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Last updated: March 11, 2009 4:19 pm
UK exports fell at a record pace in the three months to January, highlighting the fact that Britain has not escaped a plunge in global trade.
Total exports of goods fell by 9.3 per cent between November and January, compared with a 2.4 per cent drop in the previous three months, data from the Office of National Statistics showed on Wednesday. That is the sharpest drop in exports since monthly figures from the ONS began in 1980, excluding some periods in recent years when VAT fraud distorted the data.
Export volumes have fallen even further and were down 15.6 per cent in January compared to a year earlier.
The collapse in sales of British goods abroad reflects a sharp retrenchment in global demand that has hit export dominated economies including Germany and Japan even harder than the UK. While UK exports were down 6.7 per cent in January compared to a year ago, Japan’s exports were down 45 per cent and Germany’s fell by 20 per cent.
Declining exports suggest that slumping global demand is undermining hopes for a quick reorientation of the UK economy towards exports as consumption falls at home and a weaker pound makes British goods more competitive.
“The weakness of global demand appears to be delaying the much hoped for rebalancing of the economy,” said Vicky Redwood of Capital Economics. “Until the UK’s export sector starts to perk up, any recovery in the overall economy seems unlikely.”
The extent of the deterioration in exports came as figures showed that the UK’s trade deficit had grown to £3.6bn from £3.2bn in January, as exports fell more quickly than imports during the month. The deficit was at its highest since August, and suggests that falling global demand for British goods continues to more than offset the effect of the lower value of sterling.
However imports were also extremely weak, down 2.7 per cent in the three months to January and falling for the sixth month in a row, in a sign of weakening demand from businesses and consumers.
Exports of goods to the EU were up 6 per cent, but outside of the EU, they fell by 16 per cent. Imports from non-EU countries fell by just half a per cent.
The sharper fall in exports than imports in January meant the trade deficit in goods widened to £7.7bn from £7.2bn in December. The trade deficit in goods has remained fairly stable since the global financial crisis began in the second half of 2007, in contrast to Japan, which recorded its first current account deficit since 1996 in January, and Germany.
Economists said that might reflect the impact of the weaker pound, which has fallen by more than a quarter on a trade-weighted basis since late 2007, driving up export prices.
The weaker pound is being clearly shown through in the rising cost of foreign goods. Import prices excluding oil and erratics up 14.3 per cent year on year in the last three months, the fastest gain since monthly data began in 1981. Prices of imported consumer goods are up 13.9 per cent year on year, the fastest gain since 1985.
“In the near term, the recession will probably ensure that consumer goods prices in the shops continue to fall, albeit at the price of a very sharp drop in retail margins,” said Michael Saunders, economist at Citigroup. “But, over time, the sharp rise in UK import prices will eventually add to UK inflation.”
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