Trade deficit balloons as imports surge to record

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The Independent Online
A RECORD surge in imports drove the UK's deficit in trade in goods with the rest of the world to its highest level for six months, according to figures published yesterday.

The trade gap ballooned to pounds 2.5bn in June, from pounds 1.6bn in the previous month and ahead of City forecasts of pounds 2.2bn. The Office for National Statistics said it expected the trade position to deteriorate further.

Analysts said the data, coming a day after it emerged that businesses were running down stocks, was further evidence that growth had recovered faster than had been thought.

Imports rose by 7 per cent to pounds 20.12bn in June, the highest monthly figure since records began. Even after erratic items such as oil, aircraft and precious stones, the trade deficit in goods was a record pounds 2.67bn. Exports rose by 1 per cent.

Imports from non-European Union countries surged by 10 per cent, the highest since February 1998, while EU imports rose by 5 per cent. Trade with EU countries showed a deficit of pounds 800m compared with pounds 300m in May, while the gap with non-EU nations widened to pounds 1.7bn from pounds 1.2bn.

Kevin Gardiner, senior economist at Morgan Stanley, said; "A widening trade deficit is one of the surest signs that growth is recovering."

Marian Bell, head of research at Royal Bank of Scotland, said the "dreadful" trade data would be negative for sterling. The pound fell about a cent to $1.5925, its lowest for a month.

The Office for National Statistics also released figures for trade with non-EU countries for the month of July, which showed an unexpected rise to pounds 2bn from pounds 1.7bn in June. Economists had forecast a figure of pounds 1.4bn.