the tax base, and it could actually provide a mechanism for improved growth.

    I beg to differ on your second point re Hesletine and am always worried when I hear people talking of "industrial policy" as though past interventions in some way provided a light. I think you will also find that the economics is with me on this.

  • rate this
    +1

    Comment number 80.

    60.fallingTP
    57. "Are you really suggesting that the majority of people who work in the City now are any different from you?"
    -
    'Fraid so. There been a massive shift away from moral hazard in the structure of 'The City' and the intrusion of large institutional capital enterprises has sheltered the individual from responsibility.

    You must be the only person left who has missed this?

  • rate this
    +1

    Comment number 79.

    70

    Low taxation is impossible given our current circumstances. Dogma is not a solution. Our current situation has to be gradually unpicked otherwise we end up like post-Soviet Russia.

    To describe Heseltine's interventions as crony capitalism just shows you weren't there at the time. It brought about a manufacturing revolution which Labour strangled until Mandelson came back in 2008.

  • rate this
    0

    Comment number 78.

    77. About £100bn. is bank financing. Most of the debt has been generated by expansive public sector spending, grossly inflated wellfare payments & trying to keep educ and healthsystems runnign which promise all things to all men. Obviously it's also helped to fill you pocket with taxpayers money.

    Charged more than what?

  • rate this
    +1

    Comment number 77.

    76.fallingTP

    10 Minutes ago
    ==
    Not disagreeing then that have charged more. Plenty day to day public sector money is spent in/on private sector (I work for such a company).

    Current debt estimate = £1.5tr. How much of that includes the banking bail outs and subsequent cost which will eventually cost £1.5tr (much more than your figure incidently).

  • rate this
    0

    Comment number 76.

    75. Interesting analysis but I think you'll find most of the PFI liabilties are off balance sheet and thus do not form part of current debt estimates which as we know by most conservative est will be £1.5 trl by 2015.

  • rate this
    +1

    Comment number 75.

    The Public Sector is so indebted because most of the work has been farmed out to Private Sector (PFI etc) which is not, contrary to myth, efficient, rather is has to squeeze service provision and/or charge more.

    Anyway JfH thank you for the peer to peer tip - an initial modest sum has been invested. Reclaiming my money from the crooked bankster leeches has been put into practice.

  • rate this
    0

    Comment number 74.

    John @71 I'll not argue about itsrealism, but with a discount rate of 25%, the future doesn't matter and the past never existed.

    FallingTP @70 Isn't the state and the public sector necessary to provide those things that the private sector can't or can't do well or can't justify doing because they use John's discout rate?

  • rate this
    0

    Comment number 73.

    Education system needs greater flexibility, not targets, nor is university a measure of much generally particularly if its eg North London. See Peter Thiel

    As for infrastructure well may be but I'm not convinced that the state has to be the sole provider of such.

    Health well marbe but if you were starting to plan health service 0you would start from here either.

  • rate this
    +2

    Comment number 72.

    70.fallingTP Implicit in your model is the complete rejection of targets for education (50% go to university etc.). Isn't this a recipe for decline, when our competitors are already better educated?

    I don't think that any country can leave it to the market in the way you suggest. What about the choices in building roads, railways, ports? I won't go on and look at health and elderly care!

  • rate this
    +2

    Comment number 71.

    69.stanilic "facilitates manufacturing investment"

    But how should one asses investment choices, when money (vehicle of assessment) is worth nothing? Do we use a long therm IRR or DCF using a discounting rate of 0%,10% or the one I like to use 25% (or the Vulture Capitalist rate of 75+%)?

    See what I mean about a prudential price of money being crucial! (Zombie business are use 0% I suspect!)

  • rate this
    0

    Comment number 70.

    69. I am suggesting that govt creates an environment of low broadbased taxation, less regulation, stable money, flex educ etc & leaves it to the private sector. Anything other than this - as favoured by arch cronies like Hes -involves picking winners, subsidy, govt favour which I undertand pretty much encaps crony capitalism (see UK industrail policy in 1950s & 60s).

 

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