LONDON: Silver export to India helped Britain’s trade deficit narrow to its lowest level in seven months in October. Exports edged up to £24.3bn in October, helped by sales of silver, while imports fell by nearly £700m, according to the Office for National Statistics (ONS).
The ONS said the deficit shrank to £9.6bn, from £10.5bn in September, when a rise in oil helped to widen the shortfall. Economists had forecast a gap of £9.5bn.
The ONS said a drop in oil imports was the main driver for this fall, possibly reflecting return to production in the North Sea, where maintenance hit output over the summer. Falling oil prices have also reduced the cost of imports.
Including Britain’s surplus in trade in services, the overall trade deficit narrowed to £2bn in October, down by almost £800m and hitting its lowest level since March.
Britain has relied on domestic demand to propel its economic recovery since the middle of last year. A sharp slowdown in the eurozone in recent months has added to problems hampering the government’s plan to focus the economy more on exports.
Britain’s goods trade deficit with countries in the 28-nation European Union narrowed to £6bn, down by more than £400m, as exports picked up slightly despite concerns about that the eurozone’s weakness would hurt demand.
The shortfall with non-EU countries narrowed more than expected to £3.6bn from £4bn in September, compared with forecasts for a gap of £3.8bn.
Economists said that while further drops in the oil price were likely to support the trade balance over the coming months, the deficit was unlikely to narrow significantly.
“The economic recovery continues to be driven by relatively import-intensive retail spending and investment,” said Maeve Johnston, an economist at Capital Economics. “Exporters continue to face strong headwinds. While sterling has fallen from July’s high, on a trade-weighted basis it remains about 4pc higher than it was a year ago. And the euro-zone, the UK’s largest single export market, continues to show signs of a slowdown.”
Others were more optimistic. “While the UK is likely to remain heavily reliant on the domestic economy to drive GDP growth in 2015, we should at least see net trade ceasing to be a drag and, maybe, even offering some modest support of its own,” said Martin Beck, senior economic adviser to the EY ITEM Club.
