"Manufacturers will be hoping that the recent extended good news on the U.K. economy further lifts business and consumer confidence which in turn translates into sustained higher demand."
- Howard Archer, an economist at IHS Global Insight
During the last couple of months markets got overexcited about the U.K. economy, as a series of the reports indicated the recovery is gaining momentum. Nevertheless, the Friday's trade data are likely to temper investor's optimism, as the trade gap widened to the biggest level in more than a year during the third quarter—imports soared to a record, weighing on the recovery. A report from the Office for National Statistics showed the total deficit, which is the difference in value between the imported and exported goods over the corresponding period, rose to 9.72 billion compared with 5.46 billion pounds in the three months through June. Analysts, however, expected a gap of just 9.1 billion pounds. The data also showed shipments from the country plunged 3.5%, while the amount of imported goods inched higher 1% to a fresh record of 135 billion pounds.
The worse-than-expected trade data will possibly have a strong downward effect on the second revision of Q3 growth due late in November. The first estimate showed the economy accelerated to 0.8% in the third quarter, however, it was based on just 50% of the data available at that time. The U.K. has been struggling from weak demand, and, according to the NIESR, the nation's independent economic research institute, it is expected for the trade balance remain in the negative territory and business investment weak until 2017.