Strong June boosts UK growth, along with trade outside the EU

Fri 11 Aug 2023
Posted by: Danielle Keen
Trade News

ONS logo on letterhead

UK trade data from the Office of National Statistics (ONS) released on Friday (11 August) revealed an increase in the value of non-EU exports.

A rise of £0.6bn in exports to non-EU countries in June, was enough to offset a decrease in EU exports.

Overall, the value of exports increased £1.6bn (1.7%) in the second quarter.

The trade deficit for goods and services also continued to narrow, down to £19bn, from £19.3bn last quarter.

Sunny June outlook

Overall, GDP is estimated to have grown 0.2% in Q2, driven by a more productive June.

Growth of 0.5% in June helped to bump up slower growth earlier in the spring, following growth of 0.2% in April and a fall of 0.1% in May.

Production output also grew by 0.7% in Q2, led by a 1.8% rise in June.

The weather has been suggested as a potential cause for such positive data in June, along with increased working days, following the additional coronation Bank Holiday in May.

Sector successes

Among the economy’s success stories were construction and manufacturing, which both posted strong figures this quarter.

Construction output rose by 0.3%, driven mainly by repair and maintenance (up 0.9%).

Manufacturing saw output increases of 1.6%, with most sub-sectors reporting growth.

Transport equipment increased substantially, with the Society of Motor Manufacturers and Traders (SMMT) reporting a 16.2% increase in car manufacturing compared to June last year.

Experts have suggested that lower input costs could have contributed to strong manufacturing figures.

Global inflationary picture

Elsewhere the latest data showed US inflation rose slightly for the first time since June 2022, increasing to 3.2% (up from 3% last month).

This is despite the federal reserve’s decision to raise interest rates to a 16-year high of 5.25%.

By contrast, the European Central Bank (ECB) is facing calls to walk-back its rate hikes as Germany’s weak growth and trade threatens to tip the eurozone intro recession.

Cautious optimism

The ONS figures have led commentators to express tentative hope about the UK’s economic outlook.

David Bharier, head researcher at the British Chambers of Commerce (BCC), said:

“Today’s first estimate for Q2, showing GDP grew by 0.2% is better news than expected, but the UK economy remains in a precarious place. Businesses are continuing to face a worrying mix of high inflation, rising interest rates, a tight labour market and global economic uncertainty."

Marco Forgione, director general at the Institute of Export and International Trade (IOE&IT), cited the data as evidence of the connection between trade and growth:

“Today's statistics demonstrate the positive impact that international trade can have on the economy. But clearly more work still needs to be done to support businesses in achieving sustainable, long-term growth. It is encouraging to see a slight uptick in manufacturing exports in June with an increase in machinery and transport contributing to this rise.

“It is vital that we get more businesses trading internationally and for the UK to be seen as an attractive option for inward investment, if we are to tackle the cost-of-living crisis and to produce real economic growth.”