UK's trade deficit widens more than expected

Harriet Green
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The UK’s trade deficit increased in January to £2.6bn. A revised number for December showed the smaller figure of £0.7bn.

UK Trade shows the extent of import and export activity and is a key contributor to the overall economic growth in the UK.

The data, says Capital Economics, continues the run of disappointing news on Britain's export performance, with no underlying improvement in the country's trade position.

The goods trade deficit increased to £9.8bn in the month, widening considerably more than the expected £8.7bn, and from December’s £7.7bn. This was partly offset by an estimated surplus of £7.2bn on services, said the Office for National Statistics (ONS).

Source: ONS

Export of goods to both EU European Union and non-EU countries dropped by 3.7 per cent and 4.3 per cent respectively between December 2013 and January 2014.

Imports of goods from EU countries to the UK remained unchanged, whereas imports of goods from countries outside the EU increased 7.5 per cent.

The falls seen in exports reflect commodity trading - like aircraft and chemicals - which can be volatile.

In a similar way, the increase in imports also demonstrated commodities prone to volatility such as oil and, again, aircraft.

Source: ONS

Samuel Tombs, UK economist at Capital Economics comments:

Looking ahead, the fact that the latest industrial surveys show that export orders have grown strongly in recent months may provide some grounds for optimism. But given that these surveys have been misleadingly upbeat for several months now, we would not place too much weight on them.

With demand from the UK’s main trading partners in the euro-zone unlikely to rise significantly soon, we continue to think that the UK’s economic recovery will receive little in the way of support from the external sector this year.

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