The statistics, published today in the UK, is disappointing. Final figures for GDP in the first quarter was worse initial estimates and significantly below forecasts (Appendix 1). According to the ONS (Office of National Statistics), the economy has lost in the first quarter of this year about 2,4% (previously reported decline of 1.9%), while the decline for the first quarter of last year (2010) was amounted to 4,9% against the earlier estimate of 4.1%. The starting point of a recession is now called the second quarter of 2008, whereas previously talked about the zero dynamics in this period.
The trade balance deficit is considerably worse than has been expected, amounted of £ 8,5 billion, against expectations of £ 6,9 billion (see Appendix 5). In addition, the indicators were revised deficit for the fourth quarter, up from £ 8,8 to £ 7,6, which was reflected also in the overall GDP in the direction of reducing them.
So weak data overshadowed an unexpected rise in house prices marked Nationwide. Its price index rose by 0.9% after rising 1.3% a month earlier, and it should be also noted the continuation of the upward trend in the housing market for several months.
Nevertheless, Nationwide warns that stabilization takes place at very low levels and restore the price index entails some risk. Long-term dynamics suggest that the price approached the level of trend, usually after a sharp spike follows a dip, as observed in the 90's.
Export acts as a component of aggregate spending, along with the consumption (C), investment (I), government spending (G), so it increases aggregate demand. Greater volume of total expenditure corresponds to a higher level of equilibrium output. Consequently, export growth may increase national income and vice versa (Appendix 2). The same effect leads by foreign investment (see Appendix 7).
Imports in this model is considered as a function of national income. In other words, the goods are imported, have to spend a portion of the national income in the country, thereby stimulating productive activity in another country (see Appendix 3).
Thus, in a decline in production is necessary to restrain imports and encourage exports, but in terms of the output growth is vice versa. According to Appendix 5 and 6, the UK has all signs of economic recession.
So the factors that influence country’s level of exports:
- Output growh (GDP)
- FDI (inward) growth
- Low level of unemployment
- Low level of inflation.
- The factors that influence country’s level of imports:
- Decline in production (GDP)
- Rising level of unemployment
- Rising level of inflation (Appendix 7)
- Negative trade balance
In assessing the economic condition of society there is a need to identify the relationship between imports and exports of the country. This ratio is determined by the balance of payments of the country, part of which is the trade balance (see Appendix 5 and 6). Here we note that generalizing indicator is its balance of payments deficit - the difference between import and export of its articles. Excess of imports from other countries over their own exports gives a negative balance of payments and can lead to unpleasant economic consequences, such as the trade deficit. To pay for the latter country had to make debts. To repay the debt often have to reduce domestic consumption.