UK trade deficit narrows but manufacturing weakens

An increase in oil, chemical and aircraft exports helped the trade deficit in goods to fall by more than £2bn to £7.72bn, the ONS said. Fewer imports of aircraft and ships also boosted the figures, it said.Manufacturing output rose by 0.3% in December, less than the 0.6% predicted. The wider measure of industrial output rose by 0.4% in the month.

However, the ONS said the weaker-than-expected growth was not enough to change the estimate of GDP growth in the fourth quarter of 2013, which was 0.7%.

When services were included, the overall trade deficit narrowed to £1bn in December. This was down from a deficit of £3.6bn the month earlier and also the smallest deficit since July 2012.

'Even picture'
Despite the weaker-than-expected manufacturing figures, Lee Hopley, chief economist at the EEF manufacturers' organisation, remained upbeat.

"Manufacturers had a strong finish to 2013, but more encouraging, are the indicators we've seen since the start of the year which suggest that positive trend has rolled into the early part of 2014.

"Our expectation is that we see another quarter of 0.6% expansion in the three months to March, with a pretty even picture across sectors.

Ms Hopley added that export demand would "gather pace" through the year, and the official data would follow.

The UK's economy grew last year at its fastest pace since 2007, expanding by 1.9%.

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Wage rises outpaced by inflation for fifth year running, official data shows

The average pay rise improved to 2.2% – from 1.5% a year earlier – but still failed to match inflation at 2.4%
Wage rises failed to keep pace with inflation for a fifth successive year, according to official figures that show a recovery in pay in the year to April 2013.

Average pay rises jumped to 2.2% from the previous year's total of 1.5%, but the recovery still left workers worse off after prices rose by an average 2.4%.

Much of the rise in wages was distorted by City bankers and other well-paid staff delaying salary rises and bonus payments to take advantage of the cut in the top rate of tax from 50p to 45p in the £1.

The decision of people earning more than £150,000 to wait for a change in the tax rate before taking some of their pay could account for much of the failure of average pay to recover during 2012.

The Office for National Statistics said median average annual earnings before tax for full-time employees, where workers were in the same job for at least a year, was £27,000. This was an increase of 2.1% compared with £26,500 in the year ending 5 April 2012.

Median gross annual earnings for men were £29,300, up 1.9% from 2012, and for women were £23,600, up 2.2%. But despite the higher pay rises for women, the pay gap between women and men widened from 9.5% to 10%.

More women work in part-time jobs than men and much of the recovery in employment until the spring this year was in part-time work, probably leading to a lower gross figure. Low pay remains a feature of British working life, according to the figures.

The ONS found there were 203,000 jobs held by over-21s with pay less than the national minimum wage, in breach of low pay rules.

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Concerns over underlying health of UK economy as 0.3% growth confirmed

ONS says Britain avoided a triple-dip recession because businesses replenished stocks – rather than from surging sales

Britain suffered one of the biggest falls in investment among the G8 last year, adding to concerns that UK businesses are losing competitiveness by refusing to spend on new equipment.

According to an analysis by the House of Commons library, Britain invests a lower percentage of GDP than any other of the leading western industrial nations. The figures, obtained by Labour, show that while most G8 countries have increased investment as a proportion of national income since 2010, Britain suffered the biggest fall of any G8 country apart from Italy.

In France and Germany, capital investment has remained largely stable at 19.9% and 17.2% of GDP respectively. In Britain it fell 0.8 percentage points between 2010 and 2012, to 14.3% of GDP. The US, Japan, Canada, Italy and Russia have higher levels of capital investment than the UK.

The ONS said UK consumer spending rose a meagre 0.1% while business investment fell 0.4%

David Cameron hosts the G8 countries in County Fermanagh in July and is expected to stress the need for the world's leading economies to make greater efforts to generate growth.

The Treasury's independent economic forecaster, the Office for Budget Responsibility, has pencilled in a strong rise in business investment next year in response to growing optimism that the UK recovery will be gathering strength in 2014. However, the OBR has been forecasting a bounce in business investment for each year of this parliament only to see its targets missed.

Ed Balls, Labour's shadow chancellor, said: "Britain has a poor historical record on investing for the long term but things have got worse not better over the last three years. Since 2010 we've seen the biggest fall in investment as a share of national income of any G8 country other than Italy."

"Alongside action now to ensure we have a strong and sustained recovery, we need long-term reforms to make our economy stronger, more balanced and better able to attract new investment and create skilled jobs for the future."

In March Labour published a report by former Institute of Directors boss Sir George Cox, who found businesses wanted the government to play a constructive part in fostering long-term investment.

Figures from the Office for National Statistics showed that business investment was a significant drag on growth in the first three months of the year. The ONS confirmed that Britain avoided a triple dip recession with growth of 0.3% in the first quarter, but a breakdown of the figures showed that investment dropped 0.4%, mainly offset by stockpiling by British businesses.

A Treasury official said several surveys highlighted a nascent recovery in business confidence and activity leading to the expected increase in investment next year. "There are positive signs that activity is picking up across the economy."

The chancellor, George Osborne, is keen to move away from Britain's traditional dependence on the City and government spending as the chief drivers of economic activity. In the first two years of the coalition he focused on providing support for manufacturers and increasing the amount of credit available to firms for investment.

However, separate ONS figures showed that a 0.2% increase in activity across the services sector in March relied heavily on a buoyant banking sector and a modest rise in government spending.

David Tinsley, UK economist at BNP Paribas, described the reliance on stockpiling as "unimpressive". Capital Economics analyst Martin Beck said talk of rebalancing the economy looked "forlorn".

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Article source : http://www.guardian.co.uk