The U.K. visible trade deficit narrowed more-than-expected in August despite exports falling to a near 4-year low, figures from the Office for National Statistics showed Friday.
The visible trade deficit decreased to GBP 9.1 billion in August from GBP 10.4 billion in July.
This was the first time in the past five months that the goods trade deficit has narrowed. Still the actual deficit was below than the expected shortfall of GBP 9.6 billion.
Exports decreased GBP 0.7 billion to GBP 23.2 billion, the lowest since September 2010. The fall in exports reflect lower shipment of oil and chemicals. At the same time, imports dropped GBP 2 billion, which was the biggest monthly fall since July 2006.
The trade deficit with EU nations narrowed to GBP 5.5 billion from GBP 5.7 billion. Similarly, the shortfall with non-EU nations decreased to GBP 3.6 billion from GBP 4.8 billion in July, less than the GBP 4 billion deficit expected by economists.
In the three months to August, the trade in goods deficit widened by GBP 2.7 billion to GBP 29.2 billion, data showed. Within the EU, Germany remains the largest trading partner for the U.K.
Trade in services registered a surplus of GBP 7.2 billion in August after posting GBP 7.3 billion surplus in July. Consequently, the total trade deficit declined to GBP 1.9 billion in August from GBP 3.1 billion in July.
U.K. economic growth is currently dependent on robust domestic demand; and the underlying August trade data will do little to dilute the view that this will remain the case in the near term at least, IHS Global Insight's Chief U.K. Economist Howard Archer said.
Another report from the ONS today showed that construction output declined 3.9 percent in August from July. The output for July was revised to 1.9 percent from an original estimate of no change.
On a yearly basis, construction output slid 0.3 percent in August, which was the first fall since May 2013.
The monthly fall in construction output in August suggests that the economic recovery became very dependent on the dominant services sector in the third quarter, Paul Hollingsworth, a UK economist at Capital Economics, said.
Nonetheless, the economist said he remains confident that domestic demand should be strong enough to ensure that it maintains a healthy degree of momentum over the next couple of years.
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