UK trade deficit widens as exports fall again

Trade in goods deficit widened unexpectedly to £9.4bn from £9.2bn in May after British exports fell more than imports



Britain's trade position worsened in June, as exports fell for a third month in another blow to the government's ambitions to rebalance the economy.

The trade in goods deficit widened unexpectedly to £9.4bn from £9.2bn in May after British exports fell more than imports according to the Office for National Statistics (ONS). Economists had expected the deficit to shrink to £8.8bn, and said that tensions between Russia and the west, a weak eurozone economy, and a strong pound making British goods more expensive abroad, were all likely to weigh on foreign demand for UK goods in the short term at least.

George Osborne has long argued that a sustainable future for the UK economy depends on a lesser reliance on debt-fuelled spending and the financial services and a greater reliance on manufacturing and exports. The chancellor set a target in 2012 of doubling UK exports to £1tn by 2020, but so far the rebalancing of the economy has proved elusive.

The June data completed the trade picture for the second quarter, and showed a widening of the goods deficit to £6.9bn from £5.5bn in the first quarter.

Rob Wood, chief UK economist at Berenberg said the latest figures highlighted "the lopsided nature of the UK's recovery".

Exports fell by £400m in June to £23.5bn, largely driven by a drop in oil exports and manufacturing goods. Imported goods fell by £100m to £32.9bn after a fall in oil and aircraft imports.

Britain's main trading partners are the European Union and the US. In a bid to create demand for UK goods elsewhere and improve Britain's global trade position, Osborne has led various trade missions to some of the world's emerging powers, including China. However the ONS said June's fall in both exports and imports was driven by a drop in trade with countries outside the EU in the latest setback for those ambitions.

Howard Archer, chief UK economist at IHS Global Insight said that growth in the UK would be heavily reliant on domestic demand for the short term at least.

"The hope has been that gradually improving global growth will increasingly help UK exports over the coming months, but this hope is under threat from heightened global geopolitical tensions. In particular, UK exporters will be perturbed by current worrying signs that already weak eurozone growth is faltering anew as deteriorating relations with Russia and tit-for-tat sanctions weigh down on confidence.

"Another concern for UK exporters is the current strength of the pound, which traded at a near six-year high on its trade-weighted index in July."

http://www.theguardian.com/business/2014/aug/08/uk-trade-deficit-widens-exports-fall

Trade deficit figures are the real way of showing how an economy is doing. All the bluster about recovery is just that, bluster, while trade deficit continues to rise.