The U.K. visible trade deficit narrowed sharply in July driven by strong growth in exports, weathering the global economic slowdown.
The visible trade gap fell more-than-expected to GBP 7.1 billion in July, the smallest since February 2011, data from the Office for National Statistics revealed Tuesday. The deficit was forecast to drop to GBP 10 billion from GBP 10.1 billion in June.
The trade in goods with EU countries showed a shortfall of GBP 4.3 billion compared to a GBP 5 billion deficit in June. Likewise, the deficit with non-EU nations halved to GBP 2.9 billion from GBP 5.1 billion due to a record increase in exports to these nations.
Exports to EU nations rose 7.7 percent, with a notable increase in oil shipments, and imports grew 1.1 percent. At the same time, shipments to non-EU nations increased 11 percent, while imports fell 5.3 percent.
Meanwhile, the trade in services resulted in a surplus of GBP 5.6 billion compared to June's GBP 5.7 billion surplus.
The total trade balance, including both goods and services, showed a deficit of GBP 1.5 billion, down sharply from GBP 4.3 billion deficit in June. The oil deficit fell to GBP 0.6 billion in July from GBP 1.6 billion in June.
The sale of chemical and consumer goods improved in July, while imports of oil and precious stones declined markedly.
The ONS warned that month-on-month growth rates can be volatile.
The improvement in overall trade largely reflects a reversal of some one-off adverse factors in June, like the extra bank holiday, Jonathan Loynes at Capital Economics said. Moreover, a big drop in the volatile oil deficit that helped in July could rebound in future months, the economist added.
The sharply reduced trade deficit in July suggests that net trade could well make a rare recent positive contribution to GDP in the third quarter after being a major contributor to the contraction suffered in the first half of 2012, IHS Global Insight's Chief UK economist Howard Archer said.
by RTT Staff Writer
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