UK Exports Drop Widening Trade Deficit

Britain’s trade position worsened in January, as diminishing demand for British goods abroad triggered a fall in exports.

The trade in goods deficit – exports minus imports – widened to a worse than expected £9.8bn in January from £7.7bn in December, according to the Office for National Statistics.

The government’s ambitions to rebalance the economy away from debt-fuelled spending and towards exports were disappointed by a 4% fall in exports in January to £24.2bn. Imports however increased by 3.4% to £34bn, as an improved economic backdrop boosted domestic demand for foreign goods.

“January’s trade figures continue the disappointing run of news on the UK’s export performance,” said Samuel Tombs, UK economist at Capital Economics. He said the fall in exports might partly be explained by the recent strengthening of the pound, with a risk it was starting to have an adverse effect on the UK’s economic recovery.

He added: “With demand from the UK’s main trading partners in the eurozone unlikely to rise significantly soon, we continue to think that the UK’s economic recovery will receive little in the way of support from the external sector this year.”

Part of the weakness in the UK’s trade position in January could be explained by distortions of erratic items, in particular strong imports of aircraft.

While imports from the European Union – Britain’s biggest trading partner – were flat at £18bn, imports from outside the EU jumped 7.5% to £16bn in January.

Goods exports to the EU fell by 3.7% to £12.2bn, while exports to non-EU countries fell more sharply by 4.3% to £12.1bn.

The broader trade in goods and services also widened sharply to £2.6bn in January from £700m in December.

via The Guardian

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza