UK Trade Deficit Remains Unchanged In July

Wednesday, the British overall as well as visible trade deficits remained unchanged in July. With rising global demand, exports recorded the biggest monthly growth since January 2008.

A report from the Office for National Statistics revealed on Wednesday that the deficit on trade in goods and services totaled GBP 2.4 billion in July, unchanged from June. The deficit for June was revised from the initial estimate of GBP 2.2 billion. Economists had expected the shortfall to narrow to GBP 2 billion in July.

The visible trade deficit was GBP 6.5 billion in July, unchanged from June. Exports and imports of goods increased by GBP 0.9 billion each. The visible trade deficit was larger than the expected shortfall of GBP 6.2 billion.

British exports of goods grew 5% month-on-month in July, the biggest increase since January 2008. Goods worth GBP 19.2 billion were exported in July. At the same time, total imports of goods increased 3.5% to GBP 25.7 billion.

The ONS report showed that the trade in goods with both EU and non-EU nations resulted in deficits in July. While the deficit with EU nations narrowed, the non-EU shortfall increased from the prior month.

The visible trade deficit with EU nations dipped to GBP 2.6 billion in July from GBP 2.8 billion in June. Exports to EU nations climbed 6.5% and imports from EU moved up 3%.

Meanwhile, the deficit with non-EU countries widened to GBP 3.9 billion from GBP 3.7 billion in June. Shipments to non-EU countries were up 3%, while imports from those nations grew 4.5%.

As the summer maintenance work curbed North Sea production, the oil deficit reached the highest level in a year. The shortfall stood at GBP 537 million in July, up from GBP 433 million in June.

At the same time, the visible trade deficit was partially offset by the surplus in services. The trade in services showed GBP 4 billion surplus versus June’s GBP 4.1 billion.

In an interview to BBC, former Federal Reserve chief Alan Greenspan said UK would be harder hit than the U.S. by the current recession and collapse in world trade.

In a report released on Wednesday, Moody’s said it is unlikely to downwardly revise the Aaa-rated sovereigns in the near term. The rating agency said the UK and USA have lost height in the Aaa space and continue to warrant its characterization as “resilient”. However, to maintain this status, UK and US will have to severely adjust their fiscal policies, even in the unlikely event of a strong rebound of their economies, the report said.