UK EXPORTS increased to their highest level ever in August, as the economy fared unexpectedly well, according to data out yesterday from the Office for National Statistics.
A 0.5 per cent increase in total exports compared with July was recorded, taking the total value up £191m to £40.77bn.
Meanwhile, imports fell by £205m, also 0.5 per cent, to £42.65bn.
The trade deficit fell to £1.88bn – a fall of £396m on July and £2.52bn on August 2010. It is also substantially below the £5.5bn peak registered in December 2010.
Methodological changes used to measure the economy meant export figures for earlier months were also revised, with the result that the deficit is lower than previously thought.
Services exports have been revised upwards by £9bn, or six per cent, for the first seven months of 2011. “More categories of services are now measured, with much more data available in what has traditionally been the most difficult component of the balance of trade to measure,” Capital Economics’ Samuel Tombs explained.
“Those revisions represent very good news. The overall trade deficit now appears to be on an improving instead of a deteriorating trend.”
Almost all of the deficit’s fall in August can be attributed to goods. The deficit fell by £386m in goods trade and £10m in services.
Fuels in particular rebounded, after oil facilities which were closed in Spring and early summer re-opened, cutting demand for imports and boosting quantities available for export.
Fuel exports increased by £223m in August whilst imports fell by £137m. However, the sector still registered a trade deficit of £1.18bn.
Exports to major Eurozone economies including Germany, France and Italy all fell in August, by £222m, £22m and £205m respectively.
Analysts believe this decline will accelerate, as the Eurozone crisis remains unresolved and demand falls across the currency union.
“We expect significant downside pressures on exports, especially to the euro area, as economic activity in the UK's biggest trading partner has shown signs of weakening,” said Blerina Uruci from Barclays Capital.