Sterling falls; manufacturing goes into reverse; trade deficit narrows

The pound has fallen (yet again) against the dollar after new figures showed that January's manufacturing output fell compared with the previous month.

by Michael Northcott
Last Updated: 19 Aug 2013

With just over a week to go before George Osborne announces his budget, he could really do with some good-news data to come down the pipeline. But, alas, manufacturing output fell 1.5% in January compared with the month before, which is worse than expected - output actually rose in December compared with the month before that. 

In response, the pound hit another new two-and-a-half-year low against the dollar, of $1.48, and the euro rose to a two-week high against the pound of 87.7 pence. This comes after a string of other poor currency performances in the UK in recent weeks, prompted by news such as much-stronger-than-expected employment figures in the US, and news that the Monetary Policy Committee in the Bank of England has been split on whether or not to extend quantitative easing. 

With all other attempts to stimulate growth having not had much effect, perhaps a little ‘unofficial’ devaluing is now favoured by the powers that be…

Nonetheless, there is a silver lining: other data from the Office for National Statistics showed that the UK’s goods trade deficit shrank from £8.73bn in December to £8.19bn. The trade deficit is the amount by which UK imports exceed exports, and the narrower the gap, the better for the UK economy. This is the lowest the deficit has been since July last year.

We can’t wait to see what sterling does when Osborne announces his budget next week.

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