New blow for Coalition economic rebalance as UK trade deficit widens
Trade deficit jumped to £9.2bn in May from £8.9bn in April in new blow to George Osborne
A swelling trade deficit and a shock fall in manufacturing output have dealt a blow to the Coalition's strategy of rebalancing the economy.
The Office for National Statistics has reported that the trade in goods deficits jumped to £9.2bn in May, up from a £8.9bn gap in April and higher than economists' expectations.
Earlier in the week official figures showed factory output fell unexpectedly by 1.3 per cent in May, with some economists suggesting the strength of the pound could be crimping export orders. George Osborne was in India this week in a bid to encourage bilateral trade and investment with the fast-growing emerging market economy.
He has also recently heralded indications the recovery is broadening out from household consumption and services growth to business investment and industrial production.
But Paul Hollingsworth, of Capital Economics, called the latest trade figures “disappointing” and predicted the adverse effects of the strong pound would continue to be felt by manufacturers over the coming months.
“For now, then, the onus remains firmly on domestic demand to keep the UK's economic recovery chugging along,” he said.
That view was echoed by Howard Archer of IHS Global Insight, who said: “Net trade will likely find it difficult to make a sustained, significant positive contribution to UK growth in the near term at least, given muted domestic demand in the eurozone and the strength of sterling.”
The ONS said the £400m jump in imports of aircraft parts was the main driver of the widening deficit.
Exports of goods to countries outside the European Union crept up by £200m in May, but by less than the value of imports, widening that element of the deficit to £4bn. Analysts had predicted a contraction to £3.4bn. Including the UK's traditional surplus on services, the total deficit widened to £2.4bn, up from £2.1bn in April.
The value of sterling, weighted by our major trading partners, has increased by 14 per cent since the recovery began in early 2013, as analysts have priced in an earlier interest rate rise by the Bank of England.
- 1 Man on naked bike ride gets ejected after becoming aroused
- 4 Ann Summers survey reveals the UK's favourite sex position
- 5 Ayyan Ali: Pakistan's top model now appears in the courtroom rather than on the catwalk
Man on naked bike ride gets ejected after becoming aroused
Caitlyn Jenner's mother Ester thought her daughter, formerly known as Bruce Jenner, had transitioned for money
Charles Kennedy 1959-2015: A gifted, compassionate politician whose career was cut short by the 'demon drink' - latest news
Charles Kennedy dead: A guy once asked the Lib Dem leader who his favourite Muppet was and his letter response was wonderful
Jaden Smith wears gender fluid dress to high school prom with Hunger Games actress
Thousands of teenage girls enduring debilitating illnesses after routine school cancer vaccination
Migrants in Kos: Photos show real tragedy after Brits abroad complain of 'awkward' holidays
British tourists complain that impoverished boat migrants are making holidays 'awkward' in Kos
Michael Gove determined to scrap the Human Rights Act – even if Scotland retains it
Threat to scrap Human Rights Act could see UK follow Nazi example, warns UN official
Why this year's general election was the most unfair in Britain's history
iJobs Money & Business
£30000 - £35000 per annum: Recruitment Genius: The UK's fastest growing, multi...
£70000 - £90000 per annum: Recruitment Genius: A Financial Reporting Manager i...
£23000 - £25000 per annum: Recruitment Genius: They win lots of awards for the...
£13500 - £20000 per annum: Recruitment Genius: This nationwide enforcement com...