U.K. Trade Deficit Narrows as Imports Decline on Cheaper Oil

  • Price of imported oil drops to lowest since February 2009
  • Total trade deficit on course to widen in the fourth quarter

Britain’s trade deficit narrowed marginally in November as the cheapest oil imports since 2009 drove down the cost of overseas goods.

The shortfall of 10.6 billion pounds ($15.5 billion) compared with 11.2 billion pounds in October, the Office for National Statistics said in London on Friday. Economists in a Bloomberg survey had forecast 10.5 billion pounds. Exports fell 1.3 percent and imports declined 2.5 percent, with oil imports plunging 18 percent.

The trade deficit including the surplus on services narrowed to 3.17 billion pounds from 3.51 billion pounds.

The modest improvement may not be enough to prevent trade once again exerting a drag on the economy. The total trade gap will widen in the fourth quarter unless December sees of deficit of 2.1 billion pounds or less. The average monthly deficit in 2015 is 2.6 billion pounds.

Trade last provided a spur to the economy in 2011, and the pressure on exporters is intensifying as concerns about China’s slowdown, falling oil prices and the withdrawal of Federal Reserve stimulus depress global growth prospects. It leaves Britain heavily reliant on domestic spending, itself starting to lose momentum, partly due to fears that Britain could exit the European Union in a referendum that may be held this year.

Domestic Reliance

“November’s improved U.K. trade figures are unlikely to be sufficient for the external sector to support the economy in the fourth quarter,” said Scott Bowman, an economist at Capital Economics Ltd. in London. “There are a number of challenges exporters face, not least the strong pound and weakness of demand overseas. Accordingly, the economic recovery looks set to remain reliant on the domestic services sector.”

The pound, which fell to its weakest level against the dollar since 2010 on Thursday, was trading at $1.4611 as of 11:43 a.m. London time, down 0.1 percent on the day.

Bank of England officials meeting next week have indicated they are in no hurry to raise the benchmark interest rate from a record-low 0.5 percent. Goldman Sachs Group Inc. on Thursday pushed back its rate-increase forecast to the fourth quarter from the second.

In November, the price oil imports fell to the lowest since February 2009, while oil export prices were at their cheapest since May 2005. Brent crude has fallen from over $115 a barrel in mid-2014 to around $34, and on Thursday dropped to its lowest level in almost 12 years.

The trade data showed Britain’s deficit with the EU widening to a record 8.19 billion pounds in November, driven by car imports. Exports to both EU and non-EU countries declined.

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