The trade deficit deteriorated once again in September, inflaming concerns over the lack of balance in the UK’s recovery.
According to the Office for National Statistics (ONS), the gap between the value of goods exports and imports came in at £9.8bn, up from August’s £9bn and £400m worse than analysts had been expecting. Including the surplus from services, the overall trade deficit was £2.8bn, higher than the £1.8bn recorded in the previous month.
A breakdown of the figures showed goods exports to the beleaguered eurozone have taken a big hit over the past three months, falling by 11 per cent on the same period last year. Imports from the single- currency zone fell by just 6 per cent. Exports to the rest of the world were down 3 per cent year on year, although imports were down more sharply at 5.2 per cent.
Some analysts said the figures pointed to a policy failure. “We must drastically change our approach to supporting exporters, as we are failing to make adequate progress towards rebalancing the economy” said David Kern of the British Chambers of Commerce. “The Government must introduce further measures to support UK exporters around the world, including the growing economies of Asia.”
The ONS estimates that GDP grew by 0.7 per cent in the third quarter of the year, down from the second quarter. Over that same period the total trade deficit widened to £7.6bn, from £6.5bn in the previous three months, suggesting net trade was a drag on growth. “With relatively import-intensive retail spending and investment continuing to drive the UK’s economic recovery, we do not expect the trade deficit to narrow much over the course of this year” said Maeve Johnston of Capital Economics.
The UK has long run a trade surplus with the US, but in the third quarter this fell to its lowest level in almost eight years, according to the ONS. The latest jobs figures from the US yesterday showed a slight moderation in employment growth, with 213,000 non-farm jobs created in October. That was down from the previous month’s 248,000.
But analysts were heartened by a ninth straight month of jobs growth higher than 200,000, suggesting that the end of the Federal Reserve’s stimulus programme should not derail the recovery.
“Such stable growth will reassure the Fed ... and encourage it not to tinker unduly with monetary policy” said Marcus Bullus of MB Capital, “With a ‘steady as she goes’ approach from the Fed and interest rate rises unlikely until well into 2015, the stage is set for more gains in US equities as the economy enters the Christmas spending spree in buoyant mood.”Reuse content