The U.K. trade deficit narrowed more than economists forecast in February as exports jumped the most in seven years on record sales of chemicals.
The goods-trade gap was 6.2 billion pounds ($9.5 billion), the least since June 2006, the Office for National Statistics said today in London. The median of 13 forecasts in a Bloomberg News survey was for a reading of 7.4 billion pounds. Exports surged 9.5 percent, while imports fell 0.1 percent.
Prime Minister Gordon Brown’s Labour Party yesterday said it will create 1 million skilled jobs and increase exports as it tries to win the May 6 election. Officials are hoping manufacturers will benefit from the weakness of sterling, which has fallen by about a quarter in the past three years on a trade-weighted basis.
Today’s data “lifts hopes that exports will be increasingly helped by the combination of the weak pound and improved global growth and trade,” Howard Archer, an economist at IHS Global Insight in London, said in an e-mailed note. “There are welcome signs that euro-zone growth is picking up modestly after faltering around the turn of the year and U.K. exporters will be fervently hoping that this continues.”
The pound rose as much as 0.2 percent after the release and traded at $1.5390 as of 10:20 a.m. in London. The yield on the benchmark two-year gilt was unchanged today at 1.174 percent.
The trade deficit narrowed as all categories of commodity exports increased apart from non-chemical, semi-manufactured goods. Chemicals and oil led the gain on the month, the statistics office said.
Britain’s trade deficit with non-European Union countries narrowed to 3.3 billion pounds in February, the statistics office said. The gap with European Union nations also shrank, reaching 2.8 billion pounds.
U.K. manufacturing output jumped in February by twice as much as economists forecast, rebounding from a drop the previous month when the country was afflicted by its worst cold snap since 1979.
“The sharp jump in exports in February suggests that they were held back significantly in January by the bad weather stopping the transportation of some goods overseas,” IHS Global Insight’s Archer said.
A.G. Barr Plc, the Scottish maker of Irn-Bru and Tizer soft drinks, said on March 22 that it hopes to capitalize on a 31 percent increase in overseas sales in the year through January to accelerate future growth rates.
The U.K. economy expanded 0.4 percent in the final three months of 2009, capping the recession at six quarters. The statistics office will release data for the first quarter on April 23.
Britain “has more room to use exchange-rate adjustments as a way of adjusting the economy” than do nations that use the euro, billionaire investor George Soros said on April 9. “It’s a question for the next government to decide. It has a number of options, of which a currency depreciation is one.”