By Valerie Herzberg, Maria Sebastia-Barriel and Simon Whitaker of the Bank’s Structural Economic Analysis Division.
The recent economic slowdown in the United Kingdom has been characterised by declines in business investment and exports. The impact on domestic output has been alleviated by robust household spending, but also by a sharp decline in imports of goods and services. This article shows that these divergent trends in the components of demand, and differences in their import content, can help explain the weakness in imports during 2001. More generally, close attention to the relative contribution of the components to aggregate demand can help explain fluctuations in imports. The analysis has been aided by the recent publication of updated information from the ONS on the import content of different expenditure categories.
Why are UK imports so cyclical?