New data from the Office for National Statistics (ONS) on Friday (10 March) showed that the UK’s trade balance narrowed by around £4.3bn in January, despite a drop in the value of exports.
This was fueled by an 8.7% month-on-month decline in imports, compared to a 1.8% fall in exports, leaving the trade deficit at £19.3bn.
Rest of World growth
The ONS’ monthly report showed that a fall of 4.2% in exports to EU countries was partially offset by an increase in sales to non-EU countries by around 0.9%.
Declining EU figures were driven by falling sales of fuels, chemicals and manufactured goods.
Exports to the rest of the world benefitted slightly from higher chemicals exports to the US and pharmaceutical exports to South Korea.
Global trade lull
Over the past 12 months, the volume of UK goods exports has been relatively flat with cost of living pressures hitting consumer incomes globally. The British Chamber of Commerce forecasts that these pressures will continue to be a drag on global trade in 2023.
The value of goods imports fell by 11.4% from the EU with decreases in machinery and transport equipment and 6.7% from the rest of the world.
In services, excluding inflation, import values fell by 0.3% while export values fell by 0.6% in January compared with the previous month.
A Twitter analysis by Resolution Foundation economist Emily Fry concluded that the January trade data shows “a gloomy picture for UK trade including falling imports driven by machinery & goods exports revealing their underlying weakness. BUT although services exports fell slightly, they continue to demonstrate relative strength compared to peers.”
GDP up, slightly
UK GDP increased by 0.3% in January ahead of chancellor Jeremy Hunt’s Spring Budget this week, which will aim to reduce inflation and debt.
Growth was ahead of the 0.1% predicted by economists and was driven by a return of activity across the education, health and recreation sectors, including the return of football’s Premier League after the World Cup, the Guardian reports.
A rise in the use of private health services also played a part as more people sidestepped lengthy NHS waiting lists.
Milder recession
Analysts expect a milder recession than what was forecast at the beginning of the year, but with a shallower recovery.
According to the FT, increased activity in the UK construction sector, combined with recent positive news from the services and manufacturing Purchasing Managers’ Indices (PMIs), “suggest the risk of recession is easing”.
The S&P Global/Cips UK construction PMI registered 54.6 in February, up from 48.4 in January. Any figure above 50 indicates growth.
Commercial construction was the best-performing area, registering a reading of 55.3 and the fastest pace of expansion in nine months, as builders indicated renewed confidence in the sector thanks to “fading recession fears and an improving global economic outlook”.