Trade deficit at record high

Tim Wallace
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A RECORD trade deficit in goods was recorded in September as import growth outstripped export demand, according to figures published by the Office for National Statistics (ONS) yesterday.

Exports crept up by 0.2 per cent to £24.46bn, while imports shot up 3.8 per cent to £34.27bn, leaving the deficit in goods at an unprecedented £9.81bn.

In services – for which the UK has a large surplus -- imports and exports both fell, by 0.5 per cent and 0.4 per cent respectively.

The total trade deficit came in at £3.94bn, up from £2.73bn in August. The total deficit was last higher in December 2010.

Overall goods exports increased, but exports to EU countries fell 0.8 per cent in the month, which economists blame on the ongoing financial crisis.

“The Eurozone’s stagnation starves the UK of external demand,” said Philip Rush, an economist at Nomura.

“That said, we are surprised by how resilient goods exports are proving, with values up 0.3 per cent over the third quarter despite the manufacturing PMI’s export orders index languishing well below 50, the “no change” mark. The sharp widening in the deficit was caused by a surge in imports, which suggests domestic demand remains relatively resilient for now.”

A further positive sign comes in the revelation that £500m of the rise in imports came in semi-manufactured goods, which require further manufacturing and so indicate further manufacturing activity in the UK.