Jobless rise offset by boost in trade deficit figures
NIESR suggests zero growth in April, while unemployment rises to 2.2m
Wednesday, 13 May 2009
Further tentative signs of recovery in manufacturing and on the trade deficit emerged yesterday, despite a record rise in unemployment of 244,000 – the biggest jump since 1981 – leaving the total at 2.2 million.
Distressing as they are, economists usually regard the jobless statistics as a "lagging indicator", though the scale of the current increase seems likely to constrain consumer confidence and recovery for many months to come. More forward-looking data – such as the up-to-date data on industrial production and the trade figures from the Office for National Statistics (ONS) – reveal more hopeful trends.
Most encouragingly of all, the latest estimates of GDP from the National Institute of Economic and Social Research (NIESR) even suggested that the economy saw zero growth April, the first month that has not seen in decline in a year – possibly signalling an earlier end to recession than many had thought possible. The NIESR has a high reputation for accuracy in its economic predictions.
The NIESR said that the economy declined by 1.5 per cent in the three months to April, which, although a poor showing by the standards of the past few years, is a notable improvement on the 1.5 per cent decline seen in the official figures. It was substantiated by the new numbers on industrial production, which fell by a smaller-than-expected 0.6 per cent in March, with manufacturing output dropping by just 0.1 per cent during the month. Both figures were better than expectations and dire recent experience.
Survey evidence indicates that manufacturing firms are noticing some progress in their overseas order books, but yesterday's improvement in the trade deficit was much more a matter of the weak pound and depressed domestic demand squeezing imports than any revival in exports. The trade gap narrowed from £2.8bn to £2.5bn in March, although a weak start to the year saw the quarterly balance deteriorate from £8bn to £8.3bn Total exports of goods fell by 0.5 per cent to £18.7bn and total imports of goods fell by 1.5 per cent to £25.3bn.
Meanwhile, the ONS and an IDS survey both suggested that average earnings are rising at about 3 per cent per annum, excluding bonuses – a comparatively healthy showing for workers able to secure a pay rise at a time of generally falling prices.
Howard Archer, UK economist at Global Insight, commented: "Earnings growth is expected to remain under severe downwards pressure given that unemployment is rising sharply, companies are desperate to keep down their costs and retail price inflation has turned negative. Indeed, a substantial number of companies have imposed wage freezes."
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