Export figures lead to weaker pound
Yesterday's trade figures have caused concern in currency markets with a rise from £6.3 billion to £7.5 billion between February and March. It is believed that imports increased far quicker than exports even though the weaker pound has been helping exports of late. So what does this mean in the short to medium term?
The very fact that imports have increased at a far greater rate than exports could lead to pressure on prices and increased inflation. While the Bank of England earlier this week confirmed that inflation was not its main issue there is no doubt that unless inflation falls back in the short to medium term we could see UK base rates rise later in 2010. There are also fears that unless exports increase we could see the UK economic recovery encounter something of a setback which would obviously impact upon consumer and business confidence.
The UK economy is proving more and more difficult to forecast even though on the surface it should be fairly straightforward with sterling under pressure and exports offering better value to overseas buyers. However, the economic recovery is not quite panning out as expected and it seems to be one step forward and two steps back for the UK economy at the moment.
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