LONDON, Oct 13 - The goods trade deficit narrowed more than expected in August as export values hit a record high, official data showed, raising hopes that trade may give a lift to overall economic growth in the third quarter after nearly a year of stagnation.
However, the outlook for the economy has deteriorated so rapidly since August, that the Bank of England launched a new round of stimulus last week, and Bank deputy governor Charles Bean said the asset purchases could be extended further if needed.
The government is banking on strong export demand to help support the economy at a time of fiscal austerity, and Thursday’s figures may provide some comfort that the rebalancing of the economy is continuing.
The Office for National Statistics said that the goods trade deficit narrowed to 7.768 billion pounds in August, well below forecasts for a deficit of 8.8 billion pounds.
A major overhaul of historical data meant the trade gap was narrower in earlier months too.
While analysts said the figures could spell good news for economic growth in the July-September period, weak orders figures in recent surveys suggested the pick-up could be brief.
“With the largest revisions made over the past couple of months, this release looks positive for the contribution of external trade to GDP growth in Q3,” said Philip Rush, economist at Nomura.
“Unfortunately, the sharp deterioration in orders recorded by the PMI survey suggests that this strength will not be repeated in September.”
Moreover, the debt crisis in the euro zone — Britain’s main trading partner — is a threat to the UK economy and was one of the reasons why the Bank of England last week restarted its quantitative easing with a 75 billion pound cash injection.
The Bank’s chief economist Spencer Dale told Reuters he expected the economy to weaken for the rest of this year.
His colleague Bean voiced confidence that the Bank’s stimulus would work. “If we need to undertake further asset purchases, then we will do so,” Bean said in a newspaper interview.
“The benefit of the additional asset purchases that we are undertaking now is that it will help to sustain demand; it will help to contain the rise in unemployment,” he said.
A jump in unemployment in the three months to August to its highest level in 17 years shocked Britons on Wednesday and economists warned more job losses were set to come.
The ONS said the value of goods exports rose to 25.5 billion pounds in August, the highest since monthly records began in 1998, driven by intermediate goods.
In the three months to August, export volumes excluding oil and erratics rose 0.5 percent, up from a 1.5 percent decline booked in the three months to July. Import volumes also rose by 0.5 percent, down from a 2 percent gain in July.
“August’s trade data suggested that the economy is considerably better balanced than previously thought,” said Samuel Tombs at Capital Economics. “However, we fear that this rebound could prove to be short-lived.”