UK exports disappoint as economy limps to end of weak first half
LONDON (Reuters) – Britain’s economy put in a weak performance in June when declines in car manufacturing, construction and exports gave an uninspiring end to the weakest first half of any year since 2012.
A year after Britain voted for Brexit, there is still little sign that exporters have gained much by way of competitiveness from the fall in the value of the pound after referendum.
The Bank of England has said it is counting on a recovery in exports to help lift growth in the economy.
“This is a disappointing set of data for a country that has recently seen an 18 percent fall in the currency,” said HSBC economist Elizabeth Martins.
Britain’s goods trade deficit jumped to a nine-month high of 12.7 billion pounds in June from 11.3 billion pounds in May, exceeding all forecasts in a Reuters poll, and the figures also showed the growing importance of exports to the European Union just as Britain is preparing to leave the bloc.
The Office for National Statistics said nothing in Thursday’s data pointed to a material change in its earlier estimate that the economy grew 0.3 percent in the three months to June after expanding just 0.2 percent in the first quarter.
Car production recorded its biggest quarterly fall since 2011 and construction declined by the most since 2012.
Rising inflation has weighed on consumer demand since the start of the year, and a separate survey on Thursday showed property valuers reported the weakest growth in house prices in over four years.
A spike in oil production in June helped ensure the headline measure of industrial output exceeded forecasts, growing by 0.5 percent after flat-lining in May. But this reflected a lack of production interruptions in North Sea oilfields from seasonal maintenance, which is likely later in 2017 instead.
Industrial output contracted 0.4 percent on the quarter – in line with previous estimates – while construction declined by more than previously thought, driven 1.3 percent lower by less public sector, commercial and repair work.
Forecasters at Britain’s National Institute of Economic and Social Research (NIESR) estimated that the data showed GDP growth in the three months to July slowed to 0.2 percent.
Thursday’s trade data continued the sharp divergence between private-sector business surveys, where exporters have reported big increases in demand since last year’s Brexit vote, and official figures which show much less of a pick-up.
Goods export volumes dropped by 4.9 percent on the month in June, their biggest fall in a year. Looking at the second quarter, exports were 5.0 percent higher than last year, but this was almost matched by a 4.8 percent rise in imports.
The figures highlighted Britain’s reliance on EU markets, at a time when Brexit talks are bogged down on preliminary issues and have yet to discuss trade, less than two years before existing arrangements are due to end.
The EU is the destination of more than half of Britain’s goods exports, and over the past year these exports to the EU have grown almost twice as fast as those heading elsewhere.
“Safeguarding the favourable terms of trade that UK firms currently enjoy with partners and markets in Europe and beyond must be a key priority,” the British Chambers of Commerce’s head of economics, Suren Thiru, said.
Much of the gain in exports reflected a stronger global economy, rather than a weaker currency – which raised manufacturers’ costs for imported raw materials – and overall economic growth was likely to weaken, he added.
A Reuters poll on Thursday showed economists expected Britain to grow by 0.3 percent a quarter on average over the coming year, compared with 0.4 percent in the EU countries that use the euro.