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Economy in Brief

UK Trade Picture Show More Deterioration
by Robert Brusca March 11, 2009

In the UK both export and import flows are losing momentum fast. Weak exports tell a tale of weakening growth in UK export markets. Dropping imports tell of still weakening domestic demand. Both series are quite weak and have a record of tracking one another relatively closely. The deficit in goods and services trade widened this month but the trends still seems to show a contraction phase is in train (see chart). While exports fell more steeply than imports in January, the two months of January and December taken together show much more similar behavior.

The trade gap is currently 41% of exports which is not far from its peak ratio of nearly 45% (since 1990). The deficit is also 29% of imports which is close to its max ratio of 31%. So while the deficit has been gradually on the decline the size of the deficit relative to the trade flows is expanding, effectively increasing its burden.

Year-over-year UK export and import values are lower by about 7% and 6% respectively. But over the recent periods we get a better taste of what is really in train. The annualized rate drop for exports is 38% over three months compared to 28% for imports. Over six months it’s 31% for exports compared to 25% for imports. Obviously the unraveling has been recent and has some on with great vigor. Sterling has dropped during this period, something that should help the UK to hold its trade competitiveness. However, that makes things more difficult for exporters based in the euro-Zone, trying to penetrate the UK market and it has been the source of some UK e-Zone tensions.

UK Trade trends for goods
  m/m% % Saar
  Jan-09 Dec-08 3M 6M 12M
Balance* -££ 7.75 -££ 7.23 -££ 7.61 -££ 7.66 -££ 7.72
All Exp -4.0% -1.8% -37.8% -31.0% -6.7%
Capital gds -6.7% 0.5% -24.7% -13.0% -5.5%
Road Vehicles -6.0% -12.2% -68.0% -58.9% -34.5%
Basic Materials -14.6% 7.9% -79.6% -75.2% -23.4%
Food Feed Bev & Tbco -0.3% 7.3% 13.5% 5.4% 8.2%
All IMP -1.0% -3.5% -27.9% -25.5% -5.7%
Capital gds -4.8% -4.8% -20.1% -13.9% -8.8%
Road Vehicles -0.3% -11.9% -70.3% -57.1% -43.9%
Basic Materials -15.2% -4.5% -61.8% -53.4% -30.2%
Food Feed Bev & Tbco 3.2% -4.1% 14.4% 5.3% 10.9%
*Stg Blns; mo or period average
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