Bloomberg News

U.K. Trade Deficit Widens to Record as Imports Surge 3.8%

November 09, 2011

(Updates with comment from economist in fourth paragraph, impact on GDP in 11th.)

Nov. 9 (Bloomberg) -- The U.K. trade deficit on goods widened to a record in September as imports of chemicals and oil increased and exports barely rose.

The goods-trade gap grew to 9.81 billion pounds ($15.8 billion), the most since the data series began in 1998, from 8.62 billion pounds in August, the Office for National Statistics said today in London. The August deficit was revised from an initially reported 7.77 billion pounds. Imports increased 3.8 percent to a record and exports rose 0.2 percent.

The Confederation of British Industry, the U.K.’s biggest business lobby, cut its growth forecast today as the debt crisis in Europe weighs on export demand. The Bank of England expanded stimulus last month and will probably maintain the target for asset purchases tomorrow, economists in a Bloomberg News survey forecast.

The figures suggest the U.K. “is already suffering the adverse effects of the euro-zone crisis,” said Vicky Redwood, an economist at Capital Economics Ltd. in London and a former central bank official. “A downward revision to third-quarter gross domestic product might be on the cards.”

The pound extended its decline against the dollar after the report was published. It traded at $1.6002 as of 10:57 a.m. in London, down from $1.6089 yesterday.

Art, Antiques

Imports rose to 34.3 billion pounds in September, driven by chemicals and oil and silver, the statistics office said. By volume, the increase was led by chemicals, which rose 7.8 percent, pharmaceuticals and consumer goods other than cars. Within consumer goods, imports of works of art, which includes antiques, surged about 200 million pounds, or 131 percent.

The increase in exports on a value basis was led by oil and cars, offset by a decline in chemicals and consumer goods.

The deficit on goods and services widened to 3.94 billion pounds in September from 2.73 billion pounds in August. In services alone, there was a surplus of 5.87 billion pounds.

Invensys Plc, the British maker of railway software and washing-machine controls, said Nov. 3 it “made a solid start to the year despite the uncertain macroeconomic climate around the world.” Orders benefited from emerging markets, which are “expected to be less affected” by the global environment.

The CBI said today the U.K. economy will grow 1.2 percent in 2012, down from a previous projection of 2.2 percent. Gross domestic product rose 0.5 percent in the third quarter, according to an estimate published on Nov. 1.

Today’s report showed the trade deficit in the three months through September widened to 27.2 billion pounds from 24.6 billion pounds in the second quarter. Redwood said the trade data indicate the GDP estimate may be revised lower.

All 38 economists in a Bloomberg survey forecast the Bank of England will keep the target for its bond purchases at 275 billion pounds tomorrow. The central bank will also keep its key rate at a record-low 0.5 percent, said all 52 economists in another survey.

--With assistance from Mark Evans in London. Editors: Fergal O’Brien, Eddie Buckle

To contact the reporter on this story: Jennifer Ryan in London at jryan13@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net


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