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UK Inflation and Exports Fall More Than Expected

The latest round of economic results threw up a couple of surprises, as both inflation and exports from the UK fell more sharply than had been anticipated. With the double threat of Covid-19 and Brexit still present, it could be some time before these numbers get back to normal.

The Report on Inflation

The second lockdown imposed on the UK caused inflation to slow in November, with an annual rate of 0.3% seen in the month according to the Office for National Statistics (ONS). This was a significant drop from the 0.7% that was reported the month before and lower than the expected drop of 0.6%.

With the severe restrictions across the country stopping businesses from getting a sales boost in the run-up to Christmas, clothing, food and recreation all suffered from dropping prices. Part of this came down to the Black Friday sale prices.

The biggest falls were seen in clothing and footwear, which was put down to heavy discounts that were applied in November. Many types of food and non-alcoholic drinks also saw lower prices, with an overall 0.5% decline in these areas.

Among the areas where growth was seen were games and toys. If we take out alcohol and fuel from the numbers we are left with core inflation, which was 1.1% in November, following on from 1.5% in October.

Looking ahead, the typical rail fare increases have been pushed back from January to March, with a 2.6% rise planned. This increase has been designed to recover some of the money spent during the pandemic, at a time when many companies are paying collection agency fees to recover funds.

The truth is that UK inflation has been slowly falling for a couple of years. However, the pandemic has caused the decline to steepen, with it reaching a low point of 0.2% a few months ago. Analysts think that inflation will rise to 1.5% by the end of 2021 if a no-deal Brexit is avoided.

Exports Fall Behind the EU

Another set of figures to be published recently shows that the UK’s goods exports have fallen behind the EU and other comparable economies. Over the same period, Britain’s exports to China, the EU, Japan, India and the US have all fallen.

Among the worrying details, we can see that Italy exported more goods to the US market than the UK in the six months up to October. This is the first time that the Italians have overtaken the UK in this respect since at least 1980, which is when records began.

These numbers put more pressure on the country’s negotiators to come up with a trade agreement with the EU before Brexit is finalised at the end of 2020. They also need to agree trade deals with the countries that British manufacturers have previously dealt with through EU agreements.

The UK’s exported goods market, not including precious metals, was noted as having a value of £250 billion in the year through to October. This is 17% lower than the figures for 2019 in this respect.