According to the Office for National Statistics, exports were up 2.2% last quarter while imports rose just 0.7% - the net result being a reduction in the trade deficit from £10.9bn to £9.7bn (still pretty hefty, we think you’ll agree). This ensured that the overall growth figure was higher than expected, and leaves the UK a whole 2.8% better off than this time a year ago. Since the Government seems to be largely banking on us exporting our way to recovery – fuelled by a weak pound – this will go down very well in Whitehall, not to mention at the Bank of England.
The flipside of today’s figures, however, was that consumer spending grew just 0.3%, down from 0.7% in Q2, while Government spending slowed from 1% to just 0.4%. These trends are clearly going to continue; state funds won’t keep propping up the economy once the cuts kick in, which in turn will probably mean consumers are also less likely to splash the cash (particularly when the VAT hike happens).
The Office of Budget Responsibility is still forecasting UK growth of 2.3% in 2011, but with all the confidence surveys looking decidedly glum, most economists seem to think we’ll get nowhere near that. The trade figure represents a ray of hope – but with most other countries around the world likely to be feeling the squeeze (especially in the Euro area), there are still question marks over who exactly will be buying our stuff.
Still, let’s look on the bright side: UK exporters are clearly going out and winning more business overseas, and they should be congratulated for that. By contrast with their counterparts in Ireland, where the price of the bailout deal is likely to include massive tax hikes (including, potentially, corporation tax), their outlook seems positively rosy. Hopefully they can keep it up.