LONDON (Reuters) - Britain’s goods trade deficit with the rest of the world unexpectedly widened to a record high in July after imports of chemicals and oil surged and exports fell, data showed on Thursday.
The total trade deficit, which includes services, also widened sharply to its highest in almost five years, denting hopes that exporters will be able to pick up the slack in the economy as consumer and government spending slows.
The Office for National Statistics said Britain’s goods trade gap widened to 8.667 billion pounds in July from 7.532 billion in June, wrong-footing analysts who had expected a broadly unchanged reading.
July’s deficit was the biggest since the series started in January 1998 and has not been exceeded in earlier but non-comparable records that date back to 1697.
“July’s dreadful trade figures cast further doubt over the ability of the external sector to drive the recovery once the boost from government and consumer spending fades,” said Vicky Redwood at Capital Economics.
“Net trade will probably be a drag on GDP growth in the third quarter,” she added.
Sterling fell to the day’s low against the dollar after the data.
Imports rose 3.1 percent on the month in value terms, driven by an increase in imports of organic chemicals, pharmaceuticals and oil, the latter due to maintenance work on North Sea oil rigs.
Exports, by contrast, fell 0.9 percent, led again by chemicals and oil.
Economists will be keen to see whether the deterioration continues or if July’s figures prove a short-term hit from oil rig maintenance work.
“We should not be overly concerned about the drop in exports during July given the sizeable increase in the previous three months,” said George Buckley, UK economist at Deutsche Bank. “The trade figures can be volatile on a month-to-month basis.”
Including services, the total trade gap widened to 4.916 billion pounds from 3.932 billion, its widest since August 2005.
The non-EU goods trade deficit also widened more than expected to 4.800 billion pounds from 4.313 billion, its biggest since January.
Editing by Toby Chopra