UK trade: Mar 2017

Total value of UK imports and exports of goods together with indices of volume and price, including an early monthly estimate of the value of trade in services.

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Cyswllt:
Email Hannah Finselbach

Dyddiad y datganiad:
11 May 2017

Cyhoeddiad nesaf:
9 June 2017

1. Main points

  • Between Quarter 4 (Oct to Dec) 2016 and Quarter 1 (Jan to March) 2017, the total trade deficit (goods and services) widened by £5.7 billion to £10.5 billion; this followed a sharp narrowing in Quarter 4 2016.

  • The UK’s total trade deficit (goods and services) widened by £2.3 billion between February and March 2017 to £4.9 billion, contributing nearly half of the quarterly deficit.

  • At the commodity level, the main causes of the widening of the deficit in Quarter 1 2017 were increased imports of machinery and transport equipment (mainly mechanical machinery and cars), oil and chemicals; these commodities also contributed the most to the increase in imports in March 2017.

  • Total imports increased by £2.9 billion between February and March 2017, with an increase in imports of goods from both EU and non-EU countries.

  • Since the last UK trade release, the trade balance for February 2017 has revised up by £1.0 billion; this is mainly due to a downward revision to the imports of goods.

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2. Things you need to know about this release

Trade is measured through both imports and exports of goods and/or services. Trade in goods reports the level of import and export activity in general merchandise, goods for processing, repairs on goods, goods procured in port and non-monetary gold. Trade in services covers import and export activity across 12 service sectors. The UK trade balance is the headline figure and calculated as total exports less imports in both goods and services. The trade balance reflects the overall net position of the UK, describing whether the UK exports more than it imports (a trade surplus) or whether it imports more than it exports (a trade deficit).

Unless otherwise stated, all trade values discussed in this release are in current prices. The time series dataset also includes chained volume measures (series for which the effects of inflation have been removed), and these are indexed to form the volume series presented in the publication tables.

Data are supplied by over 30 sources; including several administrative sources, HM Revenue and Customs (HMRC) being the largest. For trade in services, data are less timely than trade in goods estimates, and sourced mainly from survey data and a variety of administrative sources. The services data are processed quarterly, so monthly forecasts are created to provide a complete trade total. This means latest months are uncertain.

Trade statistics for any one month can be erratic. For that reason, we recommend comparing the latest 3 months against the preceding 3 months and the same 3 months of the previous year.

Oil and other “erratic” commodities can make a large contribution to trade in goods, but often mask the underlying trend in the export or import values due to their volatility. The “erratics” series includes ships, aircraft, precious stones, silver and non-monetary gold. Therefore, we also publish data exclusive of these commodities, which may provide a better guide to the emerging trade picture.

This release has a revisions period back to January 2017 for trade in goods and no revisions for trade in services. This means that we have incorporated additional data for trade in goods for these periods. This revisions period is consistent with the National Accounts revisions policy.

Due to a series of errors during 2014, the UK Statistics Authority suspended the National Statistics designation of UK trade on 14 November 2014. We have now responded to all of the specific requirements of the reassessment of UK trade and are in the final stages of providing evidence to the Authority. We are undertaking a programme of improvements to UK trade statistics in line with the UK trade development plan, which will also address anticipated future demands. While delivering against this plan, we will continue to work with the Office for Statistics Regulation team to regain National Statistics status for UK trade statistics. We welcome feedback on this development plan.

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3. The deficit on trade in goods and services widened to £10.5 billion in Quarter 1 (Jan to Mar) 2017

Between Quarter 4 (Oct to Dec) 2016 and Quarter 1 (Jan to Mar) 2017, the total trade deficit (goods and services) widened by £5.7 billion to £10.5 billion. This followed a sharp narrowing in Quarter 4 2016, which was predominantly due to an increase in the exports of erratic commodities (non-monetary gold and aircraft). The widening of the deficit between Quarter 4 2016 and Quarter 1 2017 reflected a rise in imports (3.3%) and a fall in exports (by 0.5%) over the period. This was mainly due to increases in imports of machinery and transport equipment (mainly mechanical machinery and cars), oil and chemicals.

Between Quarter 4 2016 and Quarter 1 2017, exports of goods have increased by 0.6%. The value of goods exported to EU countries increased by 5.7%, whereas the value of goods exported to non-EU countries fell by 3.8% in the same period. This was due to the fall in exports of non-monetary gold to non-EU countries, classified in “unspecified goods” in Figure 3.

Figure 4 shows the rolling 3-month values of total exports and imports (goods and services) excluding erratic commodities; based on this data the trend shows an increase in both exports and imports excluding erratics since February 2016.

While the rolling 3-monthly exports have flattened since January 2017, imports have continued to grow in the recent 3 months, leading to the widening of the total trade excluding erratics deficit.

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4. How did UK trade in March contribute to the widening of the trade deficit in Quarter 1 (Jan to Mar) 2017?

The UK’s total trade deficit (goods and services) widened by £2.3 billion between February 2017 and March 2017 to £4.9 billion, contributing to the widening in Quarter 1 (Jan to Mar) 2017. Total imports in the month to March 2017 increased by £2.9 billion; the main contributor to this was an increase in imports of goods. At the commodity level, the main contributors to this increase were chemicals from the EU (£0.6 billion), oil from non-EU countries (£0.5 billion), cars from the EU (£0.4 billion) and mechanical machinery (£0.2 billion) from non-EU countries.

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5. Who are the UK’s top trading partners for goods?

In Quarter 1 (Jan to Mar) 2017, the top country of destination for UK exports of goods was the US (including Puerto Rico), worth £12.8 billion, followed by Germany and France.

For the same period, most of the goods imported to the UK came from Germany, with imports worth £17.6 billion. The countries ranked second and third were China and the US (including Puerto Rico).

When analysing these figures you should consider the “Rotterdam effect”, where goods initially exported to one country are subsequently re-exported to another country. This might overstate the share of exports going to a particular country, in this case, the Netherlands. It is not possible to quantify this issue precisely, but an article exploring the Rotterdam effect was published in 2015.

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6. Depreciation of sterling continues to apply upward pressure on prices

Trade prices continue to be affected by recent sterling movements, with depreciation from the second half of 2016 coinciding with upward pressure on export and import prices.

Between February 2017 and March 2017, export and import prices increased by 1.5% and 1.4% respectively, with the value of sterling decreasing by 1.3% in March 2017 compared with the February 2017 average. However, it remains 10.7% lower when compared with March 2016.

Currency fluctuations can affect the relative prices of traded goods and may influence changes in the trade balance. For example, by assuming that UK firms import goods with a fixed foreign currency price and keep the quantity of imports fixed, the price of imported goods would rise in sterling terms following the currency depreciation, leading to a rise in the nominal value of imports in sterling terms. Similarly, if a sterling devaluation leads to improved price competitiveness of UK exports, they may become more attractive to the rest of the world. This effect is likely to be subtle and could take longer to feed through, as companies may find it difficult to make major changes to supply chains.

However, in practice, the impact of a sterling change is likely to be much more complex. Some companies may hedge against currency movements in the short- to medium-term. In addition, evidence suggests that a high proportion of UK imports are traded in foreign currency, while some UK exports are traded in sterling, so there will not necessarily be a straightforward pass through from the changes in the value of sterling to the value of trade.

Between February and March 2017, the volume of goods exported increased by 3.2% and is now 8.5% higher than in March 2016. Import volumes have increased by 8.5% in the month to March 2017, the largest monthly growth since December 2014. The growth in export volumes in the latter part of 2016 may be a consequence of the fall in the value of sterling, making UK exports more competitive. However, volumes of imports have also increased in the same period and therefore we are not yet seeing a notable narrowing of the trade deficit attributable to the sterling depreciation.

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7. What are the revisions to trade values since last month?

Since the last UK trade release, there have been revisions across both exports and imports of trade in goods for January and February 2017. The services data are currently forecast for 2017 and are not open for revision in this release.

The largest revision was to imports, with a downward revision of £1.0 billion in February 2017. This was mainly due to a revision to the imports of erratic commodities (revised down by £0.8 billion).

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9. Quality and methodology

Trade is measured through both imports and exports of goods and/or services. Data are supplied by over 30 sources including several administrative sources, HM Revenue and Customs (HMRC) being the largest. We have now published an assessment of administrative data sources for ONS trade statistics in accordance with the UK Statistics Authority Quality Assurance of Administrative Data (QAAD) toolkit.

This monthly release contains tables showing the total value of trade in goods together with index numbers of volume and price. Figures are analysed by broad commodity group (values and indices) and according to geographical area (values only). In addition, the UK trade statistical bulletin also includes early monthly estimates of the value of trade in services.

Further qualitative data and information can be found in the attached reference tables. This includes data on:

Detailed methodological notes are published in the UK Balance of Payments, The Pink Book 2016.

The UK trade methodology web pages can now be found on our website. These have been developed to provide detailed information about the methods used to produce UK trade statistics.

The UK trade Quality and Methodology Information document contains important information on:

  • the strengths and limitations of the data and how it compares with related data

  • uses and users of the data

  • how the output was created

  • the quality of the output including the accuracy of the data

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