UK trade deficit narrows, buoying hopes for the UK recovery
Jennifer Lowe, 12 January 2010
Data this morning has shown that the UK trade deficit reduced marginally in November as exports rose.
The deficit fell to £6.8 billion in November compared to the revised £7.0 billion for October. Analysts had predicted a more modest decline of £6.9 billion. It is the narrowest deficit since August 2009 and reflects the weakness of the pound over the past few months.
The depreciation of the currency has made British goods cheaper abroad, which has brought about a solid increase in exports. Meanwhile, imports have slowed as they became more expensive for UK traders.
Duncan Higgins, senior analyst at Caxton FX said, ‘Today’s data should be encouraging for the policymakers at the Bank of England who had hoped a weaker pound would bring about a rebalancing of UK trade. Although the figures do show only a marginally lower deficit, it is certainly a positive step for the UK economy. Any sign that Britain is bringing its deficit under control should ease ongoing fears and boost demand for the currency.’
Data from the Department of Local Government has also shown that housing prices rose by 0.6 per cent last November, making it the first month of positive price growth since the spring of 2008. It marks the eighth consecutive month of improvement in the housing market, rising from -2.2 per cent in October and ahead of forecasts of just 0.4 per cent growth.
Higgins added, ‘In response to the positive data this morning, the market has moved the pound slightly higher. However, the UK currency will be unlikely to break out of its current trading range, particularly against the euro, until data has conclusively shown the economy is out of recession.’
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