The UK economy lurched further into imbalance as the trade deficit widened to a new record, mortgage lending hit a new peak and public spending accelerated.
Official figures yesterday showed that the deficit on trade in goods and services hit a record high in June as the UK sucked in imports and export demand withered. However, independent experts were quick to claim it was not all bad news.
The overall deficit rose to £2.3bn from £1.7bn, while trade in goods alone soared to £3.2bn from £2.5bn. Total exports of goods fell 1.5 per cent to £16.1bn, while total imports rose 2.5 per cent to £19.4bn, National Statistics said.
The figures were in line with expectations as a sharp rise in the non-European Union goods deficit to £3.1bn from £2.4bn – on the back of a one-off import of aircraft – was published last month. But figures out yesterday showed that the non-EU deficit has since fallen back to £2.4bn.
Meanwhile, the total deficit, excluding such erratic items, improved by £150m, while the deficit with the EU was little changed at a modest £93m.
Geoffrey Dicks, UK economist at Royal Bank of Scotland, described the more recent news as "encouraging". He said: "There is a glimmer of hope here."
There was also a boost for the manufacturing sector from figures showing that the UK motor industry suffered its smallest fall in May for 12 months.
Meanwhile, the public finances swung back into surplus in July as the continued strength of the consumer economy delivered a rise in tax revenues that outweighed an increase in public spending.
Whitehall spending rose by 7.6 per cent compared with last year, but revenues were also higher than a year ago. The public sector net cash surplus came in at £9.3bn – the largest July surplus on record – compared with forecasts of £6.5bn.
The Government's preferred measure, public sector net borrowing (PSNB), delivered a surplus of £3.4bn compared with a deficit of £2.8bn in June. On a cumulative basis, the PSNB shows a deficit of £1.7bn, compared with a surplus of £3.8bn at the same time a year ago.
John Hawksworth, at accountants PricewaterhouseCoopers, said the figures showed the Chancellor would fail to hit his Budget forecast of a year-end surplus of £5bn. "The reasons for the shortfall are all on the spending side, with overshoots of around £2.5bn for both current spending and net investment," he said.
Further evidence of the strength of the domestic economy came from a record increase of £15.5bn in mortgage lending in July, according to the Council of Mortgage Lenders.
Nick Stamenkovich, an economist at Nomura International, said: "The continued strength of domestic demand rules out another rate cut next month."