LONDON (Reuters) - Britain’s goods deficit narrowed slightly in November but held above its average for the past year, raising the chance that trade activity in the last three months of 2012 dragged on economic growth.
The Office for National Statistics said on Wednesday that the goods trade gap shrank slightly less than expected to 9.164 billion pounds from October’s 9.487 billion pounds, as exports rose faster than imports.
The overall trade deficit - including Britain’s customary surplus in services - shrank modestly to 3.466 billion pounds.
“I suspect what (the figures) confirm is that trade will act as a drag on the Q4 (GDP) numbers,” said Peter Dixon, economist at Commerzbank.
“Uncertainty around the euro zone debt crisis has not only hampered UK exports, but there is also some evidence that UK firms have turned down business in parts of the euro zone due to credit risk.”
But suggestions the data offers further evidence that the UK economy continues to struggle look unlikely to persuade the central bank to extend its stimulus programme at its policy meeting on Thursday.
Goods imports from the European Union, Britain’s main trading partner, jumped to their highest by value since May 2006 in November, driven by chemicals and cars.
The trade showing further afield was equally lacklustre.
The goods trade deficit with non-EU countries unexpectedly widened to 4.519 billion pounds from 4.502 billion in October, in contrast to forecasts for drop to 4.2 billion pounds.
December surveys of purchasing managers point to a 0.2 percent dip in British economic output in the fourth quarter of 2012.
But less timely official data on services, manufacturing and construction has been more ambiguous, and some measures point to greater resilience.
A survey showed earlier on Wednesday that the number of people finding jobs via recruitment agencies grew again in December and vacancies rose at the fastest pace in almost two years.
The survey chimed with official data that showed a record 29.6 million Britons in employment in the three months to October, despite the fact that the economy had just emerged from a recession.
On the trade front, Britain’s immediate prospects remain dim, given the continuing debt turmoil in the neighbouring euro zone.
But the Bank of England is unlikely to extend its bond-buying quantitative easing programme on Thursday, as worries about sticky inflation take precedence over the weak economic outlook.
Latest British Retail Consortium data showed that shop price inflation stayed at 1.5 percent for the third month running in December, holding at its highest rate since May. The broader official consumer price inflation measure, which also factors in rises in utility bills and university tuition fees, is even higher.
Taking the first 11 months of 2012 together, the goods trade deficit has been running at an average of 8.9 billion pounds a month, compared to 8.4 billion in 2011, the ONS said. This dampens the government’s hopes that Britain will rebalance away from an over-reliance on imports.
($1 = 0.6235 British pounds)
Editing by John Stonestreet