Trade Slowed Down Britain’s Economy in Early Months of 2017

Updated on
  • Total exports fall 0.5% January-March, imports increase 3.3%
  • Industrial output, manufacturing decline for a third month

Trade contributed to the U.K. economy’s sharp slowdown in the first quarter, figures published Thursday suggest.

The deficit in goods and services jumped to 10.5 billion pounds ($14 billion) from 4.8 billion pounds in the final three months of 2016, the Office for National Statistics said. Exports fell 0.5 percent and imports climbed 3.3 percent.

It means net trade, which drove the economy’s 0.7 percent expansion in the fourth quarter, appears to have acted as a significant brake on growth as 2017 got under way. Separate figures showed industrial production barely grew in the first quarter after it dropped more than forecast in March.

Britain is counting on the boost to exporters from a weak pound to support the economy as consumers feel the pinch from accelerating inflation. Growth slowed to 0.3 percent in the first quarter and is forecast to remain subdued this year, despite recent surveys suggesting the economy gained a little momentum in April.

The dominant services industry cooled rapidly last quarter and the economy received little support from other sectors, as separate reports from the ONS Thursday confirm.

Industrial production rose 0.1 percent, less than the 0.3 percent estimated in provisional GDP data last month. Construction output grew an unrevised 0.2 percent.

The downward revision to industrial output has little impact on GDP in the first quarter, knocking off just 0.02 percentage point.

In March alone, industrial production fell 0.5 percent, the third consecutive month of decline. Manufacturing dropped 0.6 percent. Eight of 13 factory sectors posted falls, led by metals. Construction output declined 0.7 percent.

The trade data suggest export growth is weakening after a surge around the turn of the year. In volume terms, exports rose just 0.2 percent in the first quarter, down from 6.6 percent in the previous three months, though the picture is stronger when erratic items are excluded.

In March, the trade deficit climbed to a six-month high of 4.9 billion pounds. The shortfall in goods alone widened to 13.4 billion pounds, as imports rose at double the pace of exports.

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