(Corrects to say exports to non-EU countries, not deficit, reached record in January in sixth paragraph.)
The U.K. trade deficit widened less than economists forecast in January as exports to countries outside the European Union reached record levels, boosted by shipments of cars and oil.
The goods-trade gap widened to 7.53 billion pounds ($11.8 billion) from a revised 7.18 billion pounds in December, which was the smallest deficit since December 2009, the Office for National Statistics said today in London. The median of 18 forecasts in a Bloomberg News survey was for a deficit of 7.9 billion pounds. Imports rose 2.6 percent and exports climbed 2 percent.
Prime Minister David Cameron is counting on overseas demand to rebalance the economy as his budget cuts restrain consumer spending. While net trade contributed strongly to growth last year, manufacturers’ prospects are worsening as the global slowdown deepens and the euro-area debt crisis undermines demand in the largest market for British goods.
“The picture is not a strong one,” Philip Shaw, an economist at Investec Securities in London, said before the data was released. “Unless we get the key areas of the euro zonemoving again, then certainly in the short to medium term that’s likely put a cap on the U.K.’s export capabilities. That’s probably what we’re looking at over the course of 2012.”
The pound fell as much as 0.1 percent against the dollar after the data and was trading at $1.5652 as of 9:39 a.m. in London, up 0.1 percent on the day.
Britain’s trade deficit with non-EU countries widened to 3.68 billion pounds in January. Exports to those nations rose 4.4 percent to 12.9 billion pounds, the highest since records began in January 1998. Exports were driven by sales of cars to the U.S., Russia and China, the statistics office said. The gap with EU nations widened to 3.85 billion pounds. Oil shipments to the Netherlands and Germany rose as crude-oil prices climbed.
Overall oil and car exports stood at record levels in January. A 500 million-pound increase in car shipments was the biggest monthly gain ever. This was offset by lower exports of chemicals and consumer goods other than cars, the statistics office said.
Factory output, which accounts for about 10 percent of U.K. gross domestic product, is benefiting from the pound’s drop of about 23 percent on a trade-weighted basis since the start of 2007. Net trade contributed 0.6 percentage point to gross domestic product in the fourth quarter.
The Bank of England held its bond-purchase target at 325 billion pounds this month after increasing it by 50 billion pounds in February. Still, policy makers including Martin Wealehave signaled that they are concerned about the pace of consumer-price inflation.
Return to Growth
Surveys this month indicated that the U.K. economy returned to growth in the first quarter after a 0.2 percent contraction in the last three months of 2011. Reports from Markit Economicsshowed manufacturing and services continued to expand in February and construction growth accelerated.
Weir Group Plc (WEIR), the world’s biggest maker of pumps for the mining industry, said on Feb. 29 that it had a “strong order book” for 2012 as oil and gas investment projects boosts demand in some markets in North America and the Middle East.