U.K. Trade Deficit Is Widest in Four Months on ExportsEmma Charlton
Britain posted its widest trade deficit in May in four months as manufacturers shipped fewer goods to European Union nations and sales of oil to other countries fell.
The gap was 9.20 billion pounds ($15.8 billion) compared with 8.81 billion pounds in April, the Office for National Statistics said in London today. Economists had forecast a deficit of 8.75 billion pounds, based on the median of 18 estimates. Exports rose 0.6 percent and imports climbed 1.7 percent, largely due to 1.2 billion pounds of aircraft purchases, the ONS said.
The figures underscore the challenge facing the government as it tries to rebalance the recovery toward trade in the face of an appreciating pound and a fragile recovery in the euro region, the biggest market for British goods.
Companies such as luxury-goods maker Burberry Group Plc warn that the strength of the pound is cramping growth and Business Secretary Vince Cable said today there is a limit to how far firms can absorb the loss of competitive on world markets.
The pound, which fell after today’s figures, has appreciated more than 11 percent in the past 12 months, the best performance among 10 major currencies tracked by Bloomberg Correlation-Weighted Indexes. It reached 79.15 pence per euro on July 7, the strongest level in almost two years.
Exports to the EU, the destination for about half of U.K. foreign sales, fell 0.2 percent with a decline in sales of manufactured goods offsetting an increase in oil shipments. Shipments to countries outside the 28-nation bloc rose 1.5 percent, with oil exports falling and exports of manufactured goods rising. Overall oil exports fell 4.8 percent on the month.
The total trade deficit, including the surplus on services, widened to 2.42 billion pounds in May from 2.05 billion pounds in April. In the three months through May, the shortfall widened to 5.69 billion pounds from 5.21 billion pounds in the December to February period.
The Bank of England kept its benchmark rate at a record-low 0.5 percent today, while its bond-purchase plan will stay at 375 billion pounds.
Separately, London house price rose at their slowest pace in 15 months in June and values are expected to fall as the BOE attempts to cool the property market deter buyers, the Royal Institution of Chartered Surveyors said.
A gauge of home prices in the capital dropped to 31, the lowest since March 2013, from 50 in May, RICS said, citing a poll of property surveyors. A measure of price expectations for the next quarter fell to minus 10 from 24. That indicates more respondents see declines than increases and is the weakest reading since May 2012.