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U.K. Trade Deficit Widened to Record in July as Imports Surged
The U.K.’s trade deficit widened to a record in July as purchases of chemicals and oil drove imports to the highest level in two years.
The goods-trade gap widened to 8.7 billion pounds ($13.4 billion) from 7.5 billion pounds and June, the Office for National Statistics said today in London. The median of 13 forecasts in a Bloomberg News survey was for a 7.5 billion-pound deficit. Exports fell 0.9 percent and imports rose 3.1 percent.
Deputy Prime Minister Nick Clegg said today that the U.K.’s recovery will probably be “choppy and uneven” after the economy expanded the most in nine years in the second quarter. The Bank of England today left its benchmark interest rate at a record low of 0.5 percent and its bond stimulus plan at 200 billion pounds.
“The figures are a disappointment,” Philip Shaw, chief economist at Investec Securities in London, said in a telephone interview. “Overall the great rebalancing of the U.K. economy has yet to happen. The bank will be frustrated that the long- awaited upturn in export growth simply hasn’t happened.”
The pound fell as much as 0.2 percent against the dollar after the data and traded down 0.6 percent today at $1.5405 as of 12:28 p.m. in London. The benchmark two-year government bond yield rose 2 basis points to 0.664 percent.
The total value of imports was 30.9 billion pounds in July, the most since July 2008. Exports slipped to 22.3 billion pounds, the statistics office said.
Oil Deficit
The trade deficit in oil swelled to 649 million pounds, the most in two years. Imports from non-European Union nations reached 15.6 billion pounds in July, a record high.
While the jump in imports may signal strength in domestic demand, weakening exports suggest the economy is failing to benefit from the weakness of the pound, which has fallen by a about a fifth on a trade-weighted basis since the start of 2007.
Abingdon, England-based PV Crystalox Solar Plc, a maker of silicon wafers, said Aug. 19 first-half net income fell 59 percent as average wafer prices fell about 40 percent from a year earlier. Chief Executive Officer Iain Dorrity said the company is working to build up business in Asia.
German economic data published yesterday also showed exports fell and industrial production rose less than economists forecast in July, suggesting the recovery in Europe’s largest economy is moderating. The German economy expanded at the fastest pace in two decades in the second quarter, boosted by exports.
Growth Pickup
The U.K. economy grew 1.2 percent in the second quarter, the most since 2001. Britain faces the prospect of the toughest spending squeeze since World War II as the government curbs the record budget deficit.
“This recovery that is starting is likely to be choppy and uneven,” Clegg said in an interview on BBC Radio 4’s “Today” show. “We’re putting in place the building blocks so we have a rebalanced and more stable economy in the years to come.”
To contact the reporter on this story: Jennifer Ryan in London at jryan13@bloomberg.net
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