11 October 2007
Growth of UK Export markets falters due to credit crunch
Expansion slows to lowest rate since May 2005
Growth of UK Export Markets eased for the third consecutive month in September, falling to its lowest rate in almost two-and-a-half years, according to the Euler Hermes UK Purchasing Managers’ Index® (PMI®) for exporters, produced by NTC Economics Ltd for Euler Hermes UK, an Allianz company.
“The slowdown in UK export market expansion stems largely from a weakening of the Eurozone private sector economy, where growth fell at its strongest since the aftermath of 9/11 in October 2001” explains James Daly, Commercial Director at Euler Hermes UK. “This can partly be attributed to the recent “credit crisis”, which has certainly exacerbated an already slowing trend in the single-currency region.”
Although the fallout from the recent turmoil in financial markets is still largely unknown, markets
have generally been calmer in recent weeks, raising hopes that the Eurozone economy will weather
the storm. However, downside risks to future performance remain in place, suggesting that the
Eurozone is still susceptible to sluggish growth ahead.
Daly remains cautious: “Given that the Eurozone is the principal destination for UK shipments, developments in the region, such as weaker global demand, high interest rates, and strong currency, could spell bad news for British exporters.
“UK companies face further hurdles as trading conditions in the US remain difficult. While fears of a recession are subsiding, growth is expected to be relatively weak going forward. With demand in the world’s biggest economy expected to slow down, the continued strength of sterling against the
dollar presents UK companies operating in the US with further challenges,” he concludes.
The relatively downbeat picture for British exporters was further enhanced by the latest survey
data on UK manufacturing exports from the Chartered Institute of Purchasing & Supply (CIPS) and
NTC. September figures showed that growth of manufacturing exports was maintained, but at the
slowest pace of 2007 so far. Increased competition in foreign markets was cited as a factor
driving export growth lower.
Although the Euler Hermes UK PMI Exporters’ Index remained above the crucial 50.0 no-change
mark in September, the rate of expansion signalled by the index continued to slow, falling for a
third successive month. At 54.6, the index recorded its lowest reading since May 2005, and was
well down on the previous month’s 56.3.
The Euler Hermes UK PMI Exporters’ Index is derived from the monthly Purchasing Managers’ Index® (PMI®) surveys conducted by NTC Economics and other organisations around the world covering 9,000 companies in 21 countries. By weighting together the national PMI data according to the UK’s trade with each country, a reliable monthly indication of the health of UK export markets has been calculated. The index has tended to move in advance of changes in official data on actual UK export sales, thereby providing an advance indication of export performance.