UK trade deficit narrowest since April 2003 due to fall in imports
Thursday, 09 February 2012 10:59
The Office for National Statistics (ONS) has released the latest trade deficit figures for the UK which reveal the lowest trade deficit since April 2003 and provide a welcome boost for the UK economy.
The trade deficit narrowed much more sharply than expected mainly due to a reduction in the amount of goods the UK imported in December. It means the trade deficit for the fourth quarter fell from £9.6 billion to just £6 billion.
However, there is a caveat to the figures and that is a fall in imports points to weak domestic demand which highlights the underlying weakness of the UK economy and the problems it still faces.
The best thing for the UK economy would be a surge in exports but weak demand in the eurozone, the UK’s biggest export market and a potential recession in the eurozone mean this is unlikely.
Howard Archer, Chief UK & European Economist at HIS Global said: “Looking through some recent volatile trade data, there is little real evidence of underlying marked improvement and doubts persist that stronger exports can boost overall growth and help the UK economy to become more balanced.
“Indeed, serious concern remain that UK exports will be limited for some time to come by the problems in the eurozone and muted global growth, of particular concern to UK exporters is very possible further GDP contraction in the eurozone in the first quarter of 2012.”
The deficit in goods and services was just £1.1 billion in December. This was made up by a deficit in goods of £7.1 billion and a surplus in services of £6 billion. The deficit in goods fell from £8.9 billion in November and was the catalyst for the improved figures.
Exports increased slightly, by 0.9 per cent from £25.3 billion in November to £25.6 billion in December but imports decreased substantially, by 4.6 per cent from £34.3 billion in November to £32.7 billion in December.
The decrease in imports was particularly pronounced in imports from non EU countries. Export prices fell by 0.9 per cent and import prices fell by 1.3 per cent compared with November.
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