UK exports and imports both picked up in January, the Office for National Statistics said, leaving the trade balance steady.

The trade deficit was unchanged at £2bn (after a little rounding), far out of line with the previous month’s initial level, which was rather heavily revised. Initially, the deficit was thought to stand at £3.3bn.

Exports rose by £400m in January while imports grew by £300m. The UK’s department for international trade welcomed the gradual rise in exports over the past year but said there was “more work to do to” to boost them further.

The ONS noted:

At the commodity level, machinery and transport equipment (mainly electrical machinery and cars) and chemicals were the largest contributors to the increase in exports. Oil and chemicals were the largest contributors to the increase in imports.

The decline in sterling continues to pump up both import and export prices.

Pantheon Macroeconomics writes:

January’s trade figures should not be interpreted as a sign the UK is enjoying a trade boost from the weaker pound. The entirety of the narrowing of the trade deficit since the autumn has reflected a swing in the erratics balance from a deficit to a large surplus. Excluding erratics, the trade deficit was £3.3B in January, slightly larger than its 2016 average of £3.0B. Export volumes, excluding oil and erratics, rose 2.4% month-to-month, leaving them 6.5% higher year-over-year. But import volumes also have picked up; they were still 9.1% higher year-over-year despite a small fall in January.

All this is consistent with the view that the trade boost from sterling’s depreciation will be modest, because exporters are integrated into global supply chains and because there are few domestically-produced substitutes for the goods the UK imports. Huge uncertainty about the UK’s future trade ties also likely will ensure the economy rebalances towards exports only tentatively.

The ONS has put out some impressive sets of data on UK trade of late. Here’s its analysis of the UK’s global trade, and here’s its tally of UK trade with the Commonwealth.

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