Fantastic news for UK businesses of all colours as UK exports picked up somewhat spectacularly during the second quarter of 2015, helping trade contribute the most to the economic growth of the country we’ve seen in the last four years. Exports rose 3.9 percent from the previous quarter whilst imports gained just 0.6 percent, helping to shift the United Kingdom into the sort of country which sells its goods around the world and doesn’t rely on others to produce. Overall, GDP increased 0.7%, up from 0.4% in the previous quarter, which included a 1 percent increase in net trade, the Office for National Statistics said on Monday. The growth in exports has a positive effect to our own business where sales of precision hydraulic fittings continues apace
The report also showed that consumer spending growth eased slightly to 0.7 percent, but the pace of government expenditure held solid at 0.9 percent. Business investments increased 2.9 percent from the previous quarter, which was the most in twelve months and bodes extremely well for the strength of the economy going forward. Investment in businesses shows that both investors and business owners are confident enough to put money into the business, rather than to simply put it away to weather an oncoming storm.
Meanwhile, the returning strength of the economy and the speed at which wages are growing within the country might be pushing the Bank of England policy makers into raising the interest rate from its current record low. Whilst the Governor, Mark Carney, has said that tighter monetary policy is on its way, the trouble in China and some weak markets abroad might force the Bank into staying on emergency footing for the time being.
In an interview with Bloomberg Television, Liz Martins, an economist at HSBC London said: “For all the talk of weakness in our key trading partners and strength in the currency, this is a very strong number from exports. There’s been some turmoil and from the market perspective, expectations have been pushed back a bit, but I think it’s possible that some of those expectations have been overdone and we still look for February for the BOE to start raising interest rates.”
As the data was published, the pound dropped 0.2 percent, but quickly regained ground. The strength of the pound has been an issue for the UK, with British exporters facing a drag from the pound which has risen 4.8 percent on a trade-weighted basis this year. That’s making the cost British products higher around the globe, and whilst the UK is enjoying a period of cautious, sustained growth, much of the Eurozone and China are not, thus making British products less desirable. Of course, UK manufacturing retains a certain allure around the globe, limiting the damage.
“The pound’s recent appreciation and the continued weakness of demand in some export markets such as the euro zone and China suggest that net exports are not about to play a sustained role in supporting the economic recovery,” said Samuel Tombs, an economist at Capital Economics Ltd. in London. “Nonetheless, with growth in households’ real incomes set to remain supported by low inflation, building wage growth and strong job creation, we continue to think that the economic recovery will sustain its current pace in the second half.”
That view is shared by the CBI who have predicted “decent quarterly growth” and growth of 2.6% this year and 2.8% next year, up from its June forecast of 2.4% and 2.5% respectively. They said it expected growth until the end of 2016 to remain steady, with an average of 0.7% a quarter, barring any unforeseen financial disaster.