UK exports rise in third quarter but trade deficit widens in September

UK exports rose strongly in the three months to September, the first full quarter after the EU referendum, though the UK’s trade deficit widened much more than expected in the last month.

The deficit ballooned to an estimated £5.2bn in September from £3.8bn in August, much larger than the consensus forecast of £4.0bn.

For the third quarter, the total trade deficit narrowed by £1.6bn to £11.0bn according to figures from the Office for National Statistics.

The ONS said: "So far there is little evidence in the data of the lower pound feeding through into trade volume or prices."

The quarterly deficit in goods with the EU widened by £400m to £23.8bn as imports increased more than exports, while trade in goods outside the EU narrowed by £1.9bn to £9.4bn due to a 5.9% increase in exports.

There was a 6.1% increase in export of goods and a 2.8% increase in imports of goods. This was only partially offset by a 0.1% decrease in exports of services and 0.7% decrease in imports of services.

For September, the goods trade a £12.7bn deficit was higher than the consensus of £11.2bn, rising from £9.1bn in September 2015.

Within the EU trade deficit in goods rose to £8.7bn from £7.2bn in September 2015, while trade with non EU trading partners saw the goods deficit rise to £4bn, above the consensus of £3.35bn, from £1.9bn a year ago.

As it appeared that trade made a modest contribution to UK GDP growth of 0.5% quarter-on-quarter in the third quarter, economist Chris Williamson at IHS Markit said they looked set to also make a positive contribution in the fourth quarter.

But he added: “A sour note is introduced as the ONS data showed the goods trade deficit widening in September alone, linked to a record deficit with EU countries. However, the one-month data should be treated with caution as the numbers can be extremely volatile."

Sam Tombs at Pantheon Macroecomics said though the volume of goods exports rose by 1.7% quarter-on-quarter, "this merely reversed a similar decline in Q2; the underlying trend still looks flat".

He said September’s poor trade figures "pour more cold water on hopes that sterling’s depreciation will drive an export-led revival" and that the deterioration in the September deficit partly reflected a decline in exports of erratic items, which likely will recover in October. "Nonetheless, the trade in goods deficit excluding oil and erratics was the largest on record."