A new record

Our trade balance, that is the difference between exports and imports of goods but not services, has achieved another record level - a monthly deficit for November 2008 of £8.3 billion, up from £7.6 billion in October.

Experts were predicting a November deficit of about £7.5 billion, already massive compared with just a few years ago, so our trade result was something of a shock. All this despite a fall in manufactured imports for the fourth consecutive month.

As soon as the result was announced the sterling/dollar exchange rate dropped to $1.46. There will be further falls in sterling if our trade account continues further into deficit, and confidence in sterling falls.

We have been covering a rapidly growing deficit on trade account by our invisible exports (-services of various kinds) and by borrowing, - paying foreigners to leave their sales proceeds here in return for interest. The loss in confidence, if it continues, will require higher interest rates just as the Prime Minister saves us with a mighty debt financed splurge.

A final comment - November trade result will have been produced by decisions made some weeks before. If other countries were retrenching then, it is likely that December and subsequent months will show even more shocking results and confirm that we are in a severe recession.