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Wider trade gap fuels fresh fears for recovery

The UK's trade deficit unexpectedly grew in May, official figures showed yesterday, raising the prospect of the Bank of England pumping more cash into the economy to jump-start the lagging recovery.

The goods trade deficit - the gap between goods exported and imported - rose to £8.5bn from £7.6bn in April, when analysts had expected it to shrink to £7.2bn.

The figures have compounded fears over the strength of the economic recovery in the second quarter as services and manufacturing surveys in the period have revealed a mixed performance.

The weak trade data, coupled with improved inflation figures for June, led analysts to suggest the Bank could boost its £200bn quantitative easing programme.

Chris Williamson, chief economist at Markit, said: "The trade figures will certainly add to calls for a further loosening of policy via more quantitative easing, especially give the surprise dip in inflation to 4.2% today. Without growth of overseas trade, the doves on the Monetary Policy Committee are therefore likely to be increasingly concerned that the economy could slip back into recession."

Some experts have raised fears that the economy may have contracted by as much as 0.2% between April and June.


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