Strong GBP Has Negative Impact on Exports

Order books for UK factories have stagnated as the strong pound and the protracted weakness of the eurozone affect demand for British goods overseas.

The CBI said in its monthly health check of industry that export order books stood at their lowest in more than two years following a sharp fall in March.

Only 10% of manufacturers said their export order books were above normal for the time of year, against 35% who said they were below normal. The balance of -25 percentage points compares with -8 points in February.

Rain Newton-Smith, director of economics at the employers’ organisation, said: “Sluggish export performance seems to be a headache that won’t go away, with a still subdued eurozone and headwinds from a stronger pound. But measures in the budget to support exporters should be a welcome boost for the sector’s longer-term prospects.

“With emerging markets facing a tough time and uncertainty continuing to hang over the eurozone, firms are having to work even harder for opportunities to sell their products and services around the world.”

The CBI industrial trends survey is the latest piece of evidence to suggest that the economy is growing less quickly than it was in the second half of 2014.

Overall, order books fell from a balance of +10 points in February to zero in March, while fewer firms said they had expanded output in the last three months. Stocks of unsold goods increased.

Paul Hollingsworth, UK economist at Capital Economics, said: “Looking ahead, it is clear that exporters will struggle to make headways given sterling’s appreciation and the weakness of demand in the eurozone.

via The Guardian

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza