October UK Trade Deficit reaches a 7 Month Low
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In a positive turn of events for the recovering UK economy, the trade deficit fell to a 7-month low at the end of October. The goods deficit decreased from £2.8bn in September to £2bn in September, while exports rose £200mln to £24.3bln in October. The increase in exports and the decrease in oil imports were major factors.
In a positive turn of events for the recovering UK economy, the trade deficit fell to a 7-month low at the end of October. The goods deficit decreased from £2.8bn in September to £2bn in September, while exports rose £200mln to £24.3bln in October. The increase in exports and the decrease in oil imports were major factors.
The sale of silver to India accounted for most of the £200mn increase in exports. Meanwhile, import figures came down by as much as £700mn in October, owing to lower oil imports from countries outside the European Union. This has been a welcome change from the considerable import expenses recorded by the UK in October.
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Plummeting oil prices mean cheaper UK imports
Several factors have directly, and indirectly, affected the contraction of the trade deficit. Primarily, more North Sea oil platforms are back on line, along with lower oil prices, reduced import numbers. Because the UK has always been a net importer of oil, and because oil prices are not likely to stabilize, expect future import numbers to be closer to the ones recorded for October. This bodes well for the health of the trade deficit, and the contraction could continue.
Tough financial questions for UK exports
The economics behind exports are somewhat more challenging. Exports for October were primarily commodities or metals such as silver. This warrants a deeper understanding of the real export environment in the UK. Because EU economic growth is stalling, replicated somewhat by the global economy, exports in the country have taken a hit.
The net change in exports in the three months up to October was nearly -1%. In addition to Eurozone economic weakness, sterling appreciation relative to the dismal low the currency saw last year made UK export trade unpredictable. Irregularities in otherwise stable export segments such as automobiles support this, with overseas sales of cars dropping by 7.8% in October.
A healthy outlook for the future
Whereas much of the UK economy’s future in terms of trade deficit numbers will depend on how exports pan out, economists note some positives. The stimulus from the European Central Bank is helping and if the Eurozone economy picks in 2015, it will only help the UK even more.
Finally, Germany is showing signs of an economic revival. If true, it could help the rest of the region, be better for UK exports and could lead to increased German tourism.
