What difference has the fall in exports by British industry made to the shrinkage of the economy? A big difference – and Europe is a major factor.
As reported by the ONS today, the economy shrank markedly in the 2nd quarter of 2012, but by less than the stats people had thought before. UK GDP (everything we produce) was down 0.5% rather than the previous estimated fall of 0.7%.
There are various factors, for instance construction work is well down from last year and manufacturing has fallen back as well.
Construction contributed 0.3% to the shrinkage and manufacturing 0.1%.
But international trade has been a major influence too, both what we produce to sell to other countries and what we buy from them. Exports affect GDP, so does lower spending on imports by hard-up UK shoppers.
Exports did really badly in the 2nd quarter. So how much did other countries’ problems affect our economic growth? And how much can we blame this on the havoc in the Eurozone?
Over the 3 months UK exports of goods to the EU were down £2.8bn on the previous quarter to £36.5bn. The biggest factor was oil, but exports of chemicals, cars, consumer goods, partly manufactured goods and industrial equipment were all down.
Exports to non-EU countries were down by £1bn to £36.9bn.
The ONS says that the drop in total exports depressed UK growth by 0.5%, which happens to be the same as the new figure for the overall shrinkage in GDP over the quarter. It’s just one component of the economy, out of many, but without the export drop there’s no GDP drop.
It’s worth pointing out that my £2.8bn figure for the export drop to the EU only includes visible goods (things you can see and touch), while the percentage figure for the impact on GDP includes intangibles, such as financial services and advertising.
Even so, you could argue that without the poor export performance, GDP would have been unchanged in the 2nd quarter. Also, that the Eurozone has to take most of the blame.