Business

UK trade deficit narrows after export boost

Containers on Tilbury Dock
Image caption The UK exported almost £1bn more goods in June than in May

The UK's trade deficit narrowed in June by more than expected after exports rose sharply from the previous month.

The deficit on goods and services fell to £3.3bn, against £3.8bn in May, the Office for National Statistics said.

The goods deficit was £7.4bn, compared with £8bn a month earlier, largely due to a £900m boost to exports. Trade in services produced a surplus of £4.1bn.

However, analysts said that exports were unlikely to boost economic growth in the coming months.

"It's hard to get too excited [about the narrowing deficit]," said Vicky Redwood at Capital Economics.

"The narrowing did little more than reverse May's sharp widening in the deficit. We continue to doubt that any trade boost will be big enough in the near-term to offset the effects of the severe fiscal squeeze on consumers and the domestic economy."

Alan Clarke at BNP Paribas agreed: "I think the competitiveness in the pound and signs of improvement in Germany in particular are good for the near term outlook for the UK exports sector.

"But I fear it's not going to be the engine of growth that's going to get us back to the pace of expansion that the Office for Budget Responsibility [OBR] or consensus is expecting."

The OBR was set up by the new coalition government to provide an independent assessment of the public finances and the economy.

The government is committed to cut spending sharply in order to reduce its budget deficit, and some economists are concerned that this will undermine the recovery.

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