LONDON: The UK’s goods trade deficit with the rest of the world hit an all-time high of £14.2bn in August, according to official figures. The Office for National Statistics (ONS) said the gap widened from a revised figure of £12.8bn in the previous month. Economists had predicted the figure to fall back, but the data showed a surge in the import of chemicals, machinery and clothing. It is a worrying statistic given evidence – in closely watched surveys of the manufacturing sector – that export orders and output were flourishing at the time. The fall in the value of the pound since the Brexit vote has made British-made goods more attractive to overseas buyers, though the most recent activity reports pointed to a loss of momentum in September. The ONS continued to paint a more gloomy picture. It said that while the export of goods in August was 0.7% up on the previous month, imports rose by 4.2% – the biggest leap since March.
Wider figures showed that manufacturing output rose 0.4% month on month – matching July’s performance. Sterling was up slightly versus the dollar after the figures were released – suggesting investors saw nothing in the data to spook Bank of England policymakers. The Bank has signalled it is on track to raise interest rates from their post-Brexit vote low of 0.25% to 0.5% in November. Such a move, which is aimed at helping to counter rising inflation, will also give it some more wriggle room when trying to mitigate any financial shocks as the UK continues efforts to negotiate the terms of its divorce from the EU. The pound, which was trading as high as $1.36 last month on the back of rising interest rate expectations, has faced pressure in recent weeks from a recovering dollar and concerns about the stability of Theresa May’s premiership. It was trading at $1.32 by late Tuesday morning.
