Record trade deficit adds to Britain's economic woes | Reuters
Just as well a weak pound is helping with exports. oh wait no..
Just as well a weak pound is helping with exports. oh wait no..
(Reuters) - A record trade deficit, falling employment and a sharp slowdown in shop price inflation reinforced fears that Britain is fast heading for another downturn as the euro zone debt crisis escalates.
Wednesday's data came after the Confederation of British Industry cut its forecast for UK growth for this year and next, and supermarket chain Sainsbury's warned of tough times ahead.
The welter of gloomy news is piling pressure on Chancellor George Osborne to come up with a plan to boost growth when he delivers his autumn budget statement to parliament later this month, though he has already ruled out easing the pace of his austerity measures.
Worries that Britain may face another recession prompted the Bank of England to resume its quantitative easing programme with a 75 billion pound cash injection last month, and many analysts reckon it will eventually have to pump in more stimulus, though not at this month's policy meeting.
Official data showed Britain's goods trade deficit widened to 9.8 billion pounds in September, its highest since the series began in 1998, after a record jump in imports countered a tepid rise in exports.
Economists said the numbers were a further sign that the crisis in the euro zone had dampened Britain's exports, and cautioned against interpreting the surge in imports as a harbinger of recovering domestic demand.
"With the euro zone problems no closer to being resolved, we continue to doubt that the UK's external sector will prevent the economy from sliding back into recession," said Vicky Redwood of Capital Economics.
Figures from the Office for National Statistics showed the rise in the deficit was driven by a 1.2 billion pound surge in imports to a record 34.27 billion pounds. Exports, meanwhile, rose by just 52 million pounds.
Britain sells around half of its exports to the euro zone, and the region's spiralling debt crisis has hit hard. The latest purchasing managers' survey for manufacturing showed export orders have fallen for the last three months.
EURO ZONE RISK
Business minister Vince Cable said the euro zone crisis was having a double-whammy impact on UK firms by damaging confidence and therefore demand for British goods, as well as impacting on banks' ability to lend.
"One of the good trends that was happening until very recently was that British exports were growing very briskly, manufacturing was growing strongly, that was part of the successful rebalancing of the economy," Cable told a committee of lawmakers on Wednesday.
"We have noticed, all the surveys show, that within the last quarter or so that's not happening now, primarily because of the euro zone crisis," he said.
The economy has barely grown in the last year and policymakers are worried that a sharp slowdown in its main trading partners could tip Britain back into recession at a time when consumers are cutting back spending.
The head of Britain's third largest supermarket group Sainsbury's, Justin King, said shoppers were "under tremendous pressure" as disposable incomes were squeezed by higher prices, muted wages growth and austerity measures.
The CBI business lobby group said continued uncertainty in the euro zone was the main reason why it downgraded its UK growth forecast to 0.9 percent this year from a previous 1.3 percent.
And it said it expected inflation to fall back to 2.2 percent by the end of next year -- close to the Bank's 2 percent target -- from a current 5.2 percent.
Bank policymakers have already said they expect inflation to ease sharply next year as one-off effects from this year's sales tax rise and utility price hikes fall out of the statistics.
And that view was reinforced by a survey from the British Retail Consortium, which showed shop price inflation fell to 2.1 percent in October -- its lowest this year.
Meanwhile, the KPMG/REC report on jobs showed permanent staff placements by recruiters fell for the first time in two years and salaries stagnated -- highlighting the weak state of the labour market and heralding a further rise in unemployment from the 17-year high hit in August.
Wednesday's data came after the Confederation of British Industry cut its forecast for UK growth for this year and next, and supermarket chain Sainsbury's warned of tough times ahead.
The welter of gloomy news is piling pressure on Chancellor George Osborne to come up with a plan to boost growth when he delivers his autumn budget statement to parliament later this month, though he has already ruled out easing the pace of his austerity measures.
Worries that Britain may face another recession prompted the Bank of England to resume its quantitative easing programme with a 75 billion pound cash injection last month, and many analysts reckon it will eventually have to pump in more stimulus, though not at this month's policy meeting.
Official data showed Britain's goods trade deficit widened to 9.8 billion pounds in September, its highest since the series began in 1998, after a record jump in imports countered a tepid rise in exports.
Economists said the numbers were a further sign that the crisis in the euro zone had dampened Britain's exports, and cautioned against interpreting the surge in imports as a harbinger of recovering domestic demand.
"With the euro zone problems no closer to being resolved, we continue to doubt that the UK's external sector will prevent the economy from sliding back into recession," said Vicky Redwood of Capital Economics.
Figures from the Office for National Statistics showed the rise in the deficit was driven by a 1.2 billion pound surge in imports to a record 34.27 billion pounds. Exports, meanwhile, rose by just 52 million pounds.
Britain sells around half of its exports to the euro zone, and the region's spiralling debt crisis has hit hard. The latest purchasing managers' survey for manufacturing showed export orders have fallen for the last three months.
EURO ZONE RISK
Business minister Vince Cable said the euro zone crisis was having a double-whammy impact on UK firms by damaging confidence and therefore demand for British goods, as well as impacting on banks' ability to lend.
"One of the good trends that was happening until very recently was that British exports were growing very briskly, manufacturing was growing strongly, that was part of the successful rebalancing of the economy," Cable told a committee of lawmakers on Wednesday.
"We have noticed, all the surveys show, that within the last quarter or so that's not happening now, primarily because of the euro zone crisis," he said.
The economy has barely grown in the last year and policymakers are worried that a sharp slowdown in its main trading partners could tip Britain back into recession at a time when consumers are cutting back spending.
The head of Britain's third largest supermarket group Sainsbury's, Justin King, said shoppers were "under tremendous pressure" as disposable incomes were squeezed by higher prices, muted wages growth and austerity measures.
The CBI business lobby group said continued uncertainty in the euro zone was the main reason why it downgraded its UK growth forecast to 0.9 percent this year from a previous 1.3 percent.
And it said it expected inflation to fall back to 2.2 percent by the end of next year -- close to the Bank's 2 percent target -- from a current 5.2 percent.
Bank policymakers have already said they expect inflation to ease sharply next year as one-off effects from this year's sales tax rise and utility price hikes fall out of the statistics.
And that view was reinforced by a survey from the British Retail Consortium, which showed shop price inflation fell to 2.1 percent in October -- its lowest this year.
Meanwhile, the KPMG/REC report on jobs showed permanent staff placements by recruiters fell for the first time in two years and salaries stagnated -- highlighting the weak state of the labour market and heralding a further rise in unemployment from the 17-year high hit in August.
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