The UK trade deficit in goods and services fell from £3.1 billion in July to £1.9 billion in August says the latest data from the Office for national Statistics (ONS).
The total deficit was made up of a £9.1 billion deficit in goods, offset to a large degree by a £7.2 billion surplus in services.
The trade in goods deficit was however £1.3 billion less than in July. But this was not the main driver behind the deficit narrowing in August says the ONS, the main factor was the large fall in imports from non-EU countries.
Rain Newton-Smith, CBI Director of Economics, said:
“This data again shows that export growth is struggling to pick up meaningfully – it’s a chink in the armour of the UK’s otherwise solid recovery. The weakness in the Eurozone, in particular, is a major hurdle to our export performance.
“There’s no doubt that boosting exports to high-growth markets is critical for the UK to meet its full potential, so we must continue to grow our exports to key markets around the world.”
Martin Beck, senior economic advisor to the EY ITEM Club, comments on today’s trade figures:
“The trade balance in August saw a marked improvement from the previous month’s deficit. However, it has been driven by a sharp fall in the import bill rather than an improvement in the UK’s export performance. The weakness of imports comes as a surprise, particularly given the continued strength of investment and retail sales, both of which are relatively import intensive. So the failure of domestic demand to translate into rapid import growth is a conundrum.
“With the average trade deficit in the first two months of Q3 exceeding the average in the second quarter, net trade could well drag on growth in Q3 as a whole. The fall in export volumes in August also adds to the picture of weak overseas demand, which we have seen in other the recent activity surveys.
“And the outlook for exports remains gloomy. As highlighted by the IMF earlier this week, there is an increasing risk of a renewed recession in the Eurozone. Evidence of a slowdown in a number of emerging markets will also make it difficult for the UK to shift exports elsewhere.
“Given how at odds weak import demand is with the strength of domestic activity, import growth could start picking up soon. GDP growth looks set to remain reliant on domestic demand in the near-term.”
Balance of UK Trade