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U.K. Trade Deficit Widens More Than Forecast as Exports Drop

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Dec. 6 (Bloomberg) -- Britain’s trade deficit widened more than economists forecast in October as exports dropped, led by a decline in capital goods.

The goods trade gap increased to 9.54 billion pounds ($15.4 billion) from 8.44 billion pounds in September, the Office for National Statistics said today in London. The median forecast in a Bloomberg News survey of 18 economists was 8.65 billion pounds. Exports fell 1 percent, while imports rose 2.5 percent.

Britain’s Office for Budget Responsibility cut its growth forecasts yesterday and said the economy has performed less strongly than it expected in March, “primarily reflecting the weakness of net exports.” The Bank of England will leave its bond-buying program on hold today as it assesses the need for more stimulus a day after Chancellor of the Exchequer George Osborne extended his austerity program.

“Net exports are expected to suffer from continued weakness in the euro-zone economy,” said Vicky Redwood, an economist at Capital Economics Ltd. in London. “Looking ahead, even the OBR’s new downgraded forecasts are probably still too optimistic. We think that the economy will recover even more slowly than it now expects.”

Exports to the U.S. dropped 15 percent in October, reversing a surge the previous month, the statistics office said. By category, the biggest drop in exports was in capital goods, followed by chemicals.

In the three months through October, the trade gap widened to a record 28 billion pounds from 24.9 billion pounds in the quarter through July. Exports fell 2.5 percent in that period.

The services trade surplus was at 5.9 billion pounds in October. That left the total trade gap at 3.64 billion pounds, up from a deficit of 2.49 billion pounds in September.

The goods deficit with the European Union, which buys about half of British exports, widened to 5 billion pounds in October from 4.5 billion pounds in September. Exports to the 27-nation bloc rose 1 percent on the month, the statistics office said.

To contact the reporter on this story: Svenja O’Donnell in London at sodonnell@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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