Giving rise to hopes that the economy can lower its dependence on domestic consumption of goods services and still manage to grow, the trade deficit in January improved at a much faster rate than anticipated.
The latest data provided by the Office for National Statistics (ONS) shows that trade deficit in goods stood at £7.1 billion, lower than economists forecast of £8.5 billion and much lower than December’s figure of £9.7 billion.
The improvement in January was partly aided by higher exports. However, December’s record deficit was attributed to unusually heavy import of aircraft’s to avoid higher taxes that came into effect from January.
The adjusted volume of exports in January was 6.1 percent higher than December, excluding oil – since price movements are highly volatile. Net import of oils rose sharply while total volume of imports grew by a marginal 1.9 percent.
“This is welcome news for the UK economy and signals a further rebalancing of the economy towards export-led manufacturing growth”, said Chief Economist of Markit Group – Chris Williamson.
“For many companies, it is the strength of demand in overseas markets, rather than the exchange rate, which is the most important factor behind export sales success, and in that respect global economic growth is currently the fastest for almost five years”, he added.
The services sector witnessed a surplus of £4.1 billion in January, on seasonally adjusted basis. This compares to a surplus of £4.2 billion witnessed in December.
Economist said that harsh weather conditions in December may have hindered export of goods. Exports to all of UK’s important trading partners expanded in January, barring Italy and Ireland. Imports from important trading partners, except Germany and France, dipped.
The trade deficit in goods and services put together, improved drastically to £3 billion from £5.5 billion recorded in December.