UK Trade deficit narrows, boosting hopes of an export-led recovery

London - 10 August 2010

- Exports rose four times faster than imports in June -

The UK’s Trade narrowed to £7.401 billion in June, according to the Office for National Statistics. Sterling barely reacted to the data, moving down against the dollar to $1.5815, from $1.5820 before the release.

The deficit narrowed more than expected, with most economists forecasting a fall to £7.6 billion, from £8.1 billion in May. The decline was driven by a steep climb in exports, which rose four times faster than imports. Goods exports to Non-EU countries are the highest on record at £10.75 billion pounds, and exports to the world as a whole were the highest since July 2008 at £22.444 billion pounds.

Paddy Earnshaw, Customer Director at Travelex Global Business Payments says, “This is great news. As we’ve seen in our recent Confidence Index report, importers and exporters are increasingly confident as encouraging data continues to fuel positive sentiment.

“The narrowing of the deficit will increase confidence that an export-led recovery will gather pace, although is too early to say whether this is accurately placed – this data is notoriously volatile.”

Currently, importers and exporters confidence in an export-led recovery is low - the Travelex Confidence Index recorded a 7% fall in confidence in this area to 46% in July.

Earnshaw concludes, “The pound was relatively weak against a basket of currencies in June, and this has had a positive impact on June’s deficit figure. Over the coming months, it will be interesting to see whether sterling’s recent strength will offset the hopes of an export led recovery, as more data emerges.”

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