U.K. Trade Gap Grows as Global Slowdown Takes Toll, Imports Jumpby
7% increase in imports most since December, exports drop 2.9%
Figures underscore economy's reliance on domestic spending
Britain’s trade deficit widened more than economists forecast in October as exports fell and imports increased at the fastest pace in almost a year.
The shortfall was 11.8 billion pounds ($18 billion) compared with 8.8 billion pounds in September, the Office for National Statistics said in London on Thursday. Economists in a Bloomberg survey had forecast 9.7 billion pounds. Exports declined 2.9 percent and imports rose 7 percent, the biggest increase since December.
The total trade deficit, which includes the surplus on services, widened to 4.1 billion pounds from 1.1 billion pounds a month earlier as exports fell 1.6 percent and imports rose 5.4 percent, also the largest increase in 10 months.
The figures highlight the economy’s reliance on domestic spending as weakening global demand and a strong pound take their toll on exporters. Net trade exerted the biggest drag on growth on record in the third quarter.
Bank of England officials will announce their latest interest-rate decision Thursday at noon in London along with minutes of their meeting. Policy makers have signaled that borrowing costs should stay at a record low for now to ward off risks to the economy.
The pound was little changed following the data and was trading at $1.5175 as of 9:52 a.m. in London.
The ONS largely attributed the fall in exports in October to chemicals. The increase in imports was led by chemicals, oil and road vehicles. In the third quarter, the total deficit widened to 8.8 billion pounds from 3.8 billion pounds.
While exports to other European Union nations rose 1.4 percent, shipments to countries outside the bloc plunged 6.6 percent. Excluding oil and erratic items, the trade deficit in October climbed to 10.8 billion pounds, the largest since records began in 1998.
The ONS said revisions to trade volumes in the third quarter probably had a negligible impact overall, with imports growing more slowly than previously estimated and exports falling instead of rising.
Citing a worsening global outlook, the British Chambers of Commerce cut its growth forecasts through 2017 on Wednesday and pushed back its forecast for the BOE to raise its key rate to the third quarter at the earliest.
“Premature interest-rate increases are unnecessary and too risky, at a time when the recovery is still fragile and global uncertainties are mounting,” said BCC Chief Economist David Kern.