While the Prime Minister, David Cameron, comes under fire at home and in the EU for sticking to his guns some good news comes from an unexpected quarter in the form of a drop in the UK deficit in trade in goods and services.

The Office for National Statistics (ONS) reports that the UK’s seasonally adjusted deficit in October was £1.6 billion, quite a fall from September’s £4.3 billion.

When split down the deficit in trade in goods reduced from £10.2 billion in September to£7.6 billion in October. And with trade in services the UK went from a surplus of £5.9 billion in September to a surplus of £6 billion in October.

The ONS also says that, excluding oil and erratic items, the volume of goods was 9% higher in October than in September and also that the volume of imports fell by 1.5%.

Prices of imports and exports fell but once again in favour of exports where prices fell 0.4 % compared to import prices falling by 0.6%.

But Nida Ali of the Ernst & Young Item Club said we should be careful of jumping to any firm conclusions about these figures as ‘The release contains a variety of inconsistencies’ and that they are ‘a bolt from the blue and completely at odds with trends in the wider economy’.

Liverpool Docks

Liverpool Docks

With the volume of exports up by over 8% on the month in October, the figures don’t square up with any of these trends. A closer look at the figures reveals a variety of inconsistencies. Despite weak demand resulting from the Eurozone debt crisis, exports to EU countries have increased robustly. Manufacturers have been reporting a slowdown in demand from non-EU countries as well, so a monthly increase in export volumes to non-EU countries of nearly 13% doesn’t quite add up. Export volumes have reached a record high and are well above the Q3 average, so taking these figures at face value, net trade will make a strong contribution to growth in Q4.” Nida said.

Image: Carl Davies [CC-BY-SA-2.0 (www.creativecommons.org/licenses/by-sa/2.0)], via Wikimedia Commons

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