Trade Deficit Narrows To £2.1bn

The deficit in the UK trade figures narrowed by £0.1bn from £2.2bn in January to £2.1bn in February. The deficit of £9.1bn in trade in goods was partially offset by the trade surplus in trade in services of £7bn. The trade balance reflects the exports minus imports position. The statistical bulletin from the ONS also advises data users to refer to the three monthly figures because of imports of erratic commodities such as ships, aircraft, precious stones and silver skewing the trade statistics and because trade statistics for a month can be misleading.

The impact can be seen in the three months to February which saw exports of goods decrease to £72.7bn (2.5%) due to falls across a range of commodities. Imports fell by 4.7% to £99bn over the same period due to a decrease in semi-manufactures and fuel. The estimated trade in services was £7bn with exports of £17bn and imports of £10bn. The three months to February saw an estimated surplus of £21.4bn in trade in services.

Fall In Trade In Services Surplus

The January 2010 deficit in value on the balance of trade in goods and services was £3.8bn, in December it was £2.6bn. Trade in goods was £7.9bn in deficit compared with £7bn in December and trade in services had a balance of £4.2bn, down from £4.4bn in December 2009. When the volatile items are excluded the figure for the volume of exports was 6% lower and the volume of imports was 1.2% lower than December. Export prices were 0.6% lower than December but import prices rose by 0.6%.

At the commodity level, in January 2010 compared with December 2009, exports of consumer goods were up by £23m and imports down by £222m, exports of cars were down £146m and imports down by £215m. Exports of chemicals were down £369m and imports up by £239m, semi-manufactured goods other than chemicals imports were up £332m and exports down by £65m.

The trade in services surplus got smaller by £0.2bn in January 2010 to £4.2bn. In December the surplus was £4.4bn. Exports fell by £0.1bn while imports rose by £0.1bn to £8.9bn.

Geographically, the deficit in trade in goods with the EU narrowed to £3.2bn from £3.6bn. EU exports fell by £0.2bn to £11.1bn and imports by £0.7bn to £14.2bn. There was an increase in the export of intermediate goods of £18m and imports of intermediate goods fell by £70m. The export of capital goods fell by £54m and the imports of capital goods by £145m. Imports of chemicals increased during the month by £64m and exports fell by £102m and consumer goods exports fell by £46m while imports fell by £225m. The trade in goods deficit with non-EU countries grew by £1.4bn to £4.8bn. Exports to non-EU countries fell by 12.5% to £8.4bn but non-EU imports increased by 1.6% or £0.2bn to £13.2bn.

The US was the only country in the G7 group with whom the level of exports changed significantly between December and January. Exports to the US fell by £0.5bn. There were no significant changes in the level of exports with any of the G7 countries. Switzerland was the only other country with whom the were any significant changes where imports increased by £0.5bn.

Changes in key commodity volumes between December and January include exports of food, drink and tobacco down 9.2% and imports 4.7%, exports of basic materials decreased by 24.6% and imports by 1.1%, exports of cars decreased by 9.3% and imports by 15.5%. The increase in exports was in consumer goods (other than cars) where the increase was 1.1% together with a decrease in imports of 6.2%.

The terms of trade in January decreased because export prices fell by 0.6% and import prices increased by 0.6%. Excluding the volatile items (the oil price effect) export prices fell by 1.3% but import prices rose by 0.7%.

Shop Prices Up Slightly On December

Shop price inflation went up by 2.3% in January 2009 compared with 2.2% last month according to the Shop Price Index from the British Retail Consortium (BRC). Food inflation however decreased from 3.7% in December to 2.9%. Non-food inflation increased from 1.4% to 1.9% in January.

Weak post-Christmas demand and competition kept prices down in January. The VAT increase which was expected to contribute to price increases was not passed on to customers and discounts and promotions also helped.

Food inflation was kept low because of the prices of fresh foods like meat and milk but large price rises in commodities like sugar and coca may mean price increases if they continue to put pressure on food inflation.

Terms Of Trade Unchanged In September

There was a seasonal deficit on trade in goods and services of £3.5bn in the month of September. The results for Q3 were an £8.4bn deficit compared with £8.6bn in Q2. The deficit in trade in goods alone was £7.2bn. The seasonally adjusted surplus of trade in services was £3.7bn. The volume of exports, excluding oil and erratics, was 0.2% lower, but the volume of imports was 4.1% higher compared with August. Both export and import prices rose by 1.1% in September compared with August.

The total value of exports in September was £19.4bn and increase of £0.7bn and the total value of imports rose by £1.9bn to £26.6bn. In Q3 2009 the trade in goods deficit was £19.8bn, down £0.1bn, total exports rose by £2bn to £56.9bn and total imports by £1.9bn to £76.7bn.

At the commodity level, important factors in September were capital goods and oil exports and imports of cars, aircraft, chemicals and intermediate goods. Quarterly figures show that cars, chemicals and oil were important exports and oil and cars were also important imports.

The EU-wide trade deficit widened to £3.4bn compared with £3bn in August. EU exports rose to £10.9bn (up £0.6bn or 6.2%) and imports to £14.3bn (up £1bn or 7.8%). Again the most significant factors were oil, cars and capital goods. Trade within the G7 export trade during September compared with August fell by £0.2bn with the USA, the largest among the G7 countries. Import trade within the G7 from Germany rose by £0.4bn. Imports from South Africa rose by £0.2bn. Over the quarter within the G7, exports to the US rose by £0.5bn and to germany and France both by £0.4bn. Imports from Germany rose by £0.8bn but imports from the USA fell by £0.5bn.

The volume of exports fell by 0.2% in the month to September but the volume of imports rose by 4.1%. Over the quarter, exports rose by 3.6% and imports by 3.5% compared with Q2. The terms of trade were unchanged in September as both import and export prices rose by 1.1%. There was an increase in the terms of trade between Q2 and Q3 because export prices rose by 0.6% but import prices fell by 0.4%.

The surplus on trade in services narrowed to £3.7bn in September from £3.9bn in August. Total exports fell by £0.1bn to £13.2bn but imports rose £0.1bn to £9.5bn. In Q3 the surplus on trade in services widened to £11.4bn. Total exports rose to £39.7bn (up £0.3bn or 0.9%) and imports rose to £28.3bn (up £0.2bn or 0.8%).