International Economic Review: July 2017

An analysis of international economic statistics and the main economic stories

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Table of contents

  1. Authors
  2. Main points
  3. Introduction
  4. Estimating the value of service exports by destination from different parts of Great Britain
  5. Measuring the impact of the depreciation of sterling on the current account and the international investment position
  6. The UK experience of global commodity price movements
  7. Consultation on changes to the ONS gross domestic product release schedule
  8. Understanding the UK economy
  9. Effect on gross domestic product and other economic statistics from improvements being introduced in Blue Book and Pink Book 2017
  10. Annex A – Weights for IMF and UK-based commodity indices
  11. Annex B – Demand and supply indicators

Main points

Service exports by destination

  • London dominated the absolute value of service exports to the EU accounting for 42% of all EU service exports from Great Britain in 2015.
  • Although exporting smaller values of services compared to London, the regions with the highest proportion of their exports sent to the EU were: the North East (50%), the West Midlands (47%), the South East (45%) and Yorkshire and The Humber (40%).
  • The North West dominated in the export of services in the manufacturing sector with 53% of its exports going to Asia.

Impact of sterling on the current account and international investment position

  • The effective export price (UK export price adjusted for exchange rate movements) has been on a declining trend and has fallen 5.2% since Quarter 3 (July to Sept) 2015.
  • There is limited evidence of a sustained pick-up in export volumes due to the recent decline in the value of sterling, but there are tentative signs of a slow-down in services imports (particularly of UK residents travelling abroad) in response to the recent movement in sterling.
  • The currency depreciation since Quarter 3 2015 has had a positive effect on foreign direct investment (FDI), portfolio and other investment credits in each quarter of 2016.
  • Currency effects are also noticeable in the quarterly change in the net international investment position throughout 2016.

The UK experience of global commodity price movements

  • The sterling exchange rate depreciation during 2016 has been a strong influence on differences between the UK-weighted index for commodity prices compared with world commodity prices, which are also reflected, to differing degrees, in the prices producers pay for imported food and metal commodities.

Understanding the UK economy

  • The household saving ratio fell to a new record low and is mirrored in the net lending and net borrowing data, which show that in Quarter 1 (Jan to Mar) 2017, the household and non-profit institutions serving households (NPISH) sector continued to be a net borrower.
  • There was a 0.5% fall in labour productivity in Quarter 1 2017, ending a run of productivity growth that extended over the previous four quarters, suggesting a continuation of the “productivity puzzle”.
  • As at May 2017, total real weekly pay remains below its pre-downturn level for finance and business services, construction and manufacturing industries.

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Source: Office for National Statistics licensed under the Open Government Licence v.1.0.

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