U.K. trade deficit narrows in Dec, net trade probably contributed to GDP for second straight quarter

Britain's goods trade deficit fell to GBP10.9 billion in the month of December from GBP11.6 billion in the previous month. Exports rose 4.4 percent and imports climbed 1.4 percent. The deficit including services also narrowed, leaving the fourth-quarter shortfall at GBP8.6 billion compared with GBP14.1 billion in the previous quarter.

The improvement was due to shipments of oil and aircraft to non-European Union countries and export sales of gold, , a tentative sign that the pound's devaluation may indeed be helping Britain to close its own trade gap. Since the result of the Brexit vote, sterling has weakened by almost 20 percent against the U.S. dollar, making British exports more competitive.

Data suggests net trade probably contributed to growth for a second straight quarter. Still, while the pound’s decline since the Brexit vote should help export competitiveness, ONS statistician Kate Davies said there’s “little evidence” that it’s had an effect on the trade balance.

The U.K. surplus in visible trade with the U.S. stood at GBP3.4 billion ($4.25 billion) in the October-December period, over three times more than the GBP1.1 billion seen in the preceding quarter. Data highlighted the challenge faced by President Donald Trump's administration as he pledges to narrow the country's trade gap with the rest of the world.

Meanwhile, exports to the EU rose steadily, but they were outshone by a significant increase in non-EU exports of £43.8bn, while imports from non-EU countries fell after rising steeply in the third quarter.

As the U.K. prepares its exit from the EU, Britain's trade balance will be closely watched for the government's success in forging new economic relations outside the European bloc. Economists warn that trade data will be volatile for some time until a clear pattern emerges.