U.K. Trade Gap Narrows as Exports of Oil, Chemicals Soar
Britain’s trade deficit narrowed more than economists forecast in July as exports soared the most in more than nine years.
The goods-trade gap fell to 7.2 billion pounds ($11.5 billion pounds) from 10.1 billion pounds in June, the Office for National Statistics said today in London. The median forecast in a Bloomberg News survey of 20 economists was 9 billion pounds. Exports rose 9.3 percent, the biggest increase since January 2003, while imports fell 2.1 percent.
Britain is struggling to emerge from a double-dip recession as the debt crisis continues in the euro area, its biggest trading partner. The Bank of England held its target for bond purchases at 375 billion pounds last week as policy makers assessed the impact of their Funding for Lending program to boost the flow of credit in the economy.
“Hopes that net trade could boost overall economic activity proved to be sadly misplaced in the first half of 2012,” Howard Archer, an economist at IHS Global Insight in London, said in a research note. “Prospects for exports still look troublesome given the ongoing serious problems in the euro zone and softer economic activity elsewhere.”
On a cash basis, exports rose 2.2 billion pounds in July from June, the most since records began in 1998, the statistics office said.
The increase in exports was led by oil, chemicals and consumer goods. Within imports, the biggest declines were recorded by oil, semi-manufactured goods and precious stones including diamonds. The ONS said trade figures have been “very volatile” in the past few months.
The pound remained higher against the dollar after the data were published and traded at $1.6023 as of 9:33 a.m. in London.
The Bank of England said last month that if the pound continues to strengthen, that “could make it harder for British producers to compete in world markets.” The pound has risen about 3.6 percent this year on a trade-weighted basis. It’s still down about 20 percent since the start of 2007. Against the euro, sterling has appreciated about 4.1 percent in 2012.
The goods deficit with the European Union, which buys about 49 percent of British exports, narrowed to 4.27 billion pounds in July from 4.99 billion pounds. The gap with non-EU nations fell to 2.88 billion pounds from 5.08 billion pounds, as exports to those countries rose to a record.
Birmingham-based IMI Plc (IMI), a maker of fluid controls and retail displays, said Aug. 23 growth in the second half may decline, though it won’t be a “significant slowdown.”
There was a 5.63 billion-pound surplus on services in July, which left the total trade gap at 1.52 billion pounds, today’s report showed.
In the three months through July, goods exports increased 0.3 percent from the previous three months, while imports fell 2.1 percent. The deficit in the three months was 25.2 billion pounds.
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