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UK trade deficit in August – 2nd highest on record

The UK’s deficit on trade in goods and services increased to £4.2bn in August, from £1.7bn in July, according to the Office for National Statistics. This was the second highest figure on record for the total trade deficit.

UK's trade deficit continues to worsen

Our trade in goods deficit also widened to £9.8bn from £7.3bn in July. This was due to a drop in exports and a rise in imports, particularly due to an increase in oil imports of almost £1bn.

There has been a large fall in our exports of goods to the eurozone over the past year which led to a deficit with the overall EU27 of £4.9bn in August – up from £4.4bn in July. The UK is being particularly hit by the eurozone crisis but things do not look much better in the rest of the world either. When trade outside the EU is considered, there was a deficit of £5bn in August, which was a large increase on the £2.9bn deficit recorded in July.

Net exports are a component of aggregate demand, and the fact that it is becoming increasingly negative, will weigh on our GDP performance.

Not surprisingly our manufacturing output fell by 1.1% in August, following a previous increase of 3.1% in July, but this fall was greater than most economists had forecast. Industrial production as a whole fell by 1.2% compared to August last year, and this was the 17th consecutive month of decline. With consumer spending showing weaknesses at home, and with manufacturers finding it difficult to export abroad, the picture is not particularly rosy. In fact the International Monetary Fund said on Tuesday that they now expect the UK to contract by 0.4% this year.

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Posted in Balance of Trade, International Monetary Fund

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