UK trade deficit narrows as China, US exports rise

Bloomberg/LondonBritain’s trade deficit narrowed more than economists forecast in April, helped by exports to China, Saudi Arabia and the US.The goods-trade gap narrowed to £8.6bn ($13.2bn) from £10.7bn in March, the least in 13 months, the Office for National Statistics said in London yesterday. Economists had forecast a deficit of £10bn, based on a Bloomberg survey. Exports rose 2.8%, with sales to non-European Union nations surging 4.7%.With trade acting as a drag on growth in recent years, the British Chambers of Commerce has called on David Cameron’s Conservative government to do more to help open markets beyond Europe. While the April data showed an improvement, three-month figures show exports fell 2.5%.“There is no room for complacency,” said BCC Chief Economist David Kern. “We need to see greater focus on encouraging medium-sized businesses to export and to increase their penetration in growing markets outside Europe.”The ONS also revised data for the first quarter - when net trade knocked 0.9 percentage point off GDP - and the last three months of 2014. While the figures indicate the impact on first- quarter GDP may be less than originally estimated, the ONS wasn’t able to quantify it.In a separate release, the ONS highlighted the increasing prominence of China, which became the UK’s second-largest import partner behind the US last year. Imports rose to £37.6bn in 2014 from £11.4bn in 2004, while exports more than quadrupled to £16.7bn.Trade with China is dominated by goods, and because imports exceed exports, the UK’s goods-trade deficit with the nation has grown to the second-largest after Germany.In the three months through April, the UK’s overall goods deficit widened by £1bn to £30bn.With trade faltering, consumer spending and business investment have driven the economy into its longest stretch of growth since the financial crisis. GDP has now expanded for nine consecutive quarters, though the 0.3% rate seen in the first quarter lagged the 0.6% pace in the final three months of 2014. Meanwhile the unsecured borrowing, which is typically used to fund consumer spending, is also forecast to rise steadily as a share of income over the coming years as households ease off on paying down debts, the government’s budget watchdog predicts. But a consumer-led recovery may be the lesser of two evils, given lack of demand for British exports in much of the eurozone, Britain’s largest trading partner. Stronger wage growth, rising house prices and past prudence mean households have scope to spend more for several years to come, Michael Saunders, chief UK economist at Citi, said.