The last couple of days has seen news on the UK to delight all but the most cynical. Alas it has also seen news to make the cynical look smug, and say ‘I told you so’.
The good news relates to trade. Exports of goods in the second quarter of 2013 reached £78.4 billion, the highest on record. Okay, imports were up too, rising to £103.3 billion, the highest level since the three months to November 2011. But when it comes to records, ‘best ever’ would normally be seen to score the ‘best in 18 months’.
The UK’s deficit in goods and services in June was £1.5 billion, the lowest deficit since January.
But the real encouragement relates to exports outside the EU. In June exports of goods outside the EU rose, while imports fell. In fact exports to non-EU countries increased by £1.3 billion (10 per cent) to £14.2 billion and imports from non EU countries decreased by less than £0.1 billion (0.2 per cent) to £16.8 billion.
Within the EU, exports of goods also rose, but not by as much (£0.9 billion or2.3 per cent), while imports increased by £0.3 billion or 0.6 per cent to £52.9 billion.
In Q2, UK exports to the US rose by £348 billion while imports were £96 billion, and exports to China were up £153 billion while imports shrunk by £17 billion. The rise in UK exports to China seems to be part of a trend. They have risen sevenfold since 2002.
Don’t over-egg the trade data; it is good, but not brilliant. It is encouraging, however.
Less pleasing was data compiled by the House of Commons Library at the request of the Labour Party. It found that since 2010, of the 27 countries in the EU only three have seen real wages (that’s wages after inflation) fall so steeply. It turns out that UK wages, after inflation, have fallen by 5.5 per cent since 2010. Only in Portugal, Greece and Holland have wages relative to inflation fallen more than that.
Those two sets of data show the two sides of the UK economy at the moment.
There are signs, albeit not overwhelming signs, of exports leading recovery. But as long as wage rises continue to lag behind inflation, the UK’s economy looks fragile. Much of the growth we are seeing is coming on the back of consumers spending more, which itself occurs because they are once again running up debts.
The fix lies with getting productivity up, and that surely depends on more investment. That is why George Osborne’s approach to creating growth via rising house prices is dangerous, but we don’t seem to have learnt from past lessons.
Not enough investment and rising house prices were characteristics of the UK economy before 2008. They are becoming characteristics again.
© Investment & Business News 2013