Business

UK trade deficit narrows in August

Felixstowe port Image copyright Getty Images
Image caption British exports fell again in August, the ONS said, but imports fell by more

The gap between the amount the UK imports and the amount it exports narrowed in August, the latest official figures show.

The Office for National Statistics (ONS) said the UK's trade deficit in goods and services stood at £1.9bn in August, compared with £3.1bn in July.

But the narrowing was down to a fall in imports rather than a rise in exports.

Separate figures from the ONS also showed a fall in output from the UK's construction industry.

Construction output dropped by 3.9% in August after a 1.9% rise in July, the ONS said.

Eurozone weakness

Goods exports fell by £0.7bn to £23.2bn in August, the ONS said, although most of that was attributed to a fall in oil exports, particularly to countries outside of the EU.

Imports fell more, by £2bn, narrowing the goods trade deficit to £9.1bn.

In contrast, the UK continues to run a surplus in its trade in services, selling more abroad than it buys in.

Analysts said the narrowing of the trade deficit did not detract from concerns over the health of the eurozone, and the impact that is having on UK exports.

"It's easy to see why exports are declining," said Chris Williamson, chief economist at Markit.

"Growth has slowed sharply in the eurozone, with even Germany facing the possibility of a renewed recession. Sanctions with Russia are clearly hurting European trade.

"In addition, just as demand is slumping, sterling's appreciation is making UK goods less competitively priced in overseas markets."

Manufacturers said there was a persistent downward trend in exports.

"The trend in exports remains downbeat," said Lee Hopley, chief economist at EEF, the manufacturers' organisation. "While some of the decline can be attributed to oil, there has been a slide in manufactured exports generally over the past year.

"The data provide yet another reminder that the export part of the rebalancing equation continues to face some significant challenges."

Housebuilding falls

There were further worrying signs for the UK economy in separate construction industry figures released by the ONS.

The 3.9% fall in output in August was the first drop in 18 months, as housebuilding and infrastructure construction slowed.

It is also in direct contradiction to other surveys of the construction sector, which suggest homebuilders have been expanding their output consistently this year.

"We suspect this is a wholly inaccurate representation of the sector's health, and that construction in fact continues to boom," said Markit's Chris Williamson. He blamed changes to the way the ONS reports its data to comply with EU rules for "skewing" the data.

Markit's own survey data suggests construction continued to expand strongly into September.

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