Michael Heseltine, the President of the Board of Trade, said the monthly figures were volatile and that 1994's performance demonstrated the success of the export-led recovery. Brian Wilson, Labour's industry spokesman, said claims of an export-led recovery were "over-hyped", and that yesterday's figures would increase nervousness over the prospects for sustained recovery.
Sterling closed a fraction higher, buoyed by firm expectations of a rise in base rates in the next week or two.
The value of exports fell 5 per cent to £5.3bn in December, while imports rose 5.5 per cent to £6.3bn. The Central Statistical Office said the trend suggested that the deficit in trade in goods was widening.
Total exports were £63.2bn in 1994 and imports were £69.8bn. The deficit, at £6.5bn, was £2.7bn lower than in the previous year. During the year export growth slowed while import growth accelerated. The deficit in the final quarter of 1994 was £1.9bn, nearly twice the previous quarter's gap.
Part of the reason for the deterioration in December was a £100m increase in aircraft imports. In addition the balance of trade in oil returned to a small deficit after a small surplus.
Yet the underlying trade gap, excluding oil and erratic items like the aircraft, worsened by nearly £600m between November and December, to reach £928m. Underlying import volumes climbed by 6.3 per cent. Export volumes fell 5 per cent.
Import prices rose sharply too. They were 2.8 per cent higher, excluding oil, in the month, after declinining for the preceding five months.
The unexpected surge in import volumes was mainly due to increases in two categories, basic materials and finished manufactures. Imports of timber, pulp and metal ores were significantly higher. So were imports of works of art and jewellery - included infinished manufactures, along with the aircraft.
City reaction to the figures ranged from disappointment to deep pessimism. Adam Cole, UK economist at James Capel, called them ``truly appalling'' and said they proved that the pace of economic growth was not sustainable.
Andrew Cates at UBS said the sharp widening of the deficit in December changed the whole picture on trade, which was clearly no longer on an improving trend.
Others were more cautious about drawing conclusions from one month's set of statistics. David Owen at Kleinwort Benson said: "The £1bn gap cannot be explained away easily, but it is probably erratic."