Non-EC trade gap widens but long-term trend is better

BRITAIN'S visible trade deficit with countries outside the European Community widened dramatically in September, exceeding pounds 1bn for the first time in seven months, writes Robert Chote.

The deterioration reflected increased imports and a fall in exports, but the Treasury blamed a large part of the widening on erratic items. The trade gap increased from pounds 729m in August to pounds 1.09bn in September, according to the Central Statistical Office. The manufacturing trade deficit rose to a nine- month high of pounds 665m.

The figures - which encompass about 40 per cent of Britain's total trade - caused little market reaction. They were in line with recent figures and surveys showing domestic spending continuing to recover while exports are suffering.

The CSO said the trade gap was now on an increasing trend, although it cautioned that this was largely the result of September's erratic figure and that the trend was likely to flatten out in coming months.

Excluding oil and erratic items - ships, aircraft, precious stones and silver - the picture was less bleak. Exports rose by pounds 28m on the month to pounds 4.19bn while imports rose by pounds 142m to pounds 4.852bn. The pounds 662m underlying trade gap was about 20 per cent higher than August's but a little lower than in the previous month. The underlying non-EC trade gap is continuing to shrink on a trend basis, but at an increasingly slow rate.

'Even on an underlying basis, these figures suggest that there is some life in imports and that the domestic economy is not completely moribund,' Kevin Gardiner of Warburg Securities said.