Can UK exports boost the recovery in 2010?

By Trevor Williams, Chief Economist, Corporate Markets

Figures for December showed a widening in the UK’s trade deficit in goods with the rest of the world
to £7.3bn from £6.8bn in November. This represented the worst monthly outcome since January 2009 and called into question the expectation that UK growth in 2010 will be boosted by ‘net trade’, as exports exceed imports.

In December, UK imports of goods rose by 5.2% while exports rose by 4.5%. Figures in the second
release of UK gdp for Q4 2009 highlight how difficult the path to a strong economic recovery will be in 2010. Although Q4 growth was revised up from 0.1% in the first release to 0.3% in the second, all of the growth came from stocks and government spending.

A slower pace of destocking added 0.5 of a percentage point to Q4 growth, while government spending contributed a further 0.3 of a point. UK net trade (total exports
minus total imports) deteriorated, however, depressing Q4 growth by 0.2 of a percentage point, despite signs of a pick-up in global demand and the competitive boost afforded by the sharp fall in the pound.

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* All charts are sourced to Lloyds TSB Corporate Markets Economic Research, Bloomberg, IMF and Datastream

 


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