British trade deficit widens on strong Pound in June

Source: Dukascopy Bank SA
"Concerns about manufacturers being hammered by a stronger sterling and flat eurozone demand may have been premature, although encouraging as this may be, one decent quarter doesn't necessarily signal that big contributions to [economic] growth from net trade are around the corner"
-Lee Hopley, chief economist at manufacturing group EEF

The British trade shortfall widened again in June as a strong Sterling continues to undermine exports of domestic companies. Nevertheless, trade still made a positive contribution to the UK economy in the second quarter overall. The trade gap came in at 1.6 billion pounds in the reported month, according to the Office for National Statistics. Total goods exports in June were 24.9 billion pounds, while goods imports increased to 34.1 billion pounds. Even though the deficit widened in June, its significant narrowing in April and May still allow for trade to have had a positive impact on economic output in the three months through June. British gross domestic product rose at a quarterly 0.7% between April and June, compared with a slower 0.4% in the first quarter.

The total trade deficit in the second quarter dropped to 4.812 billion pounds from 7.496 billion pounds, the smallest gap since the second quarter of 2011. Economists remained sceptical about whether the improvement would be long-lasting given the strength of Pound, which reached the highest level in more than seven years on a trade-weighted basis earlier this week. The Bank of England said earlier in the week Sterling's strength meant inflation would only climb slowly, pointing to a possible rise in interest rates early next year.


© Dukascopy Bank SA

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