July trade deficit hits record high - and whither Middlesbrough?

The latest trade figures don't exactly suggest that the private sector recovery is ploughing ahead at full speed...

by James Taylor
Last Updated: 19 Aug 2013
Some gloomy economic news this morning: the Office for National Statistics reported that the goods trade deficit (the difference between the value of our imports and exports) widened to a record £8.7bn in July, while the overall trade deficit (which also includes services) was almost £5bn, a five-year high. That doesn't exactly suggest that the private sector recovery is alive and kicking. And given that the Government is about to unleash a public sector recession - which according to a BBC report today, could devastate towns like Middlesbrough where the state is the biggest employer - that's not great for any of us...

The only good news in today's figures was that our trade in services showed a surplus of £3.8bn in July, which at least brought the overall trade deficit below the £5bn mark. Still, that goods deficit is not just a big jump on the June figure - it also represents the biggest monthly figure since records began in 1998. It was caused by a sharp rise in imports, particularly chemicals, oil and pharmaceuticals, and, perhaps more worryingly, a 0.9% drop in exports. Admittedly June had been a surprisingly good month for exports, so this may just represent a correction of sorts. But there's certainly nothing here - or in the recent survey data, for that matter - to suggest that a major upturn is in the offing.

That's particularly bad news given the devastation the Government is about to unleash on the public sector: spending review cuts are likely to result in hundreds of thousands of job losses. And even if you accept that the state had got too big and too bloated, the human consequences of this are going to be nasty - particularly, as this new BBC research points out, in areas like the North East and the Midlands. In Middlesbrough, for example, over 40% are apparently employed by the state. The Government hopes the private sector will recover fast enough to pick up the pieces, but that still looks a big ask, particularly in the regions.

All of which paints a picture of an economy that still looks pretty feeble - as the Bank of England has just acknowledged by leaving interest rates at the record low of 0.5%, for the 18th consecutive month.

One snippet that did please us today was the news that Robert Chote of the Institute for Fiscal Studies has just been appointed as the new head of the Office for Budget Responsibility. That's not just because he's an ex-hack (he used to write for the FT) or because the IFS is one of the UK's most respected think-tanks. It's also because it shows an admirable willingness on behalf of the Government to employ good people even if they're unlikely to toe the party line (Will Hutton's another). The IFS recently clashed with the Government over claims that its emergency Budget was 'regressive' - now Chote is in charge of its favourite new watchdog. Admirably grown-up, especially by political standards.

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