There was a big increase in the UK’s trade deficit in August 2012, new figures showed today.
A report from the Office for National Statistics (ONS) reveals that the UK’s deficit on trade in goods and services grew to GBP4.2bn, from GBP1.7bn in July.
The figures confirm that the UK has some way to go in its recovery from the financial crisis.
Earlier today the IMF downgraded its economic estimates for the UK, saying that it now expects the UK economy to shrink by 0.4% this year. This is down from the forecast of 0.2% growth in July. In 2013 the IMF foresees the economy growing by 1.1%, a reduction from its previous forecast of 1.4% growth.
The ONS figures for August show that the UK had a deficit of GBP9.8bn on goods, GBP2.5bn greater than in July. This was partly offset by an estimated surplus of GBP5.7bn on services.
Overall, exports of goods from UK manufacturers fell by 4.0% to GBP24.6bn in August, from GBP25.7bn in July.
David Kern, chief economist at the British Chambers of Commerce, said that although some reversal was expected in the August trade figures following the strong bounceback seen in July, the latest numbers are disappointing.
He noted that figures for the last three months show that both exports and imports have fallen, with the decline in exports larger than the drop in imports.
In the three months ending August 2012 the UK’s trade in goods and services was estimated to have been in deficit by GBP9.8bn, compared with a deficit of GBP9.2bn in the preceding three months.
Reflecting the continued troubles in the eurozone, UK exports to the EU fell by 4.1% while exports to non-EU countries declined by a smaller 2.0%.
Lee Hopley, chief economist at EEF, the manufacturers’ organisation, said that the latest trade statistics provide few reasons for optimism in the short term, with the large drop in goods exports to parts of the eurozone underlining the ongoing impact of the debt crisis.
“For many exporters, it is not just a question of when demand there will stabilise, but whether other parts of the world will help pick up the slack next year,” Hopley added.
Separate figures released today by the ONS show that the UK’s industrial production declined for the 17th month in a row in August 2012, falling by 1.2% compared with August 2011. Production fell by 0.5% between July 2012 and August 2012, with manufacturing output shrinking by 1.1%.