Does a current account deficit matter?

Yes according to economist Roger Bootle writing in the latest edition of the Deloitte Economic Review and reported in this article from the Financial Times.

“Britain is headed for its highest peacetime current account deficit and both household and government spending will have to slow painfully to correct it, according to economist Roger Bootle”

Our whopping trade deficit!

International trade statistics always come with a health warning atatched to them - the data on the value of exports and imports is frequently subject to future revisions. That said, the ONS released figures today showing that the UK economy ran a current account deficit for the year 2007 of £57.8 billion (-4.2 per cent of GDP), compared with a deficit of £50.7 billion in 2006 (-3.9 per cent of GDP). The rise in the annual deficit was mainly due to a higher deficit on trade in goods and a lower surplus on investment income.  A deficit of £46.6 billion was recorded with the EU in the 2007,
compared with a deficit of £39.0 billion in 2006. The deficit on trade in goods was £87.6 billion in 2007, a rise of £10.1 billion compared with 2006. The surplus for trade in services was £38.5 billion in 2007, a rise of £7.4 billion compared with 2006. You can download the data here

I have produced a chart summary of some of the key stats which might be useful when revising the current account with students.

PowerPoint
UK_BoP_2007.ppt

A Tale of Two Trade Deficits

‘Most of our imports these days come from overseas”. (George W Bush)

The publication of the overseas trade figures rarely makes headline news these days, the balance of payments isn’t as high in the national consciousness as it once was in days of yore - there are still economics teachers out there who remember the sterling crises of the late 1960s and early 1970s! But today we had confirmation (in so far as the trade data can ever be relied upon) that the United States has seen the first reduction in its trade deficit in goods and services for six years whilst the UK has just notched up its biggest ever gap between the value of exports and imports!