Trade to contribute to UK economy

Bloomberg

Trade appears set to make a rare contribution to U.K. economic growth in the second quarter
despite a sharp decline in exports in May.
Figures published by the Office for National Statistics showed the deficit in goods and services widened to 2.3 billion pounds (US$3 billion) from 2 billion pounds in April. Exports fell 4.4 percent, with shipments of goods alone dropping 8.2 percent. Total imports declined 3.5 percent.
It still leaves the shortfall for the quarter on course to come in well below the 12 billion pounds between January and March. The trade deficit will narrow unless June sees a gap of 7.8 billion pounds, a level never registered in any month on record.
As the shock vote to leave the European Union hits consumer confidence and threatens business investment, trade — a consistent drag on growth — may emerge as a bright spot if the sharp fall in sterling boosts demand for British exports. The risk is that key markets in the EU weaken in response to Brexit. The pound’s depreciation will also push up the value of imports.
The currency has fallen 13 percent against the dollar since the June 23 referendum to its lowest levels in 31 years. It was at US$1.2931
Along with healthy retail sales in May and April, and much improved industrial production overall in May/April, the trade data suggest that UK GDP growth could actually have improved in the second quarter despite the heightened uncertainty over the EU membership referendum and likely markedly weaker activity in June,” said Howard Archer, chief economist at IHS.
In May, sales of goods to the EU, the destination for almost half of British exports, fell 2.5 percent. Shipments to countries outside the bloc dropped 13 percent. It followed a sharp increase in exports in April and left the overall deficit in goods higher on the month at 9.9 billion pounds.