Euler Hermes UK Exporters' PMI - December 2008

January 2009

Falling pound helps boost exports in December

Key Points

> Growth of UK exports quickened due to
substantial drop in the value of sterling...
> ...as global activity continued to decline.
> Sharp contractions in output registered in the
US and Eurozone.

Summary

December data suggested that the severe depreciation in the value of sterling over the month had provided some relief for UK exporters, despite further considerable declines in global activity.

At 54.1 in December, the Euler Hermes UK Exporters’ Index, compiled by Markit, signalled a solid increase in exports for UK companies. This represented an improvement on November, where growth in exports was weaker. Exports have now risen continuously since September 2004, although in recent months, the pace of increase has generally eased as sharp slowdowns in export markets negatively impacted on underlying demand for UK produced goods and services.

A further substantial depreciation in the value of sterling in December provided some respite for UK exporters. On a trade weighted basis, sterling was close to 22% lower at the end of December compared with one year earlier, and had fallen to near parity against the euro.

The Euler Hermes UK Exporters’ Index showed that the positive trade impacts of weak sterling seen in early 2008 had begun to ease in the second half of the year as the global downturn gathered pace.

However, the strength of the depreciation in December seemed sharp enough to boost export sales as 2008 drew to a close.

Exports increased in December, in spite of a further considerable decline in UK export market conditions. Sharp contractions in business activity were recorded in the UK’s major trading partners, particularly the US and Eurozone. Moreover, the deterioration in export markets signalled by the Euler Hermes UK Export Climate Index was broadly similar to the series record posted in November.

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Euler Hermes UK Exporters' PMI - December 2008