June trade deficit at record high
The figures will dash the government hopes for an export-led recovery
By CFOWorld staff | CFO UK | Published 10:55, 09 August 12
The June trade deficit widened to £4.31 billion from £2.72 billion, marking the largest gap since records began and further disappointing the government, official data showed on Thursday.
A sharp drop in goods exports meant the total goods and services trade deficit hit a record high in June, disappointing both the coalition and the Bank of England, which have been hoping for an export-led recovery to lead the economy out of its second recession in four years.
However, demand has been suffering because of the ongoing debt crisis in the euro zone, Britain’s main export market and the Bank has warned that a recent rise in sterling against the euro poses a threat to manufacturers.
The Office for National Statistics said the June trade deficit’s widening to £4.308 billion pounds was the largest since records began in 1997.
This was driven by a bigger-than-expected widening in the goods trade deficit, which grew to £10.119 billion from £8.364 billion, well above economists' forecasts of a much more modest rise to £8.63 billion.
Industrial output contracted by 2.9 percent in June, due in part to extra public holidays to mark the Queen’s Jubilee year, and economic output as a whole was 0.7 percent lower - the sharpest fall since 2009 in the immediate aftermath of the financial crisis.
Goods exports were down 7.4 percent in volume terms in June, the biggest drop since April, and fell to their lowest total value since November 2010 at £23.453 billion.
The figures for the three months to June, which are less volatile than the monthly numbers, painted just as grim a picture.
The total goods and services trade deficit for the second quarter rose to £11.214 billion, the highest since records began, and a figure that suggests net trade was a significant drag on GDP in the second quarter.
Exports in the three months to June fell at their fastest pace in volume terms in a year.
The ONS said the fall in exports had been driven by sharp falls for oil, cars and chemicals, in particular pharmaceuticals.
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