UK Falling Trade Deficit Rebukes Brexit Fearmongers

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A decline in Britain’s trade deficit due to a sharp increase in exports is emboldening supporters of the UK leaving the European Union.  The country’s trade deficit with foreign countries fell significantly, after a high deficit was recorded earlier in the year.

According to the Office for National Statistics, the trade deficit fell 7.2% in April from the prior month, which other studies suggest are a result of higher exporting activity and resurgence in Britain’s industrial output.

Exports jumped 11.2% from the prior month, reaching the highest point since 2013.

Strong Manufacturing

The ONS study noted that manufacturing output rose 2.3% in April from the prior month and 1.6% on a year-over-year basis, the largest increase in nearly 4 years. The trend was driven largely by the pharmaceutical industry, which saw an 8.6% increase in output.

"Anecdotal evidence suggested increased exports were the main contributing factor to the rise in the pharmaceutical sector,” said the ONS in their report.

Economists note that the increase in manufacturing may have also helped retail sales, which rose significantly in April. Some analysts say that the increase in output is helping the labor market and giving consumers more confidence to spend.

Critical View

Many analysts are adopting a critical view of the data, dismissing it as volatile and not indicative of fundamental economic strength.

Market Economics Chief Economist, Chris Williamson, said that the ONS data is likely only part of a short-term blip, and next month’s data will be significantly weaker. "The improvement in the official data also contrasts with deteriorating survey evidence on the health of the economy, and manufacturing in particular, in recent months, suggesting the April upturn may be reversed in May,” he said.

Williamson has repeatedly warned in reports that a Brexit would be detrimental to Britain’s economic health, as exports would slow and companies would struggle to find their footing in an uncertain regulatory environment.

Some analysts have predicted that a slowdown in manufacturing and exports would intensify in April and May, arguing that foreign firms would pull back on relationships with British producers as they await the decision of the UK’s referendum on whether to remain in the EU or not.