Narrowing UK trade deficit ‘may aid growth’

Britain’s trade deficit with the rest of the world narrowed more than expected in April, suggesting that it might act as less of a brake on the country’s growth during the current quarter, official data showed yesterday.

The UK’s Office for National Statistics said that Britain’s total trade deficit narrowed to £1.202bn in April from an upwardly revised £3.093bn in March, its lowest since March 2014.

The deficit in goods, alone, narrowed to £8.561bn from £10.705bn, also the lowest since March last year, compared with economists’ forecasts for it to drop to £9.9bn.

Britain’s total trade deficit lopped 0.9 percentage points off quarterly economic growth in the first three months of this year, contributing to a disappointing overall expansion in Britain’s GDP of just 0.3%.

Yesterday’s data revised down the first-quarter trade deficit by £219m, while the trade deficits for the third and fourth quarters of 2014 were each revised up by almost £1bn.

British exporters have struggled in the face of weak demand in the eurozone — the most common destination for British exports —and a rally in sterling to its strongest on a trade-weighted basis since August 2008. However, yesterday’s data offer some hope of a turnaround, with export volumes in April alone rising by 4.8%, the biggest increase since September 2014.

Britain’s trade data is volatile on a monthly basis, however, and the ONS said that in the three months to April, exports were flat after 0.3% growth in the first quarter, while imports were up 2.1%, the same as in the three months to March.

German data on Monday showed that exports from Europe’s largest economy rose by 1.9% on a seasonally adjusted basis in April, beating economists’ forecasts for a 0.1% rise.

Reuters