U.K. Trade Gap Widens to Record on Oil Imports
Bloomberg.com: U.K.
Oct. 11 (Bloomberg) -- Britain's goods trade deficit unexpectedly widened in August to a record, as the U.K. imported more oil than it exported for the first time in almost a year.
The gap grew to 5.6 billion pounds ($9.8 billion) from a revised 5.5 billion pounds in July, the government statistics office in London said today. The shortfall excluding oil and other volatile items such as aircraft and precious stones narrowed to 5 billion pounds as exports rose faster than imports.
The Bank of England is counting on higher exports and investment to bolster economic growth, sapped by a slowdown in consumer spending, the engine of 52 quarters of expansion. Annual growth slowed to a 12-year low in the second quarter, prompting the bank to cut its benchmark interest rate for the first time in two years in August.
``The underlying picture is bad but it's not as bad as the headline figure suggests,'' said George Buckley, an economist at Deutsche Bank AG in London in a telephone interview. ``There was a big effect from oil production, which is erratic. Nevertheless, this could affect third-quarter economic growth.''
Economists forecast a 5-billion pound shortfall, according to the median of 23 estimates in a Bloomberg survey.
Slowing Growth
Growth in the U.K. economy may have slowed to 0.3 percent in the three months ended Sept. 30 from 0.5 percent in the second quarter, the National Institute of Economic and Social Research said Oct. 7. The government said on Sept. 28 that the economy grew 1.5 percent year-on-year in the second quarter, the slowest in more than 12 years.
The pound was little changed against the dollar at $1.7521 as of 12:55 a.m. The implied rate on the interest-rate future maturing in June 2006 was unchanged at 4.27 percent.
Overall goods exports increased 3.7 percent to 17.8 billion pounds in August and imports rose 3.3 percent to 23.4 billion pounds, the statistics office said.
The oil account fell into a record deficit of 413 million pounds, the first shortfall since November 2004, as U.K. production was curbed by a fire at an oil installation in the North Sea, the statistics office said. Crude oil reached a record of $70.85 a barrel in New York on Aug. 30.
Oil Distortion
``The large rise in the oil price has distorted the trade figures,'' said James Carrick, an economist at ABN Amro in London. ``Underlying export volumes were stronger.''
Exports excluding oil and erratics rose 6.3 percent, while imports rose 1.9 percent, the statistics office said. By volume, exports in this category climbed 5.4 percent and imports advanced 0.8 percent.
Economists said the trade figures were also distorted by the inclusion of insurance claims on Hurricane Katrina. For accounts purposes, the payouts were counted as having been made in the same month as the hurricane hit, the statistics office said
Lloyds of London, the world's biggest insurance market, paid out 1.4 billion pounds in claims, reducing the surplus on services to 300 million pounds from 1.6 billion pounds in July. That also caused the trade deficit in goods and services to widen to a record 5.3 billion pounds from 3.9 billion pounds the previous month.
Exports to countries outside the EU dropped 0.7 percent, while imports rose 4.9 percent. The drop in exports swelled the non-EU deficit to 3.2 billion pounds from a revised 2.6 billion pounds in July.
EU Exports
Today's figures showed an improvement in the European economy may have begun to feed through to exports. U.K. exports to the region gained 7.2 percent, helped by demand from Germany, and imports increased 1.9 percent. This caused the trade deficit with the EU, which buys about two-thirds of U.K. exports, to narrow to 2.5 billion pounds from a revised to 2.9 billion pounds.
German imports rose a seasonally adjusted 6 percent in August, after rising 3.6 percent in July, a German government report showed yesterday. Exports gained 3.5 percent, having increased 0.9 percent in July.
``Europe is by far and away the most important market for the U.K. and the outlook for Europe, particularly Germany is improving,'' said Gavin Redknap, an economist at Standard Chartered bank in London, in a telephone interview.
The statistics office last month said July's trade data had been adjusted to reflect a value-added tax related fraud affecting trade in small, portable goods like computer components and mobile telephones. This investigation is still ongoing and the figures are subject to adjustment, it said today.
Oct. 11 (Bloomberg) -- Britain's goods trade deficit unexpectedly widened in August to a record, as the U.K. imported more oil than it exported for the first time in almost a year.
The gap grew to 5.6 billion pounds ($9.8 billion) from a revised 5.5 billion pounds in July, the government statistics office in London said today. The shortfall excluding oil and other volatile items such as aircraft and precious stones narrowed to 5 billion pounds as exports rose faster than imports.
The Bank of England is counting on higher exports and investment to bolster economic growth, sapped by a slowdown in consumer spending, the engine of 52 quarters of expansion. Annual growth slowed to a 12-year low in the second quarter, prompting the bank to cut its benchmark interest rate for the first time in two years in August.
``The underlying picture is bad but it's not as bad as the headline figure suggests,'' said George Buckley, an economist at Deutsche Bank AG in London in a telephone interview. ``There was a big effect from oil production, which is erratic. Nevertheless, this could affect third-quarter economic growth.''
Economists forecast a 5-billion pound shortfall, according to the median of 23 estimates in a Bloomberg survey.
Slowing Growth
Growth in the U.K. economy may have slowed to 0.3 percent in the three months ended Sept. 30 from 0.5 percent in the second quarter, the National Institute of Economic and Social Research said Oct. 7. The government said on Sept. 28 that the economy grew 1.5 percent year-on-year in the second quarter, the slowest in more than 12 years.
The pound was little changed against the dollar at $1.7521 as of 12:55 a.m. The implied rate on the interest-rate future maturing in June 2006 was unchanged at 4.27 percent.
Overall goods exports increased 3.7 percent to 17.8 billion pounds in August and imports rose 3.3 percent to 23.4 billion pounds, the statistics office said.
The oil account fell into a record deficit of 413 million pounds, the first shortfall since November 2004, as U.K. production was curbed by a fire at an oil installation in the North Sea, the statistics office said. Crude oil reached a record of $70.85 a barrel in New York on Aug. 30.
Oil Distortion
``The large rise in the oil price has distorted the trade figures,'' said James Carrick, an economist at ABN Amro in London. ``Underlying export volumes were stronger.''
Exports excluding oil and erratics rose 6.3 percent, while imports rose 1.9 percent, the statistics office said. By volume, exports in this category climbed 5.4 percent and imports advanced 0.8 percent.
Economists said the trade figures were also distorted by the inclusion of insurance claims on Hurricane Katrina. For accounts purposes, the payouts were counted as having been made in the same month as the hurricane hit, the statistics office said
Lloyds of London, the world's biggest insurance market, paid out 1.4 billion pounds in claims, reducing the surplus on services to 300 million pounds from 1.6 billion pounds in July. That also caused the trade deficit in goods and services to widen to a record 5.3 billion pounds from 3.9 billion pounds the previous month.
Exports to countries outside the EU dropped 0.7 percent, while imports rose 4.9 percent. The drop in exports swelled the non-EU deficit to 3.2 billion pounds from a revised 2.6 billion pounds in July.
EU Exports
Today's figures showed an improvement in the European economy may have begun to feed through to exports. U.K. exports to the region gained 7.2 percent, helped by demand from Germany, and imports increased 1.9 percent. This caused the trade deficit with the EU, which buys about two-thirds of U.K. exports, to narrow to 2.5 billion pounds from a revised to 2.9 billion pounds.
German imports rose a seasonally adjusted 6 percent in August, after rising 3.6 percent in July, a German government report showed yesterday. Exports gained 3.5 percent, having increased 0.9 percent in July.
``Europe is by far and away the most important market for the U.K. and the outlook for Europe, particularly Germany is improving,'' said Gavin Redknap, an economist at Standard Chartered bank in London, in a telephone interview.
The statistics office last month said July's trade data had been adjusted to reflect a value-added tax related fraud affecting trade in small, portable goods like computer components and mobile telephones. This investigation is still ongoing and the figures are subject to adjustment, it said today.
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