Latest trade numbers from the UK showed a narrowing trade deficit at £1.5 billion for July, a much needed respite considering the June’s spike. July’s goods export surged ahead by 9.3% to £25.8 billion while imports declined by 2.1%. The trade deficit data was released by the Office for National Statistics, ONS.
The trade deficit data comes inline with market expectations. The turnaround in the trade deficit was on account of balancing the one-off factors in June which was the disruption of services due to the extra bank holiday for the Queen’s celebrations. The data for July are a welcome change after June’s disappointing data which saw trade deficit rising to £4.3 billion.
The improvement in the exports sector comes in line with Friday’s UK industrial output data which increased by 2.9% in July. However, the while the tarde numbers might seem optimistic, the impact of the Eurozone crisis could not be ignored. The deficit on trade to non EU countries decreased by £2.2 billion in comparison to the £700 million with the Eurozone.
The proportion of goods being exported to the region (Eurozone) also saw declines, falling to 43.6% which markets the lowest levels since the records were kept since 1998 by the ONS. On the same note, non EU country exports increased by 11%, clearly underlying the problem at hand, which is the UK’s reliance on the Eurozone which happens to be the country’s biggest trading partner.
There was a bit a caution in the air after Tuesday’s trade figures point to an improvement economic situation in the UK albeit the fact that the trade data is usually volatile and is revised quite often. Experiencing one of the longest recessions in recent history, official data shows that output contracted 0.5% between the periods of April through June marking the third consecutive quarter in declines.
The UK government is most likely to welcome the new trade numbers as proof that the austerity measures and the strategies being followed in order to insulate the nation from the Eurozone crisis is working, most notably by boosting trade with emerging economies such as Brazil and China, the latest being the direct investment by Huawei.
The strategy seems to have paid off (at least for the moment) after David Cameroon lead his delegations to non EU Countries back in mid 2010. Besides the efforts to offset the implications of the Eurozone region, the government has also embarked on improving the manufacturing sector and also decrease its over reliance in the financial services sector.
The UK’s economy however is seeing signs of having made a stronger start fo the third quarter as most of last week’s data, with the exception of the construction sector seeing large improvements. Furthermore while the Olympics might not have made an impact on retail sales, ONS is hinting that the strong ticket sales from the event could well add about 0.2 points to the nation’s economic growth during the third quarter.
To access the original UK Trade deficit report from the ONS, click here.