The trade figures came as the European Commission published figures showing that the inflation rate in January was 3.2 per cent, compared with the figure of 2.8 per cent on the government's preferred measure of RPIX - the retail price index minus mortgage interest.
Chancellor Kenneth Clarke dismissed the figure as partial and said that the real picture was much more encouraging than that. Even so, the new interim measure, designed to assess countries' progress towards the inflation qualification for entry into EMU, left Britain missing the target - which must be no more than 1.5 per cent higher than the three best performing countries. In January, the best performer was Finland (0.8 per cent) and the Netherlands was third best, with 1.3 per cent. Britain is challenging the methodology used to compile the new European statistics.
The overall trade deficit of pounds 557m in December surprised the City which had been anticipating a deficit of about pounds 900m. The surplus with the EU was the first since August 1993 an improvement mainly attributable to a 2.6 per cent fall in imports from other EU members. Exports fell 0.4 per cent.
The 3 per cent fall in imports of semi-manufactured goods suggests that the underlying trade position was flattered by lower stockbuilding, as manufacturers strove to shed excess inventories. The 9 per cent fall in manufacturing investment in the final quarter of 1995 was reflected in a drop of over 4 per cent in capital goods imports. The deficit with countries outside the EU, for which information is available earlier, worsened by almost pounds 300m to pounds 890m in in January.
Over the year as a whole, the trade gap was pounds 11.6bn, compared with pounds 10.8bn in 1994. The balance was helped by an oil trade surplus of pounds 4.3bn, the highest for 10 years.
Separate figures showed that new consumer credit rose by pounds 549m in January compared with pounds 827m in December. This brought the annual growth rate down slightly but it remained a rapid 13.1 per cent in January. The smaller than expected rise led City analysts to conclude that nothing now stood in the way of a further cut in base rates.