Britain’s trade deficit slightly narrowed in August to £4.7bn from £4.8bn in July but was wider than expected, as exports were hit by a slowing world economy that offset the sharp fall in sterling.
The Office for National Statistics said the trade deficit in goods and services widened to £13.9bn in the three months to August, from an £11.3bn deficit in the previous three months.
Capital Economics said the figures showed that the weakening world economy had started to exacerbate the downturn in the UK. It said the trade deficit was a cumulative £1bn wider than analysts had expected for July and August.
Monthly and quarterly trade figures, however, are highly volatile and prone to revision. The ONS warned that the unreliability of the estimates made interpretation of short-term movements difficult.
The ONS has revised its estimate of the trade in goods deficit in July to £8.2bn, much wider than the previous estimate of £7.7bn. This deficit was left unchanged in August, at a level that analysts said was a record high.
Total exports of goods fell in August by 4.5 per cent to £21.3bn, while total imports of goods fell by 3.5 per cent to £29.5bn. Exports to European Union countries rose by 1 per cent while exports to non-EU countries fell by 11.5 per cent.
Capital Economics said the decline in the value of August’s exports reversed the healthy gains seen in the previous two months, suggesting that the downturn in the global economy was more than offsetting the boost from the 15 per cent decline in the pound.
Net trade appeared to be a drag on the rate of growth, supporting other evidence that the economy entered a recession in the third quarter, it said.
Howard Archer of Global Insight, the economic analysts, said the disappointing August data raised doubts as to whether trade contributed positively to gross domestic product in the third quarter, and reinforced fears that the economy had contracted.
“Going forward, UK exporters will benefit from the markedly weaker pound; but, crucially, this seems certain to be increasingly countered by weaker domestic demand in key overseas markets,” he said.
