UK trade deficit widens more than forecast

The UK's trade deficit widened much more than expected in October, with the £4.1bn much wider than the £1.8bn forecast and £1.1bn the previous month due to a greater imports of goods.

Visible trade, which refers to physical goods rather services, also surged to a deficit of £11.8bn, worse than the £9.7bn estimated and the £8.8bn from the month before.

This was mainly due to an 8.2% month-to-month rise in the volume of goods imports, mainly finished manufactured goods, plus a 2.7% decline in the volumes of exports.

Trade outside of the EU swelled to a deficit of £3.7bn, bigger than the £2.5bn forecast and more than double the £1.7bn from September.

The three-month rolling trade balance, which provides a less erratic gauge of underlying trends, narrowed slightly from £8.8bn to £8.4bn.

The wide swing of the deficit was a continuation of recent extreme volatility, economists noted, with importers and retailers piling up stocks ahead of Black Friday and Christmas a likely cause.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the rise in imports is likely to be reversed soon as importers stockpile goods, but he was less confident of a rebound in exports, which have been much less volatile than imports, as surveys of export orders point to further declines ahead.

"With the real effective exchange rate nearly back to its pre-recession peak, net trade is likely to slow the economic recovery further over the coming quarters."

Paul Hollingsworth, UK economist at Capital Economics, said the "dismal" UK trade figures "provided further signs that the economic recovery has remained worryingly-unbalanced in the fourth quarter", though took the figures with a large pinch of salt.

Monthly trade figures are very erratic, prone to significant revision and last year had their status as official national statistics suspended due to a string of errors

Hollingsworth added that trade could improve over the last two months of the year, though the fallback in price of oil would be met by the headwinds of the strong pound and weak overseas demand.

"Accordingly, the economic recovery looks unlikely to garner support from the external sector in Q4, and instead will remain reliant on the domestic services sector."