UK's trade deficit narrows in July as exports of goods to EU rise

UK trade balance report published by Office for National Statistics (ONS) earlier on Friday showed UK's visible trade deficits narrowed in July, coming in almost bang on expectations. The improvement was largely driven by an increase in the export of goods to the EU in July.

UK visible trade deficit July narrowed to GBP -11.764bln almost matching expectations at -11.65bln and compared to a revised reading of GBP - 12.92bln in the previous month. Compared with the three months to the end of April, the trade deficit widened by £5.1bn to £14.1bn in the three months ending in July.

Including services, the nation's overall deficit with the rest of the world narrowed to GBP4.5 billion in July from GBP5.6 billion in June, the ONS said. The shortfall narrowed both with other EU countries and those outside the bloc. Trade balance non-EU came in at GBP -4.188bln vs -3.6bln expected and -4.7bln previous.

But economists cautioned monthly trade data can be volatile and it may be months before any clear pattern emerges. Sharp depreciation of sterling after the UK voted to leave the EU was aiding the exports. Total goods exports grew by £800m, or 3.4 per cent. At the same time imports fell, including a drop of £300m in the value of cars imported.

"Result adds evidence to the economy's "current resilience". A major hope for the UK economy going forward is that the substantial overall weakening of the pound since the UK voted to leave the European Union in June's referendum will increasingly feed through to boost foreign demand for UK goods and services." said Howard Archer, chief UK and European economist at IHS Global Insight