U.K. June Trade Deficit Narrows

The U.K.’s trade deficit narrowed more than economists forecast in June as exports rose to a two- year high.

The goods-trade gap shrank to 7.4 billion pounds ($11.7 billion) from 8 billion pounds in May, the Office for National Statistics said. Exports jumped 4.3 percent to the highest since June 2008, and imports rose 1 percent.

The pound has fallen about a quarter on a trade-weighted basis since the start of 2007, making exports more competitive. While economic growth accelerated in the second quarter, Bank of England Governor Mervyn King said there are risks from a possible euro-area slowdown. Policy makers may lower their growth forecasts tomorrow after last week maintaining emergency stimulus, according to economists in a Bloomberg News survey.

Exports to the U.S. rose 0.5 billion pounds to a record 3.5 billion pounds in June on sales of chemicals and medicines, the statistics office said. Exports to the European Union rose 0.5 percent and imports fell 2.2 percent, narrowing the deficit with the bloc to 3.1 billion pounds.

The trade gap with non-EU countries narrowed to 4.3 billion pounds in June from 4.5 billion pounds in May as exports surged 8.8 percent to a record.

The deficit with China widened 4.2 percent to 2 billion pounds, as imports rose 96 million pounds, almost seven times as much as exports. Trade data from China today showed its surplus reached an 18-month high in July as exports surged and import gains eased, adding to evidence that domestic demand is slowing.

In the second quarter, U.K. goods exports rose 5.1 percent from the previous three months and imports increased 5 percent. The deficit widened by 1 billion pounds to 22.9 billion pounds.

Though the weaker pound has helped exports, efforts by governments from Italy to Spain to cut budget deficits is clouding the outlook for economic growth in Europe, the destination for more than half of British exports.

U.K. June Trade Deficit Narrows

TradingEconomics.com, Bloomberg
8/10/2010 12:35:00 PM