The deficit in goods fell from £8.1bn to £7.4bn, the lowest level in 18 months. The deficit in goods and services fell from £4.3bn to £3.6bn.
Exports rose by just over £50m, and imports fell by 2.5 per cent or £700m, as imports from non-EU countries fell.
The data round out a quarter that has seen a sharp drop in trade - with exports of goods falling by 8.1 per cent and imports of goods down by 6.5 per cent.
In the fourth quarter as a whole the trade deficit fell slightly to £11bn from £12.1bn in the previous three months. The ONS said that the trend in the deficit was fairly flat” in recent months.
Trade levels around the world have been falling at a rapid pace in recent months amid a slump in global demand. Other factors related to the credit crisis such as the drying up of trade credit insurance have also played a role.
After the sharp decline in the value of sterling in recent months, economists expect the trade deficit to begin to narrow more quickly, eventually giving a fillip to the UK’s growth. But as yet the benefit is coming from weaker domestic demand, as foreign demand for British goods remains constrained.
Surveys from the Confederation of British Industry and the manufacturing purchasing managers’ index both noted sharply falling export orders this month.
In December, exports to the EU fell by 3.2 per cent and imports also fell by 0.8 per cent. Exports outside the EU rose by 4.9 per cent, while imports fell by 4.3 per cent.
For the whole of 2008, the UK’s deficit on goods and services fell slightly to £46.1bn, compared with a deficit of £46.6bn year before.