Week 6, 2012: UK Trade Balance

Summary: UK trade balance figures for December 2011 were released this week, and show that we currently have the smallest deficit since April 2003. The improvement has come entirely from changes in the import and export of goods, rather than services, which have stayed at a balance of around £6bn for 12 months now.

What does the chart show? The black line shows the seasonally adjusted total UK balance of trade (all exports minus all imports) in billions of pounds. A negative figure indicates a trade deficit: the total value of our imports exceeds the total value of our exports. The blue and red line break down this balance into its two main components - goods (in red) and services (in blue). However, what the chart does not show is whether a change in the trade balance is due to an increase in exports or a decrease in imports in either category.

Why is the chart interesting? Although the UK has been much stronger in the export of services than goods for a long time now, it has been an improvement in the trade in goods balance that has led to the lowest trade deficit since April 2003. However, although there has been a slight increase in the export of goods (around £200m more than in November 2011), most of the improvement has come as a result of a decrease in imports (by £1.6bn since November).

This is unfortunately more of an indication of decreasing demand in the UK than of any improvement in the fortunes of UK manufacturing.