UK April goods trade gap steady, EU gap narrows

LONDON - Britain’s goods trade deficit with the rest of the world was broadly steady in April, and the trade gap with the European Union narrowed to its smallest in 1-1/2 years, official data showed on Friday.

By (Reuters)

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Published: Fri 9 Jun 2006, 10:38 PM

Last updated: Sat 4 Apr 2015, 3:23 PM

The Office for National Statistics said the goods trade gap widened slightly to 5.750 billion pounds ($10.63 billion) in April from an upwardly revised 5.708 billion pounds in March and slightly wider than analysts’ forecasts of 5.7 billion.

Economists continue to question whether trade will boost overall growth in 2006 as policymakers are hoping but came to no firm conclusions about the figures, which have been volatile in recent months and prone to large revisions.

They also noted that the recent rise in the pound could dent exports growth, which has picked up recently on the back of renewed strength in continental Europe, in the future. They also noted the speed at which Britain continues to draw in goods.

“Ongoing robust import growth continues to cast doubt on the MPC’s expectation that net trade will make a positive contribution to GDP growth this year,” said Ross Walker, UK economist at RBS.

The goods trade gap with non-EU countries was more than half a billion pounds wider than expected, at 3.37 billion versus an upwardly-revised 2.79 billion deficit in March. That was due to 600 million pound fall in exports with imports flat.

But the deficit with EU countries narrowed to 2.377 billion pounds -- the smallest trade gap with these countries since September 2004 -- from 2.920 billion pounds in March.

Geoffrey Dicks, UK economics at RBS, noted that this improvement, which was helped by a larger oil surplus, was ”further evidence of stronger demand in the euro area”.

Financial markets did not react to the data.

Large revisions

The ONS said Britain recorded in April its biggest surplus in oil trade since March 2005, at 205 million pounds. That followed a revised 13 million pound deficit the month before.

The underlying goods deficit, which excludes oil and erratic items, widened slightly to 5.895 billion pounds from 5.60 billion in the prior month.

Meanwhile revisions to prior years’ data left the full year goods trade deficit for 2005 at a bigger record 67.3 billion pounds -- and about 1.7 billion higher than at last estimate.

The ONS said that VAT-related fraud, which has plagued recent trade releases and which statisticians say is very difficult to measure, was a substantial part of that revision.

Such fraud often involves items which are easy to transport but relatively high value such as mobile phones. Typically, goods are imported into Britain with no tax paid and either sold in Britain or exported with tax added.

“In volume terms, the profile of the revisions, assuming no other revisions, could lower GDP growth slightly in Q3 but raise it modestly in Q4,” said John Butler, UK economist at HSBC.

The goods trade gap for the first quarter of this year was also revised higher, to 19.6 billion pounds from 18.9 billion previously.

The ONS said its latest estimate of the trend was that the trade deficit in goods has widened slightly and that the value of both exports and imports have been rising in recent months.

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