UK exports driving roughshod over the strong pound via ForexLive

A strong pound affecting exports? Not in the car industry it isn't.

UK car exports saw its best July on record alongside production rising 2.8% m/m and 3.4% y/y, the highest since 2004, according to July data from the Society of Motor Manufacturers and Traders.

Domestic production was 2.4% m/m vs June and 2.0% y/y, while exports rose 2.9% m/m and 3.8% y/y. Exports hit the 5 million mark since the beginning of 2010 with the average worth per car up to around £20,600 vs £10,200 in 2004.

Nearly 8 out of 10 cars made are now shipped overseas.

This is great news for the car industry that has suffered some big downturns over the years and has come in no small part to heavy investment by foreign owned car makers like Jaguar. What is also good news is that a lot of the exports are top end models, which are obviously bigger ticket items.

What may be surprising is that Europe is still the biggest export market with China and Russia pushing the US down into fourth spot on the export list. You can bet your last quid that the government will be looking to protect Russian exports from any sanctions

The export story doesn't end there though as the British Chamber of Commerce/DHL Q2 2014 survey reported that export activity was at the highest level on record and that 70% of exporters believe that turnover will improve over the next 12 months. That's 10% more than the reported in Q2 2013

Other data showed that;

• 72% of manufacturers are more confident about turnover, up from 68% in Q1
• Service sector firms were less confident, 70% from 73%
• 47% of exporters reported increases in export sales, 6% saw a fall
• Employment intentions are up 10% from a year ago with 41% expecting to increase hiring
• Cash flow also improved with 35% seeing an improvement on Q1 next to 15% who saw it decrease
• Regionally the highest export activity was seen in the East Midlands, Northern Ireland Yorkshire and the Humber

The director general of the BCC was upbeat about export prospects but warned that the drive to push more of the domestic market overseas needed to improve.

“Our exporters are bullish and optimistic about the future, with many expecting an increase in turnover having seen a rise in export sales in Q2. The volume of trade documents issued this quarter suggests that exporting activity across the UK is at an all time high. This is fantastic news – as boosting our international trade efforts are key to our long-term economic success.”

“But there is still more the UK can do if it is to reach its full exporting potential. Our international trade survey published recently showed that less than half of the businesses have ambitions to grow overseas. I understand this to a degree, as I speak to businesses that have full order books here in the UK and don't see why they would need to start selling abroad. This is why we need to transform the domestic mindset of those businesses by creating an environment that makes it worthwhile for them to export.”

 

While it's great news for our exports perhaps the biggest thing to note is that none of these reports contained any mention at the strength of the pound. Part of the reason we are seeing improved exports is that we can be competitive on prices with import costs lower due to the higher pound, something that I've alluded to previously.

It's also very good that we are branching out into other markets so that we can diversify business away from the weaker markets like Europe. DHL note that exports to Chile rose 72% this year to £1.2bn. That's no small potatoes and show that UK business can be very proactive in seeking new markets. It shows that the UK economy is ticking along and that if Europe does recover it will be a massive boost to the UK.

Now before I start jumping up and singing God save the Queen with tears in my eyes, it's also important to note that this is but one part of the big UK economic picture and there are still many other export sectors that are maybe not enjoying such good fortunes. We'll need to see this type of news become more broad based and that's going to be difficult with Europe still in a mess.

Good news yes, but maybe more of a glass half full scenario. In any event it's still a “watch this space” moment.

posted via ForexLive