U.K. visible trade gap widened to a record in the second quarter as weak demand for goods hampered exports that could act as a drag on the economy that is mired in recession.
As exports declined more than imports, the visible trade deficit grew by GBP 3.2 billion to GBP 28.3 billion in the second quarter, the biggest since comparable records began in 1997, the Office for National Statistics said Thursday.
Exports decreased GBP 3.8 billion or 4.9 percent from the previous quarter. Due to soft domestic demand, imports slipped GBP 0.5 billion or 0.5 percent.
In the second quarter, the overall deficit on trade in goods and services came in at GBP 11.2 billion, higher than a GBP 7.8 billion shortfall logged in the preceding quarter. The surplus in services dropped by GBP 0.1 billion to GBP 17.1 billion.
In June, the visible trade deficit widened more-than-expected to GBP 10.1 billion from GBP 8.4 billion in May. The expected level of deficit was GBP 8.7 billion.
The extra bank holidays had an adverse effect on trade figures in June. For May and June, data may have been affected by the changed pattern of public holidays, the statistical office said.
During the month, total export of goods dropped 8.4 percent to GBP 23.5 billion and imports fell by 1.2 percent to GBP 33.6 billion.
The visible trade deficit with EU countries and non-EU nations widened to GBP 4.9 billion and GBP 5.2 billion, respectively.
The deficit on goods was partly offset by a surplus of GBP 5.8 billion on services. Consequently, the overall balance on trade in goods and services came in at GBP 4.3 billion compared to a GBP 2.7 billion shortfall in May. The June deficit was the largest since records began in 1997.
The economy fell deeper into recession in the second quarter. Gross domestic product dropped 0.7 percent from a quarter ago on an extra public holiday and poor weather. The Bank of England forecast economic growth to be around 2 percent in two years.
The June trade data appear to confirm suspicions that net trade was markedly negative in the second quarter and contributed significantly to the 0.7 percent quarter-on-quarter contraction in GDP, IHS Global Insight's Howard Archer reckoned.
The economist hardly expects things to change in the third quarter given the ongoing serious problems in the Eurozone.
Vicky Redwood at Capital Economics also expects the trade sector to continue to act as a drag on the economy for some time yet.
by RTT Staff Writer
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