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British Trade Balances Improve

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British Trade Balances Improve

The British National Statistics Office has just released details of February’s trade figures. The Total Trade Balance is running at a deficit of GBP £2.058BN which is a further improvement from January’s negative £2.565BN. Excluding trade with the European Union countries the balance becomes a deficit of £2.919BN, this is also better than January’s £3.99BN loss. By then removing Services from the equation Britain’s Goods Trade Balance is £9.094BN, again a further gain from February’s statistic of £9.793BN.

The strength of the British Pound is proving somewhat problematic for the trade readings, although at historically normal levels, Sterling has been rising steadily over the last year. The concurrent rise of the Euro is providing some relief but overall the British economy could do with a cheaper currency to aid it’s recovery.

All the main vital signs for the British economy are healthy, GDP is growing at an impressive 2.7%, core inflation is a comfortable 1.6% and unemployment, although historically high at 7.2%, is rapidly moving in the right direction. An 88.7% Debt to GDP ratio is on the high side but compared to some other developed economies it is certainly not something the authorities should lose sleep over, yet.

The UK’s current budget deficit is the real fly in the ointment for the British recovery. The Chancellor of the Exchequer, George Osbourne, has announced some measures to attempt to get this record deficit back in line but critics are suggesting that these will fall well short of providing a solution. Politically, it is challenging for the Chancellor to introduce austere cuts to attempt to close this gap, particularly as an election year is only around the corner. It has instead become a balancing act, the signs of economic recovery are there but this activity has yet to make a measurable impact on the Treasury’s finances. Barring unforeseen events it is likely that the British upturn will automatically benefit the nations current account, the question is how big will this record deficit be allowed to get before the inevitable turnaround.

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