Volcanic ash clouds Euro trade picture – E&Y
A SENIOR adviser at Ernst & Young has said the economy should benefit from a steady rise in exports – despite the volcanic ash cloud crisis disrupting progress.
However, Andrew Goodwin, senior economic advisor to the Ernst & Young ITEM Club, said the weakness of the Eurozone remained a worry to a UK recovery.
Mr Goodwin said despite the latest international trade data confusing the picture slightly; generally the trend in export growth was positive.
He said: “Given the disruption caused to air freight by the ash cloud it’s difficult to read too much into the April figures in isolation.
“But looking at the underlying trends there does seem to be some encouraging, yet tentative, news on exports.”
Stripping out oil and other erratics, export volumes were picking up nicely, he said.
“Over the past three months they are up by more than 8% compared with a year earlier. Up until now the exports data had been surprisingly weak given that the surveys were reporting surging export orders, the pound remains weak and manufacturing output has been growing strongly,” he said.
Mr Goodwin said that given the pressures on domestic demand – with consumers still going through a balance sheet adjustment and deep public sector cuts on the horizon – exports remained key to a strong and sustainable UK recovery.
“The sustained weakness of the pound should continue to offer assistance in that regard,” he added.
However, he said a further cloud remained on the horizon – this time nothing to do with a volcano.
“The issues facing the Eurozone remain a concern. To date, the pickup in exports to the Eurozone has been solid, but has lagged behind the rest of the world.
“And with the Eurozone being our biggest export market, the possibility of the Eurozone relapsing into recession represents a threat to the UK recovery,” he warned.
