The increasing weakness in UK's foreign trade, as latest data showed, indicates that net trade will remain negative in the second quarter, and reinforces fears that the economy will suffer further contraction, IHS Global Insight Chief UK and European Economist Howard Archer said Friday.
According to the economist, the disappointing trade data add to doubts as to whether the UK can achieve a sustained improved export performance any time soon and make the economy balanced. Weak export growth in the first three months of the year contributed 0.1 percent to the 0.3 percent sequential GDP contraction in the fist quarter.
However, import prices fell back 1.9 percent month-on-month in April, helped mainly by lower oil prices. Import prices could moderate further going forward, easing inflationary pressures and helping facilitate further Quantitative Easing by the Bank of England, Archer noted.
IHS Global Insight observed that UK exports will remain limited in the near term at least by muted global growth, particularly by the weak overall economic activity in the Eurozone. Events in Greece and Spain are currently heightening the downside risk to the Eurozone economic outlook.
In addition, British exporters have had to cope with the sterling hitting a three-and-a-half year high against the euro and a 33-month high on a trade-weighted basis in mid-May, although it since come off these highs, the firm noted.
Data from the Office for National Statistics today showed that UK exports decreased significantly in April. Shipments to both Eurozone states and non-Eurozone countries fell sharply during the month, reflecting the increasing weakness in global demand. Imports also decreased notably during the month, indicating muted domestic demand.
Supporting data from the Confederation of British Industry showed that Eurozone's economic weakness is weighing down appreciably on overall foreign demand for UK manufactured goods, while the latest manufacturing purchasing managers' survey showed that foreign orders contracted for the third time in four months in May.
by RTT Staff Writer
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