Tags: EU | Britain | Economy

Britain's Trade Deficit Unexpectedly Widens on Weak Exports

Tuesday, 09 Mar 2010 03:11 PM

 

Britain's trade deficit with the rest of the world widened unexpectedly in January after lower sales of chemicals and other commodities led a drop in exports.

The trade gap in physical goods widened to 7.99 billion pounds ($12 billion), well above the 7 billion pounds forecast by analysts, according to figures from the Office for National Statistics.

The figures were a disappointment given that economists had expected recent weakness in the British pound to boost exports.

The British currency dropped further after the trade report. It was 0.7 percent lower at $1.4957 midmorning in London.

The statistics office said there was no obvious reason for the wider deficit, although some have suggested that the particularly bad weather in January may have disrupted trade flows.

Imports fell 1.6 percent and exports dropped 6.9 percent, the sharpest decline in more than three years.

Officials and economists cautioned against reading too much into one month's data.

"You cannot read too much into any monthly trade figures. The overall long-term export figures are good, with exports rising by 2.6 billion pounds to 60.3 billion pounds in the last quarter," said Mervyn Davies, the minister for Trade, Investment and Small Business.

"The different value in sterling will take some time to feed through to improved export performance and the full benefits will not be seen until demand in our main markets picks up more strongly," he added.

"With sterling persistently weak and not expected to appreciate markedly in the coming months, U.K. exporters should be able to take advantage of the boost to competitiveness and the pick up in the U.S. and Asian economies," said Hetal Mehta, Senior Economic Advisor to the Ernst & Young ITEM Club economic consultancy

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