UK exports 'show signs' of pound boost

UK factory reporter Image copyright Reuters

Evidence is emerging that the sharp drop in the pound is boosting UK exports, economists say.

In November, the volume of goods exported rose at a three-month rate of 1.1%, up from the previous report which showed a 2.7% decline, according to the Office for National Statistics (ONS).

Economists say that could be a sign that the fall in value of the pound since June is boosting exports.

It could also be behind a rebound in manufacturing output in November.

"Signs are appearing... that the weaker pound is benefitting the economy, especially in terms of rising goods exports," said Chris Williamson chief business economist at IHS Markit.

"Stronger exports do at least seem to be helping drive manufacturing output higher," he added in a research note.

Paul Hollingsworth UK economist at Capital Economics said there were "encouraging signs" that the drop in the pound was "having a positive impact".

Laptops from China

Despite those upbeat figures on exports, overall the UK's trade position deteriorated in November.

The deficit on trade in goods and services was estimated at £4.2bn in November, up from £2.6bn in October.

The widening gap reflects a £3.3bn surge in imports.

In particular the ONS noted a rise in imports of laptops and tablets from China. It also highlighted a rise in transport goods, which includes ships and railway equipment, from countries outside the European Union.

For November, the deficit on trading in just goods (and not services) increased to £12.2 billion, widening by £2.3 billion from October.

The monthly trade data tends to be volatile and subject to revisions, so figures for three months can be more useful.

For the three months to the end of November the trade deficit rose a more modest £0.1bn to £35.9bn. That was compared to the three months to August.

Worries over the quality of the trade data prompted regulators to remove its status as a "national statistic" in November 2014. The ONS is currently working on an application to regain that status.

A separate ONS report showed that industrial output rose 2.1% in November, rebounding from a 1.1% decline in October.

The increase reflected the re-opening of a North Sea oil field and an increase in production in the pharmaceuticals industry.

Industrial output figures include mining and quarrying, energy supply, water and waste management industries, as well as the manufacturing sector.

On its own, manufacturing output rose 1.3%, a recovery from October's 1% contraction.

Meanwhile, the construction sector saw a second monthly decline in output, with a 0.2% fall in November.

Analysis from Jonty Bloom, BBC business correspondent

The latest economic data is a bit of a mixed bag. The construction sector seems to be contracting but industrial production is on the increase, that figure is however quite volatile and the ONS warns it has been affected by the return to production of a North Sea oilfield that was closed for maintenance and a leap in pharmaceutical orders; which can vary a great deal from month to month.

The trade figures, also out today, show that the UK is importing increasing amounts and rising exports are not able to keep pace, thus our trade deficit is widening.

That is to be expected at the moment, although the fall in the pound should reduce imports, as they become more expensive and increase our exports as they become cheaper; that process can take years. In the short term a falling pound just makes already ordered imports more expensive and that increases the trade deficit.

What is missing from today's figures is however the most important factor, the services sector is the biggest part of the economy, almost 80% of it, and figures on its performance are not out until later this month.

Services are likely to be doing well and that means economic growth towards the end of 2016 almost certainly remained robust.