UK trade deficit widens in June, but construction recovers

Friday 08 August 2014 14.21
Exports of UK goods to countries outside the European Union fell to their lowest level since 2011
Exports of UK goods to countries outside the European Union fell to their lowest level since 2011

Sagging exports pushed Britain's trade deficit to a five-month high in June, suggesting a more balanced economic recovery still looks a way off.

However, other figures showed that the construction industry recovered from a dip in May. 

Exports of British goods to countries outside the European Union fell to their lowest level since September 2011, coinciding with the pound hitting a near six-year high against the dollar. 

The UK's total goods trade deficit grew to £9.4 billion in June, its highest level since January, from £9.2 billion in May, official data showed today. Economists had forecast a gap of £8.8 billion. 

The data dampened hopes that exports will soon make a greater contribution to Britain's consumption-led economic recovery, but separate construction data and a recruitment survey still pointed to strong domestic demand.

Britain's economy grew 0.8% in the second quarter, according to an early estimate. The Bank of England - which will release updated economic forecasts next Wednesday - expects that pace of growth to slow slightly later this year. 

Including Britain's surplus in trade in services, the overall trade deficit rose to £2.5 billion from £2.4 billion, also the biggest since January, the Office for National Statistics said. 

Exports of goods decreased in June by £0.4 billion, reflecting falls in oil and manufactured goods. Imports also declined, but only by £0.1 billion.

Meanwhile, construction data from the ONS added to survey evidence that house building has surged recently, as its monthly measure of new housing hit its highest levels since the series began in 2010. 

Overall construction output - which accounts for just over 6% of the UK economy - rose by 1.2% in June after falling by the same percentage in May. Year-on-year growth rose to a three-month high of 5.3% from 3.9% in May. 

But construction output is still 10.3% below its level in the first quarter of 2008, before the financial crisis. 

A Markit purchasing managers' survey showed house building rose last month at the fastest rate since November 2003, although overall growth in construction cooled slightly. 

The ONS revised up its earlier estimate of construction output in the second quarter to show no change, compared with a 0.5% decline previously. The revision would have no impact on its 0.8% estimate of GDP growth during the same period, it said. 

And a survey of recruitment companies also pointed to strong domestic demand, as British businesses stepped up hiring last month and continued to offer higher starting salaries.