Second consecutive quarter of export growth a positive

ANALYSIS:Value of goods exports in April-June was above average quarterly level seen in past five years, writes DAN O'BRIEN, Economics Editor

EXPORTS ARE going in the right direction, despite the blip in the figures in June. With the release yesterday of trade receipts for that month, the full picture for the second quarter of 2010 is now visible. A second consecutive quarter of growth, from the trough at the end of last year, is a positive development.

As the accompanying bar chart shows, the value of goods exports in April-June was above the average quarterly level of the past five years.

Although the June numbers registered a month-on-month decline in seasonally adjusted exports, the fall was not unusual for such a volatile data series.

The figures also show that imports are up. It is good that we are buying more from the rest of the world. The figures suggest that companies are tentatively rebuilding their inventories of inputs – usually a sign of greater confidence in the future.

A detailed breakdown of the figures is only available up to May. As the pie chart shows, in the first five months of the year, the United States has been our biggest export market – as has been the case since 2003, when, for the first time, goods shipped across the Atlantic exceeded those crossing the Irish Sea to Britain.

Belgium is now our second largest market for goods, having overtaken Britain for the first time last year.

This is likely to be almost entirely accounted for by dealings between multinationals’ Irish and Belgian affiliates. It could well include some creative accounting designed to ensure that profits are booked in Ireland to avail of our low corporation tax.

In terms such as employment, Britain remains a more important market.

Thus, what happens in the US and British economies is vital for our prospects of enjoying a trade-led recovery.

Yesterday, statisticians in both countries revised earlier calculations on the size of their respective economies. Their findings: the British economy is a fraction bigger than previously thought, and that of the United States is a little smaller.

Our nearest neighbour is doing well. British gross domestic product (GDP) in the second quarter of the year grew slightly faster than previously thought, at 1.2 per cent over the first three months of the year. This was the most rapid pace of expansion in a decade.

More timely retail sales figures – for July – suggest that Britain’s momentum was maintained into the second half of the year.

If the British economy is accelerating, the United States is running short of breath.

In the second quarter, GDP grew by 0.4 per cent. Although the revision was smaller than expected by many economists, it is a significant slowdown on the first quarter, when the economy expanded at more than twice the second quarter rate.

This and a slew of other data give cause to be concerned about the dreaded “double-dip” recession taking hold in our largest export market.