Belfast Telegraph

Unchanged trade deficit raises fears for recovery

Britain's trade deficit remained unchanged in April, official figures revealed today, raising doubts over the impact exports will have on the economic recovery.

The gap between goods and services imported and exported held at £2.8bn in April, the Office for National Statistics (ONS) said, while the trade deficit on goods narrowed to £7.4bn from £7.7bn.

The ONS reported a 0.1% increase in exports of goods in April, but the overall improvement was driven by a 0.9% drop in imports, as fewer consumer goods, such as cars and clothes, were brought into the country.

Chancellor George Osborne is banking on the private sector and strong net trade - when exports outweigh imports - to offset the impact of public spending cuts.

Earlier this week the IMF backed the Chancellor's deficit-busting plans, but on the assumption private investment and stronger trade would buoy the economy.

In the first quarter of 2011, net trade made a significant contribution to the 0.5% growth in gross domestic product. But economists warned April's figures suggested the contribution to GDP growth in the second quarter from net trade would be less significant.

Elsewhere, the figures revealed a 1.1% increase in import prices and a 1.5% increase in export prices.

The rise in import prices in April underlines the pressures faced by policymakers at the Bank of England, juggling inflation and muted growth.

Howard Archer, chief UK and European economist, said: "The trade performance in the first quarter raised hopes that exports are benefiting from decent growth and a competitive pound, thereby helping the economy to achieve some rebalancing. However, the latest data suggests it remains a struggle to generate sustained improvement."

Belfast Telegraph