U.K. Trade Gap Widens to 8-Month High

Britain’s trade deficit unexpectedly widened to an eight-month high in September as a surge in demand for cars helped imports rise at twice the pace of exports.

The goods-trade gap was 7.19 billion pounds ($11.9 billion) compared with 6.07 billion pounds in August, the Office for National Statistics said. Exports rose 3.9 percent and imports gained 7.5 percent.

Imports of cars and chemicals jumped, adding to evidence that the economy is emerging from its longest recession on record. Car imports rose 30 percent from August, the most since 1996, as a government scrappage program boosted demand. The increase came even though the pound’s drop has made foreign goods more expensive in Britain while boosting exports.

The trade deficit with nations outside the European Union widened to 3.78 billion pounds as imports jumped 7.1 percent and exports gained 1.1 percent. The trade gap with the EU widened to 3.41 billion pounds, with exports climbing 6.2 percent and imports increasing 7.8 percent.

The balance in trade in cars swelled to 801 million pounds, the most since December 2003, the statistics office said.

Exporters have yet to feel a sustained benefit from the weakness of the pound, which has fallen more than 4 percent against the currencies of Britain’s main trading partners since early August. It has lost more than 5 percent against the euro, the currency of 16 European nations that together buy half of British exports, and almost 2 percent against the dollar.

Factories are more optimistic about exports than at any time since 1995, a Confederation of British Industry survey showed last month.

U.K. manufacturing expanded in October at the fastest pace in two years, according to the Chartered Institute of Purchasing and Supply and Markit Economics. The Bank of England last week slowed the pace of its bond purchases amid growing signs the economy is recovering.

U.K. Trade Gap Widens to 8-Month High

TradingEconomics.com, Bloomberg
11/10/2009 9:29:13 AM