Britain's trade deficit narrows as exports surge

10th August 2010, Comments 0 comments

Britain's trade-in-goods deficit narrowed in June, official data showed on Tuesday, as exports hit a two-year high thanks to a weaker pound and an improving eurozone economy.

The deficit fell to a better-than-expected 7.4 billion pounds (8.9 billion euros, 11.7 billion dollars) in June, the Office for National Statistics said in a statement.

That compared with a downwardly-revised deficit of 8.0 billion pounds in May. The ONS had originally put May's deficit at 8.1 billion pounds.

Analysts estimated the June deficit at 7.8 billion pounds, according to a survey by Dow Jones Newswires.

"The narrowing in the trade-in-goods deficit ... was driven by a solid rise in exports," said Capital Economics analyst Vicky Redwood.

"That said, it's hard to get too excited. The narrowing did little more than reverse May's sharp widening in the deficit and the more forward-looking survey measures of export orders fell again in July.

"Accordingly, we continue to doubt that any trade boost will be big enough in the near-term to offset the effects of the severe fiscal squeeze on consumers and the domestic economy," Redwood said, referring to the British government's austerity drive.

The ONS said exports rose 4.3 percent in June to 22.4 billion pounds -- the highest level since July 2008.

"Exports are benefiting from the low pound as well as the euro-area pickup," said Citi analyst Michael Saunders.

Exports to non-European Union countries hit their highest level since records began in 1998 while exports to the United States reached their highest point since records began in 1988.

Imports also gained, rising 1.0 percent to 29.8 billion pounds in June, the second highest level on record.

On Monday, Europe's biggest economy German figures showed its powerful export machine cranked into high gear in June, helping drive growth across much of Europe.

Analysts said the strong figures bode well for German second quarter growth data due Friday and, given the knock-on effect, should help counter complaints that Germany's focus on exports crowds out less competitive neighbours.

The German June trade surplus of 14.1 billion euros (18.7 billion dollars) was up 44 percent from May as exports rocketed 28.5 percent from a year earlier to 86.5 billion euros, close to a record high set in October 2008.

© 2010 AFP

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