Richard North, 14/04/2021  
 


As before with the January trade figures, it is better to by-pass the legacy media altogether and go straight to the ONS website for the February results.

There, by way of the highlights, we will find that exports of goods to the EU, excluding non-monetary gold and other precious metals, partially rebounded in February 2021, increasing by £3.7 billion (46.6 percent) after a record fall of £5.7 billion (negative 42.0 percent) in January.

The increases in exports to the EU in February 2021, we are told, were driven by machinery and transport equipment and chemicals, particularly cars and medicinal and pharmaceutical products.

Imports of goods from the EU, excluding non-monetary gold and other precious metals, showed a weaker increase of £1.2 billion (7.3 percent) in February 2021 after a record fall of £6.7 billion (negative 29.7 percent) in January.

The more modest increase in imports from the EU were driven by machinery and transport equipment, and chemicals, particularly cars and medicinal and pharmaceutical products.

Interestingly, total imports of goods from non-EU countries, excluding non-monetary gold and other precious metals, increased by £1.7 billion (10.2 percent) in February 2021 while exports fell by £1.5 billion (negative 10.5 percent).

The total trade deficit for February 2021, excluding non-monetary gold and other precious metals, widened by £0.5 billion to £1.4 billion; imports increased by £2.9 billion (6.5 percent) and exports increased by £2.3 billion (5.4 percent).

The total trade deficit, excluding non-monetary gold and other precious metals, narrowed by £2.1 billion to £6.3 billion in the three months to February 2021; imports decreased by £5.7 billion (negative 3.8 percent), while exports decreased by £3.6 billion (negative 2.5 percent).

Trade in services imports and exports have consistently remained at a lower level since Q2 2020 as services accounts such as travel and transport trade continue to be affected by coronavirus (COVID-19) restrictions.

Given the circumstances, the ONS cautions that recent trade estimates are subject to more uncertainty than usual. Monthly data are erratic, it says, and it encourage users to apply caution when making short-term comparisons of trade movements.

January 2021, it reminds us, saw significant falls in imports and exports of goods from the EU, particularly in machinery and transport equipment, and chemicals. The data from that month were the first to show trade after the transition period ended on 31 December 2020.

In addition to the changes facing the UK after the transition period ended, England joined the rest of the UK in another national lockdown at the beginning of January 2021, which continued through February. The falls are also consistent with the unwinding of stocks, after businesses stockpiled in November and December 2020 in preparation for the end of the transition period.

The ONS goes on to say that the 7-day average of daily shipping visits increased from 290 visits on 31 January 2021 to 344 on 28 February 2021. The Office expects shipping indicators to be related to the import and export of goods, and therefore these early indicators suggest partial recovery consistent with the increases seen in February trade figures.

Despite the evidence of partial recovery from the substantial January falls in some commodities, though, it states that it is still too soon to determine to what extent the monthly changes in trade for January and February can be directly attributed to the end of the transition period.

From evidence adduced by the Business Insights and Conditions Survey (BICS), it is suggested that additional paperwork and higher transportation costs were the biggest challenges facing UK importers and exporters in February, which most businesses attribute to leaving the transition period.

However, trade patterns are likely to also reflect the impacts of the unwinding of stocks, coronavirus (COVID-19) pandemic restrictions, and lower demand due to the UK and global economic recession. It is too soon, says the ONS, to be able to assess to what extent recent trading patterns are short-term or reflect more lasting structural changes.

Adding some detail to the broad sweep of figures, the ONS notes that the increase in exports of machinery and transport equipment to the EU was driven by a £0.2 billion (26.3 percent) rise in exports of cars. The monthly export of cars to the EU in February 2021, it says, was at similar levels to what was seen in February 2020.

However, the increase in car exports has not seen a corresponding increase in manufacturing activity. The latest figures from the Society of Motor Manufacturers and Traders (SMMT) suggest that car manufacturing for exports decreased 8.1 percent between January and February 2021.

Illustrating the interplay of the various factors involved, it suggests that this is due to the ongoing impact of the coronavirus (COVID-19) pandemic as showrooms remain closed in the UK and across Europe.

Despite the ongoing pandemic challenges, though, the EU remains the UK's largest car buyer as demand for UK vehicles remains high. Despite the 14.0 percent fall in overall UK car production, production for electric vehicles, plug-in hybrid and hybrid vehicles increased by 25.3 percent.

This, in part, is believed to be a response to government initiatives such as the introduction of Clean Air Zones and improved charger infrastructure, driving demand for electric vehicles.

Total exports of chemicals increased by £0.5 billion (13.4 percent) in February 2021, with a £0.9 billion increase in exports of chemicals to EU countries, specifically Belgium.

Significantly, the increase in exports of chemicals to Belgium was largely seen in medicinal and pharmaceutical products. Countries in Europe began to see significant rises in cases of the (COVID-19) coronavirus throughout February, increasing demand for medical products.

Then the exports figures for food and live animals to the EU are especially interesting. They actually increased by £0.3 billion (77.4 percent) in February 2021, after being significantly impacted in January.

Confounding the wailing from some quarters, exports of fish and shellfish to the EU also saw an uptick in February 2021. Exporters, it seems, have adjusted to new regulations following the end of the transition period. Says the ONS, the disruptions to food exports in January 2021 appear to have largely been overcome and may have only had short-term impacts on trade.

As for non-EU trade and the prospects for "Global Britain", total exports to non-EU countries fell by £1.5 billion (negative 10.5 percent) in February 2021, driven by a £0.6 billion (negative 24.2 percent) fall in exports of "miscellaneous manufactures".

Illustrating how easily one month's figures can be distorted, the lower value of miscellaneous manufactures exports in February is partly explained by the export of a single high value "erratic good" in January. The nature of this "good" is not specified.

The total trade deficit for February 2021, excluding non-monetary gold and other precious metals, widened by £0.5 billion to £1.4 billion. This was due to imports increasing by £2.9 billion and exports increasing by a lesser £2.3 billion.

Removing the effect of inflation, trade in goods commodities volumes largely followed the same trend as current prices. An exception to this was trade in fuels, which saw decreases in February following an erratic 2020 picture. In February 2021, imports and exports of fuels fell by £0.7 billion (19.5 percent) and £0.5 billion (6.9 percent) respectively on the month.

Needless to say, there are those who have been quick to overlay their brand of spin on the figures, although the more sanguine commentators have for some time been expecting a slow-burn effect.

For my part, I entirely concur with the ONS view, and stand by my comments from my earlier piece, that it is far too early to draw any firm conclusions. The data are far too “noisy” and many of the effects due to Brexit many take some time to appear, especially when Covid continues to be a confounding factor.

Soon enough, we'll see which way the wind is blowing, by which time we might even have more pressing things to concern us.

Also published on Turbulent Times.






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