U.K trade deficit seems to have narrowed in October, construction output likely increased again

The balance of trade in services in U.K. is quite stable in the short term as it is based on minimal data and so is, at least initially, slightly more than an educated guess, noted Societe Generale in a research report. Trade deficit for the month of October is expected to have narrowed. On the goods front, the trade in goods balance in volatile. It reached a recent low in July and has broadened appreciably in the following two months.

While accepting that the trend is one of an ever growing deficit, the rise in September takes the deficit quite above trend and certain reversal is likely in October. This is expected to drive down the overall deficit on goods and services to GBP 4300 million from GBP 5221 million, added Societe Generale.

Meanwhile, construction output is expected to rise again. The PMI is not a huge help in predicting month-month movements in the official data. But its story of a post-referendum rebound is believed to be credible. And thus construction output is likely to have risen in October by 0.3 percent sequentially, the same pace as in September, according to Societe Generale.