Forex News – UK trade deficit smaller than expected

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The UK National Statistics office reported that the trade deficit in Britain narrowed more than forecast to 7.768 billion pounds, with exports hitting a record high in August, though imports declined. July’s trade gap was at 8.154 billion and was expected to widen to 8.8 billion pounds.

Here are some comments from analysts in reaction to the data:

 

 

HOWARD ARCHER, GLOBAL INSIGHT

“The August trade data were appreciably better than expected, giving a welcome, much-needed boost to third-quarter growth prospects.

“However, severe concerns persist about the prospects for exports in the near term, at least given recent weakened global economic activity and the current worrying growth prospects. This threatens to increasingly counter the support to UK exports coming from a competitive pound and undermine hopes that net trade can make a healthy positive contribution to UK GDP over the next few quarters.”

 

KAH CHYE TAN, BARCLAYS CORPORATE

“The latest quantitative easing measures should help to spur on UK trade by adding downward pressure on the pound.

“While this is good news for UK exporters, importers will be feeling the brunt of an increase in the cost of raw materials and finished goods.

“Despite the beneficial offset of a cooling in commodities prices, these factors will still feed into input costs adding to inflation.

“Given the global turmoil facing both exporters and importers today, it is hard to see major growth in UK trade flows in the short term at least.”

 

PETER DIXON, COMMERZBANK

“A bit of a surprise in the sense that exports were so strong given all that’s going on in the global economy. The weakness of imports is a reflection of what’s happening domestically.

“The numbers smell a bit funny because the deficit feels too narrow given where we are in the cycle. That said, it will help give a boost to Q3 GDP; the strength of the export numbers alone will certainly give us more upside to the GDP than we’ve hitherto expected.”