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.