Imports push goods trade deficit to record high
Wednesday 12 January 2011
Imports of oil and aircraft pushed Britain's goods trade deficit to a record high in November, official figures showed today.
The trade in goods deficit - the difference between goods exported and imported - widened to £8.7 billion in November, from £8.6 billion in October, the Office for National Statistics said.
The overall trade deficit, which includes services as well as goods, widened from £4 billion to £4.1 billion.
Total goods imported rose by 3.4% to £32.4 billion in the month, while goods exported rose by 4.1% to £23.6 billion, the ONS said.
Economists said a widening trade deficit was a blow to hopes that net trade - when exports outstrip imports - could make a positive contribution to economic growth in the fourth quarter of the year.
After slashing public sector spending, the Government has pinned its hopes for economic recovery on the private sector, and net trade will be key to growth.
Latest survey evidence has offered hope for exports going forward. The export orders balance of the CBI's industrial trends survey jumped to a 15-year high in December, while the export orders index for the manufacturing purchasing managers' survey was at the second highest level in its 15-year history.
The escalating eurozone debt crisis - with nations including Ireland, Spain, Portugal and Italy all falling victim - has cast a shadow over export trade in the months ahead.
But Vicky Redwood, senior economist at Capital Economics, said the troubles in parts of the euro-zone seem to have had little adverse effect on the UK so far.
She said: "November's UK trade figures are not as bad as the widening in the headline deficits suggests. However, it is clear that net trade is giving at best a limited boost to the wider economic recovery.
"The big picture is that the external sector needs to start playing a much bigger role in the recovery if the economy is to weather the fiscal squeeze now under way."
She said excluding oil and erratics, such as aircraft, the trade in goods balance narrowed from £8 billion to £7.4 billion.
Ms Redwood went on: "Encouragingly, exports rose strongly in November. The continued upbeat tone of the forward-looking measures of export orders suggest that exports will keep growing strongly in the near-term."
Import prices for traded goods were unchanged at 1.7% in November, figures which are likely to soothe the Bank of England's concerns over inflation.
Cost of living has been stubbornly high in recent months - the Consumer Prices Index (CPI) rate of inflation was up 3.3% in November, up from 3.2% in October.
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