Trade decline hits hopes of economic rebalancing

Hopes of a balanced economic recovery were dealt a blow yesterday as the trade deficit for goods jumped to £9.4bn in June from £9.2bn in May. The news was an unwelcome surprise to analysts, who had expected the gap to shrink to £8.8bn.

The wider trade deficit – which includes services, where the UK traditionally has a surplus – increased to £2.5bn in June from £2.4bn in May.

The value of total goods exports fell over the month by 1.6 per cent to £23.5bn, according to the Office for National Statistics (ONS). Within this, exports outside Europe were the main factor in the shortfall. The value of exports of goods to the EU was flat on the month at around £12bn. But exports to the rest of the world fell by 3.2 per cent to £11.5bn.

The ONS said that a decline in demand for oil and manufactured goods lay behind the contraction.

The monthly trade data is volatile, but June’s results fit with the pattern over the three months to June, with exports to the EU up 1.5 per cent on the quarter but exports to the rest of the world down by 2.9 per cent.

However, the recent decline in exports to non-EU countries bucks the trend over the period since the Coalition Government came to office in 2010. Non-EU goods exports are up 13.7 per cent since the second quarter of 2010, while EU goods exports are up only 1.3 per cent.