The UK has narrowed its trade deficit by making record levels of exports to countries outside of the European Union according to a report by the Office for national statistics.
The ONS said the goods trade deficit for non EU trade shrank to £7.149 billion in July from £10.068 billion in June smashing economists’ forecasts for a gap of £9billion making it the narrowest deficit since February 2011. Exports rose by 9.3%, the country’s biggest increase since January 2003, whilst imports fell by 2.1%. On a cash basis, exports rose 2.2 billion pounds in July from June, the most since records began in 1998, the statistics office said.
The data is another boost for the UK economy which has posted a series of strong economic figures over the last few months. The country has beaten analysts’ predictions for a number of data reports signalling that the country is slowly making progress as it tries to emerge from a double-dip recession.
The increase in exports was led by chemicals, consumer goods and oil. The biggest declines in imports were oil, semi-manufactured goods and precious stones. As a result of the data the Pound rose higher against the Dollar and secured its position above the all important $1.60 mark. The Pound has risen about 3.6% this year but is still down about 20% since the beginning of 2007. Against the Euro, Sterling appreciated by 4.1% in 2012.
The goods deficit with the European Union, which buys about 49% of British exports, narrowed to £4.27 billion in July from £4.99 billion. The gap with non-EU nations fell to £2.88 billion from £5.08 billion, as exports to those countries rose to a record high.
Despite the good news the markets remain cautious over the state of the UK economy.
“Hopes that net trade could boost overall economic activity proved to be sadly misplaced in the first half of 2012,” Howard Archer an economist at IHS Global Insight in London, said in a research note. “Prospects for exports still look troublesome given the ongoing serious problems in the Euro zone and softer economic activity elsewhere.”
For the UK to make a strong recovery the troubles in the Eurozone have to be resolved. Once the situation in Europe is stabilised then we can expect the global economy to regain confidence and stop the slowdown of emerging markets. The hope of trading the way out of recession is not over just yet.
The Pound to Euro exchange rate is currently trading at 1.251
The Pound to US Dollar exchange rate is currently trading at 1.601
The Pound to Australian Dollar exchange rate is currently trading at 1.543
The Euro to US Dollar exchange rate is currently trading at 1.279
The Euro to Pound exchange rate is currently trading at 0.799
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