Trading deficit to act as a drag on growth

Another set of data released yesterday showed output growth in the construction sector was weaker than first estimated in the July-September period but will not drag down the overall growth for the period.

The Office for National Statistics said the goods trade deficit grew to £9.816bn from £9.557bn in August. Economists had forecast a gap of £9.2bn.

The goods trade deficit with non-EU countries narrowed to £3.845bn in September from £4.324bn in August and against forecasts for a gap of £4bn.

Including Britain’s surplus in trade in services, the overall trade deficit widened slightly to £3.268bn.

The monthly figures tend to be volatile, but over the three months to September, export volumes fell sharply by 4.6 per cent – the biggest fall on that measure since the three months to March 2009 – while imports rose 1.3 per cent.

The latest data means trade acted as a drag on quarterly economic growth in the third quarter of 2013. In the previous three-month period, trade’s contribution to GDP was neutral.

Britain’s economy grew by 0.8 per cent in the third quarter, compared with the previous three months, according to a preliminary estimate. The ONS is due to release revised GDP figures on November 27.

The economy has staged a surprising recovery this year but growth has been driven mainly by domestic spending, frustrating the Government’s plan to rebalance the economy away from its reliance on British consumers.

The UK’s weak trade performance contrasts with Germany’s trade surplus which rose to a record high in September as exports climbed across the board, data showed yesterday.

The news comes as officials prepare for Export Week, organised by UK Trade & Investment, which aims to get more British businesses selling goods and services to international markets.

Lord Green, the trade and investment minister, told the Yorkshire Post: “The Made in Britain brand is sought after across the world and many UK businesses are already taking advantage of this, but we want more to follow.

“The UK’s future prosperity will not come from relying on domestic markets alone.”