U.K. January Trade Deficit Widens

The UK trade deficit widened in January although it narrowed over a three month period, fuelling expectations a lower pound should boost exports.
TradingEconomics.com, Financial Times 3/11/2009 5:16:45 AM

The trade deficit in goods and services rose to £3.6bn in January from £3.2bn in December, driven by a sharp drop in exports to countries outside the European Union that was not matched by falling imports.

Over the three months to the end of January, however, the trade deficit narrowed to £10.3bn from £11.1bn in the previous three months.

Citing the volatility of monthly data, leading economists expect the trade deficit to continue to contract in the longer-term as a weaker pound helps to support exports, while falling domestic demand – and the higher prices in sterling of foreign goods – reduces imports.

Total exports of goods fell by 4 per cent in January, due to much weaker sales of cars, as well as reduced sales of consumer and capital goods. Imports of goods however fell by just 1 per cent.

Exports of goods to the EU were up 6 per cent, but outside of the EU, they fell by 16 per cent. Imports from non-EU countries fell by just half a per cent.

Over the last three months, exports to the US have fallen by more than 10 per cent, but imports have actually risen by almost 3 per cent.

The UK economy has been less hard hit by declining exports than other major economies. Japan and Germany, which are more reliant on manufacturing and exports have seen huge drops in exports, helping to pull their economies into deep recessions in spite of less fragile financial systems than in the UK.

U.K. January Trade Deficit Widens